Lombok is one of Indonesia’s most popular holiday destinations, recognized for the stunning beauty of its natural surroundings and the friendliness of its people. With the pace of tourism picking up, the island has become a magnet for both local and foreign companies to set up a business, thanks to its untapped opportunities in both natural and human resources.
Investing in Lombok might seem to be very lucrative, but one should be aware of the legal aspects before starting a business. Understanding various rules and regulations would help an investor mitigate business risks.
This article will provide a comprehensive guide to foreigners while investing in Lombok.
Investing in Lombok: A Guide to Establish a Company
Determine Your Business Model
PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a limited liability company that allows a foreign citizen or a foreign business to earn income, profit, or participate in sales within the Indonesian territory.
The most popular business type in Indonesia is a local limited liability company, or “PT.” A PT must be entirely owned by Indonesian nationals, and the number of work licenses available to foreigners is likewise limited.
A foreign national can also create PT by collaborating with a local partner to form a joint venture.
Representative Office (KPPA)
Establishing a representative office is beneficial for foreigners who do not need to engage in commercial operations but want to explore business prospects. Since KPPA’s services are restricted to marketing and promotion, a limited liability corporation must be formed to do business and generate revenue.
|PT PMA||Local PT||Representative Office|
|Once the business is fully formed, the paid-up capital injected into the company’s bank account must be at least IDR 10 billion.||According to the most recent amendments to the Job Creation Law, the following is the size of a Local PT in Indonesia based on paid-up capital:
||No capital required|
Choose Business Address and Locations
The location of your company is an important consideration for company registration in Indonesia. Even though regional rules may differ in particular locations, a domicile letter is almost always required before beginning PT PMA.
A rental agreement must be presented to get a domicile letter as many localities do not allow a home address (such as an apartment or a house) to be used as a business address. The company’s registered address must be in a building with a valid construction permit (IMB), and the property must be zoned properly.
Alternatively, one can simply choose to set up a virtual office. One of the primary reasons why more and more international investors prefer shared or virtual offices is because of exemptions in regional regulations and difficult legalities.
Use Virtual Office
A virtual office might help you save money on overhead. You won’t have to bother about obtaining building permissions or determining whether or not your address may be used as an office. When you utilize a virtual office service, getting your company registration in Indonesia might also be significantly faster.
How to Obtain Business License in Indonesia
In Indonesia, all businesses require a business license, or they would be barred from engaging in any commercial activity. Hence, every business owner in the country should be aware of such permits.
Since 2018, Indonesia has implemented the Online Single Submission (OSS) system, which streamlined the electronic processing of company licenses.
OSS Risk-based Approach
As a part of the Omnibus Law framework, business licenses have been modified. To implement this new system, the Indonesian government has also updated OSS v1.1 to OSS Risk-based Approach.
Business operations will be examined and classified by the OSS system into the following categories:
- Low Risk
- Medium-Low Risk
- Medium-High Risk
- High Risk
These categories will define the type of business license that a company must get before starting operations in Indonesia.
Investing in Lombok: Understanding Corporate Tax System in Indonesia
Who Are Corporate Tax Residents in Lombok?
If a company is incorporated or has its domicile in Indonesia, it is regarded to be a tax resident.
A foreign company that does business through a permanent establishment (PE) pays the same tax rates as local taxpayers, plus an extra Branch Profit Tax.
Corporate Income Tax Rate
In Indonesia, the corporate income tax (CIT) rate is set at 25%. For fiscal years 2020/2021, the CIT rate is 22%.
A 3% cut-off from the regular CIT rate is available to public businesses with a minimum listing requirement of 40% and other specified circumstances. As a result, the CIT rate will be 19% for the fiscal year 2020/2021 and 17% from 2022 and beyond.
A 0.5% CIT rate applies to some small and medium-sized companies (SMEs) having gross revenue of less than IDR 4.8 million.
Tax Incentives in Indonesia
The Indonesian government has introduced several incentives such as Tax holidays, Tax Allowance, Investment Allowance, and has also set up SEZs to lure both domestic and foreign investors and improve the ease of doing business in the country.
Setting Up Your Business in Lombok With Cekindo
Company registration in Indonesia consists of multiple procedures that are time-taking and overly official. Having company registration professionals, like Cekindo, by your side can save you a great deal of time as well as provide you a hassle-free experience. Cekindo provides a wide spectrum of ancillary services related to company registration, like legal consultancy, business license and other documents acquisition, tax and accounting, and HR services.