Starting a Foreign-Owned Business in Indonesia: Important FAQs

Important FAQs: How to Start a Foreign-Owned Business in Indonesia?

 

 1. What are the types of legal entities in Indonesia?

Indonesia recognises two broad categories of business entities: Legal Entities, which separate personal and business liabilities, and Non-Legal Entities, where owners bear unlimited personal liability.

The primary legal entities available for company setup in Indonesia are:

• Limited Liability Company (PT) is the most common structure, available as PT (locally owned), PT PMA (foreign-owned)
• Cooperative member-owned, non-profit-focused organisations
• Foundation established for social, religious, or humanitarian purposes
• State-Owned Enterprises (BUMN) are government-controlled entities in strategic sectors

For foreign investors, the PT PMA is the standard and most flexible vehicle for foreign company registration in Indonesia.

2. How long does it take to start a business in Indonesia?

Starting a business in Indonesia typically takes 4 to 8 weeks, depending on the business sector, licensing complexity, and documentation readiness. For foreign investors setting up a PT PMA, the timeline is broadly structured as follows:

• Document preparation and notarisation: 1 to 2 weeks
• Ministry of Law and Human Rights approval: 1 to 2 weeks
• NIB and tax registration via the OSS system: 1 to 3 weeks

Engaging a professional advisory firm for your Indonesia business setup can significantly reduce delays, particularly for sector-specific licences that require additional regulatory verification.

3. What are the capital requirements for starting a foreign-owned business in Indonesia?

Setting up a 100% foreign-owned company in Indonesia through a PT PMA requires a minimum total investment of IDR 10 billion per business classification (KBLI), with at least 25% IDR 2.5 billion deposited as paid-up capital. This equity must be placed in a corporate bank account or demonstrably utilised for legitimate business expenses.

If your company operates across multiple KBLI codes, capital thresholds apply per classification, scaling your total requirement accordingly. The Indonesian Investment Coordinating Board (BKPM) requires a notarised capital statement during incorporation.

4. Can a foreigner start a PT local company?

A foreigner cannot directly own a standard PT in Indonesia. The correct vehicle for foreign investors is a PT PMA, a foreign-owned limited liability company that permits up to 100% foreign ownership in sectors open under Indonesia’s Positive Investment List.

Key requirements for a PT PMA include a minimum total investment of IDR 10 billion, at least two shareholders, one director, and one commissioner. Once registered, the PT PMA allows the foreign owner to generate revenue, employ staff, and sponsor an Investor KITAS for legal residency in Indonesia.

5. Can a foreigner own 100% of a business in Indonesia?

Yes, a foreigner can own 100% of a business in Indonesia, but only through a PT PMA and only in sectors classified as fully open under Indonesia’s Positive Investment List. Full foreign ownership is permitted across a wide range of industries, including manufacturing, software development, and e-commerce.

Certain sectors impose partial restrictions, typically capping foreign equity at 49% or 67%, requiring a joint venture with a local Indonesian partner. The specific KBLI code selected during foreign company registration in Indonesia determines whether 100% ownership is permissible for your intended business activity.

6. What visas are usually required for company owners in Indonesia?

Foreign company owners in Indonesia require the appropriate visa based on their level of operational involvement and duration of stay.

• Investor KITAS (Index E28A/C313): For active shareholders and directors of a PT PMA, valid for 1 to 2 years and renewable. Requires a minimum shareholding of IDR 10 billion.
• Business Visa (Index C2/D2): Suitable for owners who do not permanently relocate. Permits attendance at board meetings and investment oversight, but does not allow local salary payments.
• Golden Visa: For high-net-worth investors seeking 5 to 10-year residency, subject to higher investment thresholds.

7. What are the legal requirements for starting a foreign-owned business in Indonesia?

Starting a foreign-owned business in Indonesia requires incorporation as a PT PMA under the framework of Indonesia’s Investment Law (Law No. 25 of 2007) and Presidential Regulation No. 10 of 2021 governing the Positive Investment List.

Core legal requirements include a minimum total investment of IDR 10 billion with 25% paid-up capital, at least two shareholders, one director, and one commissioner. The incorporation process involves notarisation of the Deed of Establishment, Ministry of Law and Human Rights approval, NIB issuance via the OSS system, and corporate tax registration (NPWP). Sector-specific operational licences are issued based on business risk classification.

8. What are the initial steps to establish a foreign-owned company in Indonesia?

Establishing a foreign-owned company in Indonesia involves the following sequential steps:

1. Verify your business sector against Indonesia’s Positive Investment List to confirm foreign ownership eligibility.
2. Determining your corporate structure, a PT PMA requires at least two shareholders, one director, and one commissioner, with a minimum paid-up capital of IDR 2.5 billion.
3. Engage an Indonesian notary to draft the Deed of Establishment and Articles of Association.
4. Obtain Ministry of Law and Human Rights approval for legal entity status.
5. Register via the OSS system to receive your NIB and business licences.
6. Register your corporate tax number (NPWP) with the local tax office.

