How to Register a Foreign-Owned Company in Indonesia Without Being a Resident?

Indonesia, among the Asia-Pacific’s biggest economies to date, boasts a population of close to 280 million, with a consumer market that attracts companies despite the regulatory hurdles. Starting in 2019, the government has transformed the existing environment, featuring the Omnibus Law, an internet-based central licensing system, and the opening of over 245 business sectors to foreign investors, while also increasing the minimum required capital and transitioning the taxation and regulatory monitoring to real-time systems. Foreign investors can incorporate without having to move to the country, but the system is designed to discern investors with the intention of committing capital, with the structure leaning more to the committed rather than the distant or flipping investors.

In this guide, the process of foreign-owned business incorporation in Indonesia, where founders are non-residents, will be discussed. Although this topic may seem to offer opportunities, there is no intention to sell them; instead, the focus will be on aspects that really matter: rules concerning ownership, thresholds for capital, reasons for licensing, and requirements after incorporation.

 

 

How Does a Foreign Investor Register a Company in Indonesia Without Being a Resident?

Foreign investment in Indonesia has taken shape gradually, shaped as much by domestic politics as by economic ambition. Rather than throwing its doors open, the government has adjusted the rules in stages, trying to attract overseas capital while keeping a firm grip on an economy still dominated by small and informal businesses.

The strategy has not deterred investors. According to government data, foreign direct investment reached USD 50.27 billion in 2023, the highest level recorded. Much of that money flowed into transport equipment, mineral processing, and digital services. But the surge has not softened the regulatory framework. For founders based outside the country, incorporating a business in Indonesia remains a legal and administrative process that rewards preparation over speed.

The PMA requires foreign-owned companies to operate under conditions of ownership, minimum capital requirements, and licensing requirements. Residency is not required, but compliance is continuous. Licenses are issued under a risk-based regime that links approval to ongoing reporting rather than a single clearance at the time of registration.

After 2021, the shift became more pronounced when Indonesia replaced its longstanding Negative Investment List with a Positive Investment List, opening more than 245 business activities to full foreign ownership. At the same time, it expanded centralised reporting, required companies to document investment realisation, and increased supervision in sectors deemed strategically sensitive.

In other words, what it means for non-resident founders is that ownership without relocation is possible, but leaves little room for informality. From abroad, companies can be established, but only if founders understand how the PMA framework operates in practice and are prepared to meet capital and compliance requirements that continue long after incorporation.

 

Legal foundation

The investment regime is rooted in Investment Law No. 25/2007 and Company Law No. 40/2007, both of which were reshaped by the 2020 Omnibus Law to align licensing processes with global standards.

 

Expansion of open sectors

Digital services, wholesale trading, data centres, renewable energy, and manufacturing now allow 100 per cent foreign ownership, reflecting Indonesia’s push to diversify away from raw commodities.

 

Restricted activities

Broadcast media, certain agricultural activities, micro-scale retail, and cottage industries remain insulated from foreign equity to preserve local economic structures.

 

Oversight role of BKPM

The Indonesian Investment Coordinating Board evaluates applications, verifies capital, and enforces reporting; it revoked thousands of dormant foreign licenses in 2022 and 2023.

 

Treatment of non-resident owners

Shareholders may remain entirely abroad as long as they appoint directors and commissioners, provide certified identification, and maintain a registered Indonesian business address.

 

Why Does Indonesia Impose High Capital Requirements on Foreign-Owned Companies?

For a long time, Indonesia has failed to curb the rise of foreign-controlled microenterprises operating in the same market and directly competing with local shops and street traders. In response, the government set up a very high entry barrier in the region by requiring a minimum investment of IDR 10 billion per business line and a paid-in capital of IDR 2.5 billion.

According to officials, the strict thresholds are intended to ensure that foreign participation is genuinely developmental rather than extractive, and that capital-intensive ventures, rather than micro-trading outfits, will determine the country’s future. Moreover, the regulation helps the government approve.

Micro, small, and medium enterprises account for 97 per cent of the country’s labour market, and policymakers. Consequently, there is very little chance for the capital regulations to be eased in the foreseeable future, especially when the industrial policy is set to attract medium and large manufacturers to newly established special economic ​‍​‌‍​‍‌​‍​‌‍​‍‌zones.

 

Rationale for high thresholds

The state uses capital barriers to prevent foreign firms from operating on the same scale as local family-run shops, which dominate the domestic retail landscape.

 

Paid-in capital mechanics

Paid-in capital must be deposited into an Indonesian bank account before licensing progresses; banks apply heightened due diligence to foreign shareholders.

 

Verification and reporting

Quarterly investment-realisation filings (LKPM) are mandatory; failure to demonstrate sufficient capital deployment can trigger suspension.

 

Sectoral effects

Industries with negligible start-up costs, such as consulting, marketing, and digital content, bear disproportionate compliance pressure relative to large manufacturers.

 

Limited exceptions

Although digital enterprises operate with lean structures, the statutory capital rule applies uniformly across sectors.

 

What Steps Must a Non-Resident Follow to Incorporate a PMA Company?

Setting​‍​‌‍​‍‌​‍​‌‍​‍‌ up a PMA company means that you have to interact with Indonesia’s Online Single Submission Risk-Based Approach system (OSS-RBA), which was launched in 2021 to replace paper-based licensing. Although the system offers faster processing times, it assesses business risk levels and sends them through different approval routes. If you are a foreigner, the whole thing can be done by a corporate services company or a local attorney whom you have appointed. You do not have to be there in person, but document authentication often results in wait times.

