What Steps Do You Need to Take to Open a Company in Indonesia?

The first thing most foreigners learn about opening a company in Indonesia is that it cannot be rushed. The second is that it’s worth the wait.

In the past decade, Indonesia has quietly emerged as one of Asia’s most dynamic avenues for foreign investment. With a GDP exceeding US$1.4 trillion and an average annual growth rate of 5%, the barrier reef of 17,000 islands is now Southeast Asia’s largest economy and the 16th-largest globally.

For entrepreneurs eyeing its 275 million–strong consumer market, the opportunity is accessible, but so are the complexities. Setting up a company in Indonesia demands familiarity with a system that blends digital modernisation with deeply rooted administrative tradition.

 

How to Choose the Right Business Structure in Indonesia?

Indonesia’s Company Law No. 40 of 2007 governs corporate entities. There are two main types of limited liability companies:

 

1. PT (Perseroan Terbatas):

A local limited liability company where all shareholders are Indonesian nationals or entities.
 

2. PT PMA (Perseroan Terbatas Penanaman Modal Asing):

A foreign-owned limited liability company, allowing partial or full foreign ownership depending on the business sector.
 
The Investment Coordinating Board (BKPM) oversees all foreign investment. The minimum paid-up capital requirement for a PT PMA is typically IDR 10 billion (around US$630,000), with IDR 2.5 billion of that as issued capital.

Certain industries, such as energy, telecommunications, and healthcare, fall under the Negative Investment List (DNI), which limits or prohibits foreign participation. However, the government replaced DNI with a more open Positive Investment List in 2021, allowing 100% foreign ownership in over 245 sectors.

The Omnibus Law reforms simplified licensing and eased foreign ownership restrictions across priority sectors such as renewable energy, healthcare, and logistics. The BKPM’s risk-based approach now classifies licenses into low, medium, and high-risk categories, expediting approvals for compliant investors. PT PMAs can now operate across multiple business activities under a single entity, provided all fall within the Positive Investment List. Foreign ventures are also encouraged to collaborate with local UMKM (small enterprises) under new partnership incentives.

 

How to Register Your Company in Indonesia?

The Online Single Submission (OSS) system, launched in 2018, was designed to facilitate company registration in Indonesia. Applicants must complete the following key steps:

• Deed of Establishment, which is drafted by a notary in Indonesian, includes the company’s name, shareholders, and purpose.
• Approval from the Ministry of Law and Human Rights to legalise the company as a corporate entity.
• Business Identification Number (Nomor Induk Berusaha/NIB) issued via OSS, functioning as a combined business license, importer ID, and company registration number.
• Tax Identification Number (NPWP) is required for all companies to comply with Indonesia’s corporate tax system.

Registration costs vary depending on notarial fees and consulting services, but typically range from IDR 15 to 25 million (US$950–1,600).

The OSS 1.1 platform has reshaped how companies come to life in Indonesia. What once took weeks can now be completed in a few working days, as tax, labour, and environmental clearances are processed in one system. Newly incorporated firms are automatically registered with the national health and employment programs, removing an extra layer of paperwork. For many investors, the digital shift has turned what was once a bureaucratic enigma into a predictable process.

 

What Taxes and Reporting Rules Should Foreign Founders Know in Indonesia?

Corporate income tax in Indonesia is 22% as of 2025, aligning with the ASEAN average. Small enterprises with annual gross revenue below IDR 50 billion (approx. US$3.2 million) enjoy a 50% reduction on the first IDR 4.8 billion of taxable income. In addition:

 

VAT

11% (with a plan to increase to 12% by 2026)
 

Withholding tax

Ranges from 10–20% depending on the nature of the payment and the tax treaty status of the foreign investor
 

Dividends

Remitted abroad are subject to a 10% tax, which can be reduced under bilateral tax treaties (Indonesia has over 70).

 
Companies are required to submit annual financial statements to the Ministry of Law and Human Rights and monthly tax filings to the Directorate General of Taxes.

Indonesia’s tax architecture has moved firmly online. Through the Electronic Tax Administration, filings and payments can now be made without a single paper form. Start-ups and small firms benefit from a 0.5 per cent final income tax on modest earnings, while high-growth sectors such as agritech and clean energy enjoy temporary rebates. Multinationals, however, face tighter transfer-pricing scrutiny and mandatory disclosure under the country’s new transparency laws.

