What Foreign Entrepreneurs Want to Know Before Betting on Indonesia?

With a population exceeding 270 million, half under the age of 30, Indonesia has quietly become Southeast Asia’s economic powerhouse. Its digital economy, projected to hit $130 billion by 2025 (Google, Temasek & Bain & Co.), is turning heads from Singapore to San Francisco.

But for many foreign entrepreneurs, opportunity comes with complexity.

Before wiring funds or hiring local teams, most want to understand the nuances behind Indonesia’s investment climate:

• Can foreigners entirely own businesses here?
•  How reliable is the legal system?
•  What are the risks of working with local partners?
•  Is the political environment stable enough for long-term bets?

“You can’t just ‘enter Indonesia.’ You need to decode it,” said Maya Sutanto, a Jakarta-based consultant for foreign startups. “There are silent rules, and if you don’t respect them, you burn cash fast.”

This article unpacks what global entrepreneurs are really asking.

Can You Set Up a Company Without Setting Foot in Indonesia?

The entire incorporation process, from drafting the deed of establishment to obtaining the Business Identification Number (NIB), can be handled remotely through a local legal consultant or agency.

However, at least one director must physically visit Indonesia to:

• Open the corporate bank account
• Sign certain original documents
• Complete biometric verifications (if required by the bank)

Digital infrastructure in Indonesia has improved significantly, but full automation is still not possible, especially for banking and tax-related processes.

 

How Long Does It Take to Establish a Company in Indonesia?

Once you have all documents ready, incorporation of a PT PMA can take as little as 3–5 business days. However, full operational readiness, including tax registration, licensing, and opening the bank account, generally takes 2 to 4 weeks.

Additional factors that can delay the process:

• Industry-specific approvals (e.g., OJK for finance, BPOM for food)
• Legal translations of foreign documents
• Bank due diligence and compliance checks

Bonus Tip: Plan for at least 4-6 weeks from intent to invoice.

 

What Licenses and Permits Will You Need in Indonesia?

Beyond basic incorporation, most businesses in Indonesia require the following:

• Business Identification Number (NIB) from OSS (Online Single Submission)
• Sector-specific licenses, issued by ministries (e.g., Ministry of Health, OJK, or Ministry of Trade)
• Tax Registration (NPWP) and VAT number (if applicable)
• Municipal permits, such as signage licenses and operational location approval

If you are in a regulated sector (e.g., fintech, hospitality, mining), expect to face multiple layers of licensing, some requiring in-person interviews or inspections. Learn more here.

 

What Does the Tax Landscape Look Like for Foreign-Owned Businesses in Indonesia?

Indonesia offers a reduced tax rate (0.5%) on gross revenue for new small businesses, but only for firms under IDR 4.8 billion in turnover, and only for the first three years.

Otherwise, standard tax rates apply:

• Corporate Income Tax (CIT): 22% (may reduce to 20% in the coming years)
•  Withholding Tax on Dividends: 10–20%, unless a treaty applies
•  VAT: 11% on goods and services
•  Branch Profit Tax: 20% (if applicable)
•  Tax incentives: Certain industries in Special Economic Zones (SEZs) or under government priority lists may qualify for tax holidays, investment allowances, or R&D deductions. 

Bonus Tip: Do not wait until year-end; instead, engage a tax advisor during incorporation.

 

What are the Types of Business Structures in Indonesia?

Entrepreneurs have multiple legal structures to choose from when registering a business in Indonesia. The most suitable structure often depends on whether the business is foreign- or locally owned and what the operational goals are. The common entity types include:

 

PT (Perseroan Terbatas) – Local Limited Liability Company

This is the go-to option for Indonesian citizens and businesses.

Requirements-

• Requires at least two shareholders (individuals or entities).
•  There must be one director and one commissioner.
•  It should be entirely owned by Indonesians.
•  There is limited liability protection for shareholders.
•  It is ideal for a broad range of domestic and commercial activities.

