Home Blog 3 Key Considerations before Setting up a Business in Indonesia Uncategorized 3 Key Considerations before Setting up a Business in Indonesia InCorp Editorial Team 24 October 2024 4 minutes reading time Table of Contents Business Setup in Indonesia: 3 Key Considerations InCorp, Your Trusted Advisor for Expansion to Indonesia Many global investors are still actively looking to setting up a business in Indonesia. As the largest economy in Southeast Asia, Indonesia is also the 10th largest economy in the world based on its purchasing power parity. In 2022, Indonesia’s economic growth reached 5.3%. Furthermore, its annual headline inflation has remained at less than 3.9% (3.2% in 2020) for the past four years and will continue until 2024. On top of that, the prospering economy that makes Indonesia an investment haven is due to other main factors such as dynamic tourism, abundant agricultural products for exports, booming manufacturing sector, and ever-advancing technology. If you think this is the right time for a business setup in Indonesia, here are the three important things you must consider. Business Setup in Indonesia: 3 Key Considerations 1. Company Setup The first step in business setup in Indonesia is to choose the type of legal entity. Several common legal entities are available in Indonesia: Indonesian Limited Liability Companies (PT), Foreign-owned Limited Liability Companies (PT PMA), Representative Offices, and Public Companies. Once you have chosen your legal entity type, you need to consider if your business expansion needs physical office space in Indonesia or if you can hire employees in Indonesia remotely through a virtual office. All business setups in Indonesia must comply with Indonesian Law following your Indonesia company registration number, company type, business category, and location. Read more: A Comprehensive Guide to Business Opportunities in Jakarta 2. Employment Regulations If you need to hire employees to work for you, you must comply with all the employment regulations in Indonesia. Each country has its own set of employment and labor legislation, Indonesia is no exception. So please remember never to apply the employment law in your country in a foreign country such as Indonesia. As an employer, you must understand your responsibilities and employee rights in your targeted market to ensure a successful global expansion. Plus, getting familiar with local employment legislation can protect your company against legal implications. Non-compliance means heavy penalties, damaged reputation, imprisonment, and/or business shutdown. You have to pay attention to several key items in employment regulations, and they are different for local and foreign employees. For example, ensure you cover all aspects such as wages and benefits (paid holidays, sick leaves, maternity leaves, healthcare, overtime pay, and other compensation). On top of that, make sure that you pay your employees and report all your taxes timely and correct. Regarding foreign employment, do remember that you can employ foreigners with a fixed-term employment agreement, known as PKWT, for a maximum of two years. Moreover, the foreigner must have a work permit to be able to have legal protections under Indonesian Law. 3. Business Licenses Successful business setup in Indonesia means acquiring certain compulsory business licenses, such as an Indonesia company registration certificate. Without them, you won’t be able to operate your business legally in the country. You may also need to apply for additional specific permits, depending on the type of your business and activities. The most common type of license you need is a general business license. This license is necessary for you to run general business activities and provide goods and services. If you are a manufacturing company, you will need an industrial business license; if you are in the construction business, you must obtain a construction business license. Read more: Developing A Company? Here are Business Startup Tips to Follow InCorp, Your Trusted Advisor for Expansion to Indonesia In today’s competitive business landscape, smart business owners know that getting assistance from an effective and professional business advisor is key to achieving success for your business setup in Indonesia. The expectation that a business advisor handles your paperwork during your expansion is outdated. Instead, a reputable business advisor like InCorp Indonesia can provide insightful and pragmatic advice, as well as add value to your business operations once your business is successfully set up, ultimately leading to stellar business performance. If you are looking for a professional, efficient, and reliable business consulting service for your business setup in Indonesia, contact InCorp now. Our expert