The reasons for individuals or businesses to set up a joint venture in Indonesia are countless.
Most of the time, however, it comes down to business strategic factors to achieve business goals; compliance with requirements and regulations; development of new products; expansion into new markets particularly in a new foreign country.
A joint venture in Indonesia (JV) involves two or more businesses combining their expertise and resources to reach particular goals or pursue specific projects. It is a commercial enterprise not only combining different resources but also sharing its rewards and risks.
The benefits of setting up a joint venture in Indonesia include greater capacity, more resources, increased expertise, and gaining access to established markets and distribution channels.
However, entering into a joint venture is a big decision that involves many considerations. Cekindo provides you with this guide on how you can set up a joint venture in Indonesia so that you can assess if you are ready to start one.
In Indonesia, it is easier to start a new joint venture company than buying shares in an existing one.
Other important things you need to consider while setting up a joint venture in Indonesia are stated below:
1. Determine the Business Sector
First of all, it’s vital to determine the business sector of your Indonesian joint venture. This is because not all sectors in Indonesia are open to foreign ownership.
Therefore, you need to know that the sector of your JV is open to foreign ownership, and what business activities are allowed under the JV.
2. Negative Investment List and Foreign Ownership
Check on the maximum percentage of foreign ownership you can have under the Negative Investment List (DNI). This list can change from time to time so make sure you have the latest version.
3. Determine the Locations
Once you have determined your business sector and foreign ownership of your joint venture company, you need to know where your JV is going to operate.
This is because certain business sectors don’t allow a joint venture to operate in certain Indonesian regions, or certain business sectors only allow a joint venture to operate in specific regions in Indonesia.
The major taxation matters for a joint venture company is the withholding and income tax payable.
In most cases, foreign shareholders are responsible for 20% of the final withholding tax on dividends from an Indonesian joint venture company.
Once your JV is established, it is always advisable to outsource your taxation matters to the expert to ensure compliance and seamless operations in Indonesia.
In many circumstances, foreigners or foreign companies are restricted to form a joint venture as the particular sector is close to foreign ownership, or doesn’t allow 100% foreign ownership.
Therefore, they often opt for a Special Purpose Vehicle arrangement that provides professional shareholder and director services, allowing them to have a local joint venture in the restricted sector while still having control over the company.
A legal joint venture agreement is required in this type of Special Purpose Agreement.
Whether you are looking to establish a JV or in need of a professional director or shareholder in Indonesia, Cekindo as a leading consulting company in Indonesia provides them all.
We also provide services to support your business growth in Indonesia, including business license application and business process outsourcing.
Get in touch with our incorporation specialists via the form below.