 

PT PMA (Foreign-Owned Company)

PT PMA allows foreign nationals or companies to hold partial or full ownership in Indonesian enterprises, based on the Positive Investment List.

• Minimum authorised capital: approx. IDR 10 billion.
• Must operate in sectors approved for foreign investment.
• Permits foreign shareholding, foreign staff hiring, and profit repatriation.
• This structure is suitable for international businesses and joint ventures.

 

CV (Commanditaire Vennootschap) – Limited Partnership

SMEs often use this entity; a CV is a simple partnership structure.

• It consists of active and silent partners.
• It is not considered a separate legal entity, so partners may be personally liable.
• It is easier to set up, but it is best suited for small-scale operations.

 

Representative Offices

This entity is ideal for market research or brand promotion without direct sales activity.

Types include:

• General Representative Office (KPPA)
•  Trading Representative Office (KP3A)
•  Construction Representative Office (BUJKA)

These do not generate revenue and are used primarily for liaison purposes.

 

How to Incorporate Your Business in Indonesia in 2025?

If you are ready to start your business in Indonesia, here are the essential steps involved:

 

1. Select a Company Name

Your business name must contain at least three unique words. While local companies are required to use the Indonesian language, foreign-owned companies (PT PMA) are allowed to use names in English or other foreign languages.
To reserve the name, submit an application through the Ministry of Law and Human Rights’ Legal Entity Information System.

 

2. Appoint Key Company Personnel

Indonesian law requires at least two shareholders, one director, and one commissioner. While local companies must have Indonesian shareholders, PT PMAs allow foreign ownership.

 

3. Prepare and Submit Legal Documents

With the help of a notary, draft the Articles of Association, which should include:

• Capital structure (authorised, issued, and paid-up)
•  Company objectives
•  Registered office address
•  Board structure
•  Shareholder rights and obligations
•  Incorporation period

These documents must be signed by all shareholders and submitted to the Ministry of Law and Human Rights for approval.

 

4. Obtain a Domicile Letter

Outside Jakarta, businesses must get a domicile certificate from the local district government (Surat Keterangan Domisili Perusahaan) to confirm the company’s registered address.

 

5. Register for a Taxpayer ID (NPWP)

A company must register with the Indonesian Tax Office to obtain a Taxpayer Identification Number (NPWP), which is necessary for tax reporting, license applications, and opening a corporate bank account.

 

6. Apply for a Business Identification Number (NIB)

Register through the OSS (Online Single Submission) platform to get your NIB. This 13-digit number acts as your company’s unique identifier and is mandatory for securing operational permits and conducting lawful business activities.

 

What are the Key Considerations Before You Incorporate Your Business in Indonesia?

Foreign-owned companies (PT PMA) must show a minimum authorised capital of IDR 10 billion (approx. USD 650,000) to cover operational activity. Not all of it needs to be deposited upfront, but the commitment must be documented.

Directors and Shareholders

• Minimum two shareholders (individuals or entities), it is advisable to have one local director for the tractability of administration.
•  The director is responsible for day to day operations of the company.
•  1 director and 1 commissioner required.
•  Foreign directors need valid work permits (KITAS).

Business Address

• Your company must have a physical office in a properly zoned area. Some regions allow virtual offices under specific conditions.

 

What do you need to get a Business License in Indonesia?

The documents and approvals you need depend on how risky your business activity is. Companies in higher-risk sectors must complete more steps and get more licenses.

• Taxpayer Identification Number (NPWP- Nomor Pokok Wajib Pajak)
•  Business classification code based on KBLI
•  Company profile
•  Details about the capital ownership
•  Planned business address 

The OSS platform is connected to multiple government bodies, including the Ministry of Finance, the Ministry of Home Affairs, and the Ministry of Law and Human Rights.