9. Which companies provide business registration services for foreign investors in Indonesia?

Foreign investors setting up a company in Indonesia are best served by engaging a licensed corporate advisory or professional services firm experienced in PT PMA incorporation, OSS registration, and post-incorporation compliance.

A qualified firm will manage the full process, from verifying your sector under the Positive Investment List and preparing the Deed of Establishment, to obtaining your NIB and securing sector-specific licences. When selecting a provider, prioritise firms with demonstrated expertise in foreign company registration in Indonesia, bilingual documentation capability, and integrated tax and corporate secretarial services. 3E Accounting Indonesia provides end-to-end support across all these requirements.

10. How can I find accounting firms specialising in foreign-owned businesses in Indonesia?

Finding the right accounting firm for a foreign-owned business in Indonesia requires assessing the firm’s specific expertise in PT PMA structures, Indonesian Financial Accounting Standards (IFRS/ETAP), and cross-border tax compliance.

Key capabilities to verify include PT PMA incorporation support, bilingual financial reporting, monthly and annual tax filing (including NPWP registration), payroll administration, and foreign employee compliance. Professional B2B directories and referrals from the Indonesian Investment Coordinating Board (BKPM). 3E Accounting Indonesia offers the full spectrum of accounting and corporate advisory services tailored specifically to the needs of foreign investors operating in Indonesia.

11. How to navigate the Online Single Submission system for business permits?

The Online Single Submission (OSS) system is Indonesia’s centralised digital platform for business licensing. All companies undergoing foreign company registration in Indonesia must register through OSS to obtain their NIB, NPWP, and operational licences.

The process follows these steps:

1. Prepare incorporation documents, including the Deed of Establishment and Ministry of Law and Human Rights approval.
2. Create an account on OSS and select the appropriate business scale.
3. Input company details and assign the correct KBLI business classification code.
4. Receive your NIB automatically upon submission.
5. Complete risk-based licensing commitments. Low Risk approvals are issued immediately; Medium and High Risk classifications require additional documentation submission.

12. What are the best business consulting services for foreign entrepreneurs in Indonesia?

The best business consulting services for foreign entrepreneurs in Indonesia are those offering integrated support across PT PMA incorporation, OSS registration, tax compliance, and ongoing corporate secretarial obligations covering the full lifecycle of an Indonesia business setup.

When evaluating a consulting firm, prioritise providers with verifiable experience in foreign company registration in Indonesia, strong relationships with BKPM and relevant regulatory bodies, and the ability to manage sector-specific licensing complexities. Firms offering bilingual documentation, post-incorporation compliance support, and workforce advisory for foreign employee KITAS sponsorship deliver the most comprehensive value. 3E Accounting Indonesia provides all of these services under one roof for foreign investors.

13. Where can I get a business visa to start a company as a foreigner in Indonesia?

Foreign nationals starting a business in Indonesia should apply for the appropriate visa through Indonesia’s official immigration portal. The visa pathway depends on your stage of business establishment.

During the pre-incorporation phase, a Pre-Investment Visa (Index C12 for single-entry or D12 for multiple-entry) permits market research and partner engagement for up to 180 days. Once your PT PMA is registered and your minimum shareholding of IDR 10 billion is confirmed, you may transition to an Investor KITAS, granting two-year renewable residency with full authorisation to manage company operations in Indonesia.

14. What are the key tax obligations for foreign-owned businesses in Indonesia?

Foreign-owned businesses in Indonesia, structured as a PT PMA, are subject to the following primary tax obligations:

• Corporate Income Tax (CIT): 22% on net taxable income. Companies with annual gross turnover below IDR 4.8 billion receive a 50% rate reduction.
• Value Added Tax (VAT): 11% on domestic goods and services; 0% on qualifying exports.
• Withholding Tax (Article 26): 20% on gross payments to non-resident entities, reducible under applicable Double Taxation Agreements.
• Payroll Tax (Article 21/26): Monthly deduction from employee salaries.

15. What are the types of companies where foreign investment is strictly prohibited?

In Indonesia, certain business sectors are completely closed to foreign investment under the Positive Investment List administered by BKPM. Foreign company registration in Indonesia is strictly prohibited in the following categories:

• Gambling and betting operations
• Small-scale fisheries reserved exclusively for Indonesian citizens
• Narcotics production and distribution
• Weapons, ammunition, and explosives manufacturing
• Broadcast media and specific content distribution sectors
• Certain small and micro retail formats
• Management of protected natural forest areas

Beyond fully closed sectors, many industries impose partial foreign ownership caps of 49% or 67%, requiring a joint venture with a local partner.

 

Conclusion: How Can 3E Accounting Help You? 

Starting a business in Indonesia offers significant potential, but understanding the local regulations, capital requirements, and licensing procedures is crucial. With the proper support, you can launch smoothly and grow confidently.

At 3E Accounting Indonesia, we provide comprehensive assistance, from company registration and paid-up capital setup to legal advisory services, tax registration, and ongoing compliance.

Whether you are relocating a foreign company to Indonesia or launching a new venture, our team ensures your Indonesia business setup is structured correctly from day one.