Foreign investors looking to set up a company in Indonesia, have 3 options.
1) Setting up a Foreign-Owned Limited Liability Company – this set up requires a minimum investment capital above IDR 10 billion. Of which, 25% has to be paid up to fully incorporate a PT PMA.
2) Setting up a Representative Office – this set up does not require a minimum investment capital, and it is entitled to 100% foreign ownership. However, the company is limited to a set of specific business activities that excludes sales and all other revenue-generating activities.
3) Setting up a Local PT – this setup is done via a Special Purpose Vehicle (SPV) Agreement. The entity is a 100% local entity with its own assets, liabilities, and legal status.
Restrictions on Foreign-owned Companies in Indonesia
Although many foreign investors often choose to establish a PT PMA (a foreign-owned company) to operate its business in Indonesia, it is important to note, based on Indonesia’s Positive Investment List, certain business lines are either still fully closed-off to foreign ownership or, see a limitation or cap on foreign ownership. In such cases, foreign investors will need to opt for a Special Purpose Vehicle (SPV) or Special Purpose Entity (SPE), to start operating in Indonesia.
A Special Purpose Vehicle (SPV) is a 100% local commercial company, that is set up by an organization – such as its parent company. It is commonly structured as a Partnership, Limited Partnership, or Joint Venture. An SPV is established through an agreement (commonly known as a memorandum of association) between its shareholders, directors, and commissioners. The shareholder agreement sets out the basis on which the company is established, and it provides details such as, the company name, ownership structure, management control, authorized share capital, and the extent of the liabilities of its members, to name a few.
Asides from gaining full control of your company, and access to business lines, here are some other reasons why establishing a SPV company in Indonesia could be potentially beneficial.
1. No Minumum Capital Investment Amount Required
It might come as a surprise to some foreigners, but all foreign-owned companies are obliged to have a minimum foreign investment plan of IDR 10 billion. Of which, IDR 2.5 billion is considered Paid-Up capital, to be used for paying business operational cost. Because of this regulation, some foreign investors opt for a less financially demanding choice of a SPV, where there is no obligation to cough up large initial capital investment.
2. Faster and Less Complicated Process
Setting up a SPV is much faster and less complicated when compared to setting up a PT. PMA (foreign-owned company). For instance, a PT. PMA is required to produce an audited financial report before receiving its permanent business license. A permanent business license is a primary license a business must obtain, before any other licenses, such as an import or product license, can be issued.
To set up a SPV that is fully in compliance with Indonesia’s law, the following are key pointers to be taken into consideration:
As a one-stop market-entry consulting firm, Cekindo has accumulated a deep set of market and industry knowledge from over 10 years of experience, operating in Indonesia. Cekindo’s services for SPV setup includes the following:
Should you already have certain parts of the process covered, individual services, such as setting up a PT. Local, are also available.
If you have more questions, please send them by filling in the form below, and our consultants will attend to them as quickly as possible.