consultants will take care of all your business advisory needs. Fill in the form below. Read Full Bio Verified by Daris Salam COO Indonesia at InCorp Indonesia With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships. Frequently Asked Questions What is a PT PMA? Limited liability company with foreign direct investment ranging from 1-100% If investors intend to conduct business in Indonesia, what kind of organization must they establish? Within the scope of foreign direct investment in Indonesia, foreign investors can typically do business in two ways: Set up a PMA (Perusahaan Modal Asing) PMA is a local subsidiary in the form of a limited liability corporation for foreign investment reasons Set up a RO (Representative Office) According to Law No. 25/2007 on Investment, foreign investors are required to establish a PMA company in order to make direct investments and conduct commercial and business activities in Indonesia. A PMA firm in Indonesia is a legally recognized business entity that can engage in various commercial and business operations as long as it complies with the current laws and regulations. As for RO, its purposes include conducting market feasibility studies and liaison activities. What is PT (Perseroan Terbatas)? PT (Perseroan Terbatas) is the Indonesian term for a limited liability company. What other things should be considered when hiring local and foreign employees in Indonesia? There are a few things to consider, such as: Prohibit any form of discrimination and provide equal opportunity for Indonesians and expatriates Increase the competence of workers by giving or encouraging job training. Follow the termination procedures (Terminating an employee in Indonesia can be long, tedious, and expensive. Observe working hours, holidays, and overtime regulations Give mandatory employee benefits, including social security and health insurance Withhold only the right amount of income tax on behalf of the employees Follow the wages and other benefits outlined by the law Process work permits for foreign employees Get in touch with us. Lead Form Updates Full NameEmailPlease provide corporate email where possiblePhone NumberOffice SetupWhich city are you planning to expand into?JakartaSemarang/Central JavaBali/LombokBatam/SumateraSurabaya/East JavaOther ProvincesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Package (20% OFF)[SPECIAL PACKAGE] Product Registration + License Holder (20% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Service (20% OFF)[SPECIAL PACKAGE] Comprehensive Industrial Package (15% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Service (20% OFF)[SPECIAL PACKAGE] Comprehensive Industrial Package (15% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration (25% OFF) + Office Space (Private Office 30% OFF)[SPECIAL PACKAGE] Company Registration + Investor KITAS (25% OFF)[SPECIAL PACKAGE] Accounting + Tax Services+ Annual Fintax Report (20% OFF)[SPECIAL PACKAGE] Payroll Services for Executive Role (20% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration (20% OFF) + Office Service (25% OFF)[SPECIAL PACKAGE] Company Registration + Micro Finance Services (25% OFF)[SPECIAL PACKAGE] Property Assistance: Due Diligence + AJB Purchase/Lease Agreement (25% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesServices Company Registration Renting Virtual and Serviced Office Business and Import Licenses Corporate Recovery and Insolvency Closing of Company (Dissolution) Land and Property Ownership Shelf Company Local NomineeServices Accounting and Tax Reporting Audit and Review Transfer Pricing Compliance Tax RefundHuman Resource Sub Services Payroll Outsourcing Employer of Record Recruitment and HR Establishment Employment ServiceServices Business Visa Work Permit and KITAS Dependent Visa (Spouse and Family) OtherBusiness Visa Subservices Business Visa Visit Visa Visa ExtensionServices Medical Device Beauty (Skincare and Cosmetic) Food and Beverage Health Supplement Household Product Halal Certification TrademarkServices Legal Consultation Legal Agreement Service Due Diligence and Background Check Company Documents RevisionBusiness Advisory Business Advisory Services ESG Reporting & Advisory Internal Audit Risk ManagementMore Services Market Research and Analysis Local Distributor and Partner Bank AccountMessageSubmit What you’ll get A prompt response to your inquiry Knowledge for doing business from local experts Ongoing support for your business Disclaimer The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind. We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website. More on Uncategorized 7 Facts You Should Know Before Expanding to Indonesia Read more Franchise Business Regulations in Indonesia are Now More Relaxed Read more A Simple Guide to Opening a Restaurant in Bali Read more