Starting a Business in Indonesia: Essentials in One Place

How to Set up a Business and Start Right Away in Indonesia: The Shortcuts

  • InCorp Editorial Team
  • 26 March 2020
  • 5 minutes reading time

When talking about the world’s best investment destinations, it would be impossible not to include Indonesia. If you, as a foreign investor, are still wondering why starting a business in Indonesia is worth it, keep reading to find out.

Indonesia takes pride in being the largest economy in Southeast Asia. Moreover, in terms of purchasing power, Indonesia is now the 10th largest economy in the world. Added with a growing middle-class population, Indonesia is certainly the hot destination for foreign direct investments (FDI).

According to the Indonesia Investment Coordinating Board (BKPM), the investment realization in 2019 exceeded beyond expectations. As much as IDR 809.6 trillion was poured into the archipelagic country throughout the year, which went far beyond the target of IDR 792 trillion.

Now that you are intrigued about whether you can be the next successful foreign entrepreneur in Indonesia, you can. As long as you are on the right track, setting up and starting a business in Indonesia is seamless and hassle free.

Our business incorporation specialists have prepared a handy guide that contains all the essentials you need to know about setting up a business in Indonesia, all in one place.

Starting a Business in Indonesia: The Shortcuts

Company Registration

Before you think about anything else, you should think about the right entity that satisfies your business needs. In Indonesia, the common entities available for foreigners are:

 

After deciding the suitable business entity type, you need to pay attention to the following updates:

Business License, Import License, and Other Licenses

A business license, which can be applied through the OSS, is required for all kinds of business activities and business entities in Indonesia.

After registering online at the OSS, each business will automatically get a Business Identity Number (NIB) one day after the registration, provided that all required documents are completely submitted.

Alongside the NIB, a business license will also be granted if your business does not require other licenses (industrial license, tourism license, etc.), which depends on the business sector your company is engaged in.

Updates on licenses can be found below:

Foreign Employment

Foreign-owned companies and representative offices are permitted to employ foreign workers. Every foreigner who is to be employed, they are required to secure a work visa and a stay permit (KITAS).

Complete guidance and the latest updates on foreign employment in Indonesia can be found below:

 

Recruiting employees, both foreign and local, can be costly and time-consuming, not to mention challenging, since an in-depth understanding of labor laws and payroll regulations is a must. What is more, to ensure that you recruit only the most qualified candidates, an employee background check is something you want to consider.

Solutions to tackle recruitment challenges can be found below:

After Business Incorporation in Indonesia, What’s Next?

Now that your business is up and ready to run, your main focus should be on developing strategies to gain market presence, boost your brand, provide quality products and/or services to satisfy customers and earn profits, among others.

As such, focusing on non-generating tasks like accounting, tax filing and reporting and payroll processing is not necessary. They can be outsourced to experienced and knowledgeable specialists who know what they are doing. When outsourcing your business tasks, you can rest assured that all deadlines are met and compliance is fulfilled at all times, thus ensuring seamless business operations in Indonesia.

There are plenty of business tasks that you can outsource in Indonesia with the most important ones are as follows:

Setting up Your Business in Indonesia with Cekindo

If, after reading through all the essentials that you need to know about setting up a business and starting right away in Indonesia, you still have some questions or require further information, do not hesitate to contact us.

Our business incorporation specialists are more than happy to provide you with extensive guidance on starting a business in Indonesia. We also offer assistance in company registration, relocation to Indonesia, visa and permit application and business licenses, among others.

Fill in the form below to discuss your investment plan and setting up a business in Indonesia with our experts, who will respond to your message shortly.

 

Verified by

Ales Cina

Consulting Manager at InCorp Indonesia

Aleš manages solution delivery at InCorp Indonesia, optimizing incorporation processes and client relationships. His experience in internal auditing, retail, and sales offers valuable global insights. Aleš, with a degree in Economics and Finance from the Czech Republic, helps clients navigate cross-border business challenges, focusing on cultural and legal insights.

Frequently Asked Questions

    Limited liability company with 100% local/domestic direct investment

    In Indonesia, a PMA company is typically required to submit various reports to relevant authorities, such as:

    • Annual financial report
    • Investment realisation report
    • Manpower and employee welfare report
    • Expatriate utilisation report
    • Company loan repot
    • Foreign exchange and prudential principles report

    However, depending on the business activities and classification relevant authority may require additional reports from a PMA company.

    A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances.

    • Import facilities
      Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production.
    • Tax holiday
      The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status.

      • Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy.

    • Tax allowance
      For companies in certain designated areas or regions, the government may provide the following tax concessions:
      Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration.
      Accelerated depreciation and/or amortisation deductions
      An extension of tax losses carried forward for a maximum of ten years
      A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents
      The applicant eligible has to meet high-level-criteria for the above tax facilities:
      High investment value or for export purposes
      High manpower absorption
      High level of local content
    • Investment allowance
      The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project.
    • Super deduction
      This facility could be granted to certain businesses, such as:
      60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame.
      Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities.
      Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia.

    A limited liability corporation is required by Indonesian company law to have two or more shareholders, who may be either a legal entity or an individual. The foreign investor must find a second shareholder to own shares in the PMA firm for investments that are 100% open, which could be an affiliated party.

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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.

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