 

How Can Businesses Manage Indonesia’s Shifting Labour Landscape?

Indonesia’s Omnibus Law on Job Creation simplified hiring processes and improved flexibility in employment contracts. Among the main points are:

 

Minimum Wage

Varies by province (Jakarta’s is IDR 5.07 million/month, or ~US$320).
 

Working Hours

Capped at 40 hours per week, with overtime regulated by the Ministry of Manpower.
 

Mandatory Benefits

Social security (BPJS), health insurance, and severance pay based on tenure.

 

Foreign employees must obtain an Expatriate Work Permit (IMTA) and Limited Stay Visa (KITAS). Sponsorship by the company is required.

Employment in Indonesia has grown more flexible but also more formalised. The Job Creation Law introduced clear terms for contract work and simplified hiring rules for foreign staff. The national social security scheme now covers both local and expatriate employees, a move designed to balance labor mobility with welfare. Productivity has risen steadily, particularly in Java and Bali, reflecting a workforce increasingly fluent in technology and global business norms.

 

Where Should You Base Your Business, and How Do You Open a Bank Account?

To open a corporate bank account, founders must submit:

• Deed of Establishment
• NIB and NPWP
• Shareholder and director IDs
• Domicile letter

Most businesses choose to register in Jakarta, Surabaya, Bandung, or Bali, where infrastructure, logistics, and workforce availability are strongest. Special Economic Zones (SEZs) like Batam and Kendal Industrial Park offer tax incentives, customs exemptions, and streamlined licensing for manufacturing and logistics firms.

 

What Fiscal Rewards Await Those Who Invest in Indonesia?

Indonesia’s government offers several fiscal incentives to attract capital:

• Tax Holidays: up to 20 years for investments exceeding IDR 1 trillion (US$63 million) in priority sectors such as renewable energy, pharmaceuticals, and electronics.
• Tax Allowances: deductions of up to 30% of investment value over six years.
• Import Duty Exemptions: for machinery, goods, and raw materials used in production.

The World Bank’s Ease of Doing Business Report (2020) ranked Indonesia 73rd globally, improving from 120th in 2014, a reflection of reforms that reduced the time to start a business from 47 days to under 10.

Fiscal incentives are the government’s sharpest tool for bringing in global capital. The latest budget grants super-deductions of up to 300 per cent on research and training expenditure, while green-energy and electric-vehicle projects qualify for accelerated depreciation. The Digital Economy Roadmap rewards startups expanding beyond Java with corporate tax cuts, a quiet push to spread growth more evenly across the islands. Recent treaties with Japan and the UAE further enhance investor protection.

 

What are the Common Challenges that are Faced by Entrepreneurs?

Yet, even in this modernised environment, Indonesia keeps its complexities. Regional autonomy means that rules can shift from one province to another, and infrastructure in outer islands often lags behind Java’s efficiency. Foreigners still face hurdles in land ownership and evolving sustainability disclosures. Although the national anti-corruption agency has tightened oversight, investors must remain alert to the informal habits that persist in local bureaucracy.

• Language and regulatory complexity: most official documents must be in Bahasa Indonesia.
• Bureaucratic delays: are particularly at local administrative levels.
• Land ownership restrictions: foreigners cannot directly own land, only lease it under a Hak Pakai (Right of Use) title.
• Frequent regulatory updates: business rules can change with ministerial decrees.

Still, the digital infrastructure is rapidly expanding. In 2024, Indonesia attracted US$5.3 billion in tech investment, the highest in ASEAN outside Singapore.

 

Conclusion

Opening a company in Indonesia today is a balance between opportunity and process. The market rewards patience and local insight. For entrepreneurs dealing with Indonesia’s changing regulatory environment, 3E Accounting Indonesia acts as a reliable bridge between ambition and compliance. From structuring PT PMAs to managing taxation, payroll, and ongoing reporting, the firm ensures every stage of setup aligns with local laws. Its expertise in Southeast Asian markets helps foreign investors avoid costly delays and regulatory missteps.