Are you on the journey to register your business in Indonesia? You’re in the right place! Navigating the registration process as a foreigner in a new country might seem like a daunting task, but fear not – we are here to help you. Here, we will walk you through the requirements, process, and essential tips for a smooth entry into Indonesia’s dynamic business landscape. Types of Business Entities in Indonesia Choosing the right type of business entity is crucial, not only to comply with local regulations but also to protect personal assets. There are numerous business entity options available in Indonesia based on specific needs and preferences: PT Local PT (Perseroan Terbatas) is a limited liability company established and owned by locals (individuals, companies, or foundations). A small company (Perorangan/individual) with IDR 5 billion maximum capital can have only one local shareholder, who also acts as the director. A company with IDR 50 million to unlimited capital must have two minimum local shareholders. Plus, have one minimum commissioner and director. Even if you are a foreigner, you can still be a company director for a local company. But, there are certain job positions where foreigners are restricted, such as human resources director. Representative Office If you plan on doing business market research before generating revenue in Indonesia, setting up a representative office is the route for you. It is the fastest way to establish your foreign business entity in Indonesia with no capital required. PT PMA As a foreigner, if you want to be a shareholder or generate revenue in Indonesia, you should register your business as a PT PMA. PT PMA (PT Penanaman Modal Asing) is usually known as a foreign-owned company. It is a limited liability company which allows foreign direct investment. Besides taking control of your business, there are other benefits to PT PMA registration. It includes but not limited to: Starting operational preparations Getting work and stay permits for your foreign employees Purchasing assets under the company name Getting industry licenses Registering your products Ownership of Foreign-Owned Company In a significant shift due to the Indonesian Omnibus Law, the government has made most business classifications on the Indonesia Positive Investment List available for 100% foreign ownership. The business classifications include sectors in the digital economy, energy, infrastructure, and tourism. Moreover, there are 46 business lines open with partial restrictions for foreign ownership and 51 lines that need partnership with cooperatives and MSMEs. But, there are still sectors closed for foreign ownership. Be informed on the business line you are interested in, and let Sam Consulting guide you through the evolving landscape of business ownership in Indonesia. Risk-Based Business Licensing In addition to relaxing restrictions on foreign investment, the Indonesian government has also introduced a Risk-Based Business Licensing procedure. The risk level associated with your business, based on its potential hazards, determines the requirements for business licenses. The government will conduct a comprehensive risk analysis which comprises of: Identifying the relevant business activity Assessing the hazard level; Assessing the potential for the occurrence of any hazard Determining the risk level and business scale rating Determining the type of business licensing. Afterward, the government will classify your business activities into one of the following risk-level categories. Low-risk businesses Medium-low risk businesses Medium-high risk businesses High-risk businesses. This procedure benefits low and medium-risk businesses. Ultimately, if your business has a lower risk, you will have less complex licensing requirements. Requirements for Foreign-Owned Company Registration To start registering your foreign-owned company in Indonesia as a foreigner, prepare the requirements below: Company’s Business Classification Your business activities must match the classification listed in the Indonesian Standard Business Classifications and the Positive Investment List. This will help you know if your company can be 100% owned by foreigners, partially owned, or closed to foreigners. Let us know your company’s business activities, and we will double-check to make sure your business classification matches your intentions. Company Name When naming your foreign-owned company, you can use English or non-Indonesian language. But, make sure that the name has not been used before and is not similar to other registered names unless allowed by the name owner. Follow the pointers below to meet the standard: Contain at least three words with no obscene or misleading words Cannot have words that mean company or legal entity such as Ltd, Sdn, or Associate Written in Roman Alphabet with no numbers, special characters, or a mix of both. Company Structure Shareholders There must be at least two shareholders with either a mix of local and foreign national or 100% foreign-owned. A public notary must approve its Articles of Association. The share of a foreign-owned company is subject to the Positive Investment List of the Indonesia Investment Coordinating Board (BKPM), which varies depending on the business classification allowed. Commissioners and Directors The company must have one commissioner and one director minimum. The local or foreign commissioner oversees directors and ensures company activities align with its objectives and comply with the law and regulations. One of the directors must hold an Indonesian tax card (NPWP). The Indonesia Investment Coordinating Board (BKPM) recommends having at least one local director. If all directors are foreigners, they must obtain a stay permit (KITAS or personal domicile letters) and work permits. The general meeting of shareholders (RUPS), responsible for company management, elects the directors. Then, they can legally represent the company, sign contracts, and handle taxation documents. Company Domicile and Capital Domicile Ensure your foreign-owned company has a verified location supported by a domicile letter. It should be an unrestricted area based on its business activities. Capital There is a minimum required capital of IDR 10 billion, excluding the investment value of land and buildings. The paid-up capital needed is 100% of the minimum required capital, which makes it IDR 10 billion or higher, depending on the business classification. The Capital is not required to be deposited during the process of establishing the company, however, it should be gradully inserted in the