The incorporation steps are first the notary drafting a deed of establishment, then legalisation by the Ministry of Law and Human Rights. After obtaining legal status, the company registers with OSS-RBA to get a Business Identification Number (NIB). NIB is the primary commercial license and tax registration, as well as an import identifier. If a business is in the medium or high regulatory risk category, it may still need operational licenses issued by ministries before it can start commercial ​‍​‌‍​‍‌​‍​‌‍​‍‌activities.

 

Deed of establishment

A notary drafts the deed listing shareholders, directors, commissioners, and business classifications in accordance with Indonesia’s KBLI code.

 

Legalisation

Approval from the Ministry of Law and Human Rights grants the company legal personality, enabling the opening of a bank account and the execution of contracts.

 

OSS–RBA registration

The NIB is the central regulatory identifier and links the company to Indonesia’s national tax and reporting systems.

 

Sector-specific approvals

Manufacturing, logistics, hospitality, energy, and construction firms typically require additional operational permits from relevant ministries.

 

Domicile requirements

A registered office address, physical or virtual, is mandatory for regulatory correspondence, inspections, and licensing records.

 

How Can Foreign Owners Operate a Company Without Residing in Indonesia?

Indonesian law distinguishes sharply between ownership and management. A shareholder may remain entirely abroad, but the company must appoint at least one director and one commissioner. Directors are responsible for day-to-day operations and are legally liable for compliance and reporting. Non-resident shareholders may appoint a local director to satisfy this requirement while retaining complete control of equity.

Physical presence becomes relevant only when foreign owners seek to conduct commercial activity within Indonesia’s borders. Signing employment contracts, managing on-site operations, or negotiating deals locally requires a work visa (KITAS). Many non-resident owners therefore adopt a hybrid structure: they maintain shareholder status abroad while delegating operational authority to a local director until they secure the necessary immigration permits.

 

Roles of shareholders vs. directors

Shareholders hold equity and strategic authority; directors exercise managerial control and bear responsibility for regulatory compliance.

 

Immigration implications

Any foreigner performing work in Indonesia must hold a KITAS, irrespective of shareholder status.

 

Governance expectations

The board must submit annual financial statements, taxation filings, and investment-realisation reports.

 

Use of nominee directors

Professional nominee directors may be legally engaged if contractual arrangements preserve the real ownership and do not transfer the beneficial interest.

 

Remote management

Indonesia’s digital tax system, launched in 2020, enables fully remote filing for VAT, corporate income tax, and employee obligations.

 

What Tax Obligations Apply to Foreign-Owned Companies?

Indonesia’s corporate tax rate stands at 22 per cent, with proposed reductions tied to reinvestment in specific priority sectors. Companies with annual gross revenue above IDR 4.8 billion must register for VAT, which is currently levied at 11 per cent. The tax system is designed to ensure that foreign-owned companies meet the same fiscal obligations as domestic corporations, an approach reinforced by increasing digitisation and automated audit tools.

The Directorate General of Taxes has expanded its monitoring mechanisms, issuing more than 56,000 VAT compliance notices in 2023 alone. Treaties with over 70 countries reduce withholding taxes on dividends, royalties, and interest, but firms must demonstrate beneficial ownership to access treaty rates. Enforcement has become more robust as Indonesia seeks to strengthen revenue collection in line with its medium-term fiscal framework.

 

Corporate income tax

The standard rate applies to all PMA companies, with incentives available to firms that invest in R&D, training, or special economic zones.

 

VAT obligations

Companies that cross the revenue threshold must charge, collect, and remit VAT; late filings incur penalties and administrative sanctions.

 

Withholding tax

Payments to foreign entities are subject to withholding rates of 10–20 per cent, depending on treaty adjustments.

 

Treaty benefits

Access to reduced rates requires documentation proving genuine economic presence, not superficial registration.

 

Digital enforcement

Electronic audits allow authorities to cross-reference OSS–RBA records, banking data, and tax filings.

 

 

What Operational Risks Should Foreign Owners Consider Before Incorporation?

Indonesia’s investment climate is dynamic but uneven across provinces. While the central government has moved aggressively to modernise licensing, enforcement varies, particularly outside Java. The World Bank’s 2024 Logistics Performance Index ranked Indonesia 61st globally, highlighting transport bottlenecks and infrastructure disparities that may introduce cost unpredictability for foreign firms.

Labour rules remain complex, even after the Omnibus Law sought to streamline hiring and adjust severance requirements. Land ownership restrictions, which prohibit foreigners from holding freehold property, add another structural constraint. Companies must also navigate currency regulations requiring transactions above IDR 100 million to be denominated in rupiah, a rule that affects foreign-currency invoicing and treasury planning.

 

Regional inconsistencies

Provinces apply zoning and construction rules differently, with some requiring additional permits not mandated by the federal government.

 

Labor considerations

While hiring rules have eased, severance remains relatively high compared with other ASEAN economies.

 

Land-use limitations

Foreign entities may secure long-term leasehold rights but not outright ownership of land.

 

Currency rules

Mandatory rupiah usage influences payment structures, contracts, and hedging strategies.

 

Compliance oversight

The Corruption Eradication Commission reported 686 enforcement actions in 2023, underscoring heightened scrutiny of government licensing offices.

 

 

Conclusion

Establishing a foreign-owned company in Indonesia as a non-resident is far from a procedural formality. It requires navigating a regulatory system undergoing rapid transformation, pairing broad investment liberalisation with increasingly sophisticated compliance expectations.

The demands placed on foreign investors today extend beyond capital injections: they involve maintaining transparent governance records, complying with digital tax oversight, and demonstrating continual adherence to the statutory framework that shapes Indonesia’s economic future.

Because of this, many investors now seek partners with the technical depth to manage incorporation, licensing, and ongoing corporate governance with precision. 3E Accounting Indonesia, one of the region’s most advanced corporate service providers, has distinguished itself by integrating automation, AI-supported workflows, and cross-border regulatory expertise into the company registration process.