 

Low-Risk Businesses

Businesses considered low-risk only need an NIB to start. The NIB functions as:

• The company’s official identity
•  Importer registration number
•  Registration for the national social security program

 

Medium-Low Risk Businesses

These businesses must obtain:

• An NIB
•  A Certificate of Standards, which shows they meet certain business or product norms

The certificate is issued through the OSS system and is a requirement before the business begins operating.

The NIB allows businesses to carry out activities in both the preparation and commercial phases.

The preparation phase includes:

• Buying equipment or tools
•  Securing land
•  Hiring staff
•  Conducting feasibility analysis
•  Arranging project funding

Commercial phase includes:

• Manufacturing or offering services
•  Shipping and distribution
•  Sales and marketing
•  Other income-generating activities

 

Medium-High Risk Businesses

For this category, a company must get both:

• An NIB
•  A Certificate of Standards that must be validated by either central or regional authorities

If the certificate is not yet verified, the company can only operate in the preparation stage.

Once the government confirms that all required standards are met, the certificate is officially validated, allowing the company to enter the commercial stage.

 

High-Risk Businesses

High-risk sectors require:

• An NIB
•  An Operating License issued after the government verifies all conditions are met, which might include an environmental impact assessment 

Although the full license is needed to operate commercially, the NIB still allows them to carry out preparatory activities.

Learn more here.

 

How to Choose the Right Consultant in Indonesia?

When selecting a business registration consultant in Indonesia, it is crucial to choose a partner who can truly support your success. Prioritise consultants with a strong reputation, proven experience, and deep knowledge of both local and international business laws. Look for professionals who have successfully assisted businesses similar to yours; their expertise will be invaluable in addressing your specific needs and challenges.

 Ensure they offer clear communication, prompt responsiveness, and a genuine willingness to tailor their services to your goals. Finally, verify their credentials and request references or testimonials from past clients to confidently assess their reliability and expertise. So, what to look for in a company registration consultant? Here are some factors. –

 

1. Expertise

Skilled consultants help you with every step of registering your business in Indonesia. They make sure all legal rules are followed, help you choose the right business type, file the necessary papers, and give advice to keep your business compliant. You should select the registration consultant who has a proven track record and real experience. You should consider these questions while choosing the right consultant –

How many companies have they registered?
Can they share client success stories?

 

2 . Reputation

By doing the research, you can save your company’s reputation. You should check online reviews and client testimonials, and whether they are part of trusted business networks. A firm’s reputation speaks volumes about the quality of service you can expect.

 

3. Cost of Company Registration Consultant

Adept professionals reduce costly mistakes and expenses. A reliable consultant will provide a detailed and transparent cost, clearly outlining what is included and what is not. They also help in mitigating issues and offer strategies to manage costs.

 

4. Legal Compliance

Registering a company in Indonesia means following legal steps like getting licenses, paying taxes, and meeting labour laws. Professional consultants guide you through these processes, helping you avoid legal issues and fines.

 

5. Helping Hand Till the End

Registration is just the initial step. A right consultant will provide end-to-end service, for instance –

• Applying for tax numbers (NPWP)
•  Obtaining business licenses (NIB, SIUP)
•  Setting up local office addresses or virtual offices
•  Handling compliance filings and payroll setup

 

Conclusion

Indonesia offers significant opportunities for foreign investors, but successful market entry demands a well-informed, structured approach. Regulatory requirements, capital thresholds, sectoral restrictions, and evolving tax frameworks all require close attention during the incorporation and operational setup phase.

For companies considering Indonesia as a growth market, the following are critical:

• Understanding PT PMA structures and investment limitations
•  Accurate timeline and cost planning for compliance and licensing
•  Navigating local regulations across multiple ministries
•  Building operational resilience through local partnerships and talent acquisition

 

With 3E Accounting’s local expertise and end-to-end service, you can enter the Indonesian market with confidence and clarity. Contact our consultants today to get started.

For more information, our blogs can help you.

 

 

Frequently Asked Questions