How to Start a Business in Indonesia in 2023? Know the Latest Changes

How to Start a Business in Indonesia in 2023? Know the Latest Changes

  • InCorp Editorial Team
  • 9 August 2023
  • 6 minutes reading time

There is no better time than 2023 when starting a business in Indonesia as a foreigner. The Indonesian government has recently implemented various more business-friendly policies to improve the country’s investment climate.

Suppose you are a foreign investor looking to invest and conduct business in Indonesia. In that case, you can be relieved that business incorporation in Indonesia is getting much easier and more convenient today.

Starting a Business in Indonesia as a Foreigner in 2023: Know the Latest Changes

Starting business as a foreigner

Registering a Company

If the company registration process previously required at least two months to be completed, the case is different in 2023. A foreign investor can have their company registered in between one and 1.5 months.

Moreover, if you plan to establish your business in Jakarta, you must not submit Company Domicile (SKDP). This regulation has been running effectively since May 2019.

Working Immediately with an Investor KITAS

If you are a foreign investor who will fill the positions of a shareholder, director, or commissioner, an Investor KITAS is available for you. The good news is that this stay permit allows you to work immediately.

Furthermore, an Investor KITAS has noteworthy benefits, including easy application and waiver of work permit government fee (DPKK).

There are two options available for Investor KITAS. As a foreign investor, you can choose whether to apply for the 1-year KITAS or 2-year KITAS. Both types of KITAS allow you to enter and leave Indonesia multiple times as long as your KITAS remains valid.

To enjoy the benefits of an Investor KITAS, you must invest a minimum of IDR 1 billion in sponsored shares. And the company is required to have an invested capital of more than IDR 10 billion. Businesses can Start Operations Right Away.

As if the two changes elaborated above were not enough, your business can start operating immediately as long as it has secured a Business Identification Number (NIB) that can be applied through the Online Single Submission (OSS) system, which has been upgraded to OSS 1.1. In other words, no additional licenses are required.

Forty-five business fields have been added, namely call center, event organizer, travel agency (ticketing), and education and training (among others). For more details, please get in touch with our business consultants.

How to Register a Company in Indonesia in 2023?

For your business to be able to operate in Indonesia, you will need to register a company. For a seamless start, you need to choose a legal entity.

The most common options of legal entities available for foreign investors in Indonesia are Foreign Limited Liability Companies (PT PMA), Local Limited Liability Companies (PT,) and Representative Offices.

More about PT PMA

Starting a business in Indonesia

Since most foreign investors would choose to incorporate a PT PMA in Indonesia, we will elaborate more about the nature of PT PMA.

The foreign ownership for a PT PMA ranges from as little as 1% to 100%. To know more about foreign ownership in Indonesia, you should read through the Negative Investment List or consult with our specialist. Moreover, a PT PMA can employ foreign workers.

What are the Requirements for Setting up a PT PMA?

For a PT PMA to operate in Indonesia, it should consist of at least one director and one commissioner (one of which must be an Indonesian), plus two shareholders (can be foreign or local individuals or corporations, or a combination of both).

A PT PMA requires at least IDR 10 billion of capital investment, with a minimum paid-up capital of also IDR 10 billion as well.

A domicile letter is still required for company registration in Indonesia except for Jakarta. Knowing that a residential address is strictly prohibited for business in Indonesia is essential. To avoid the high cost of building a new office, you can always opt for a virtual or serviced office in Indonesia.

How to Establish a PT PMA via OSS?

As briefly mentioned above, to streamline the establishment process of a business entity, you have to apply via the OSS to obtain the NIB and other relevant licenses.

In short, the process is as follows:

  1. Approval of company name: it should consist of three words that are not vulgar or obscene.
  2. Deed of Incorporation: it should include an Article of Association, and a notary must be present.
  3. Approval of legal entity: After the notary submits the Deed of Incorporation, the Ministry of Law and Human Rights will approve.
  4. Registration of Tax ID (NPWP): A valid NPWP is required for securing other companies’ licenses, banking activities, and fulfilling tax obligations.
  5. Domicile Letter: Required to show the location of your business.
  6. Application of NIB: A unique company profile number that guarantees an immediate operation, provided that no additional licenses are needed. Alongside NIB, Business License(s) and Location Permit will also be granted one day following the registration via OSS. NIB also serves as an import license and customs identification number to be used for the customs clearance process.
  7. Application of other licenses: Depending on the business sector, additional permits such as commercial and tourism licenses may be required before operation.

Read more: How to Obtain KITAS Indonesia for Investment in Surabaya and Batam

Taking Care of Permits and BankAccountst to Relocate to Indonesia

After your business is successfully incorporated in Indonesia, you must secure stay and work permits for your foreign employees and ensure a bank account. If you are unsure about the process of both, you are welcome to discuss it with us.

Be Aware of Changes that May Take Placeshortlye

Implementation of Omnibus Law

Despite the recent business-friendly policies, many complicated regulations hampering foreign investments remain. Through the implementation of the Omnibus Law, thousands of laws are to be amended, including taxation and labor.

No more Negative Investment List

The Negative Investment List in Indonesia may soon be replaced by a Positive Investment List, also known as a Priority List. More business sectors will welcome foreign investments, such as automotive, coal gasification, electronics, and export-oriented and import-substitution.

How InCorp Can Assist in Starting a Business in Indonesia

It is essential to note that policies and regulations may constantly change in Indonesia to encourage more foreign direct investments. You can refer to this guide on business incorporation in Indonesia.

However, you are recommended to contact our business experts to get the most updated policies and regulations related to starting a business in Indonesia as a foreigner in 2023.

In addition to providing fresh guidance, our specialist can assist you in delivering market-entry and corporate secretarial services.

If you require further information and reliable assistance in starting a business in Indonesia, particularly in company registration, business licenses, visas, permits,s and product registration, among others, reach out to us by filling in the form below.

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

    The investment requirement for PMA companies in Indonesia varies based on their classification under the Indonesia Industrial Standard Classification (KBLI). Generally, a minimum investment of IDR 10,000,000,000 (ten billion Indonesian Rupiah), excluding investment in land and buildings, is needed to conduct one business activity in one location.

    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 foreign-owned company (PT PMA) in Indonesia is a popular choice among foreigners to set up a business. Foreign investors must check Indonesia’s Positive Investment List to see which businesses are open to foreign direct investment.

    Yes, PMA companies in Indonesia can hire expatriates, but certain positions are restricted by the Ministry of Manpower. Expatriates need both working and stay permits, and employers must employ Indonesian counterparts for each expatriate employee, typically at a ratio of at least one Indonesian counterpart per expatriate.

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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.