Complete Guide of Indonesia Company Registration

 

A Comprehensive Guide to Registering Your Indonesian Company

Indonesia’s large market is the primary reason it attracts foreigners for company registration. If you intend to set up a company in Indonesia, this guide to Indonesia company registration is a must-read.

 

What You Need to Know Before Your Indonesia Company Registration?

Guide to Indonesia Company RegistrationHome to the world’s fourth-largest population, competition is not as stiff in Indonesia compared to some of its neighbours. Being a member of the G20 group of countries has also made it a promising business destination. Indonesia is classified as a bureaucratic country. Foreign investments are monitored and regulated by the local Badan Koordinasi Penanaman Modal (BKPM), also known as the Indonesia Investment Coordinating Board. Indonesia companies are established based on the Indonesia’s Company Law No. 40 of Year 2007.

To set up a company, there needs to be a Deed of Establishment, which is to be done once you have selected the name of your company and that name has been approved. You would need to engage the services of a registered notary public. The notary public will be responsible in helping you draft your company’s Articles of Association. Indonesian law requires that the Articles of Association contains the following information:

  • Company name
  • Company’s place of domicile
  • Company’s objectives i.e. business activities or line of business
  • Capital details (i.e. authorize capital, paid-up and issued capital)
  • Value and amount of company shares
  • Minimum 2 shareholders
  • Minimum 1 director & 1 commissioner (which the director and commissioner cannot be the same person)
  • Duties and responsibilities of director & commissioner
  • Location of shareholders’ meetings
  • Method of conducting shareholders’ meetings
  • Procedure of distribution and use of company’s dividends and profits

 

To apply for a business registration number and the relevant licences, you will need the Deed of Establishment, approval from the Indonesian Ministry of Law and Human Rights (“MOLHR”) and the identification documents of all the shareholders, director & commissioner. If the shareholder is a company, you will need to provide the Deed of Establishment, MOLHR’s approval, with all the amendments (if any) of the corporate shareholder and all business licences.

Based on the BKPM guidelines, PMA companies are required to register for a minimum authorised capital not less than IDR10,000,000,000/- with 25% of the authorized capital as the minimum paid-up capital. There are two alternative ways to demonstrate to the relevant authorities on the existence of the minimum paid-up capital:

  1. Furnishing a Capital Statement Letter stating that the shareholders have sufficient funds to inject the capital after the incorporation; or
  2. Depositing the monies in the company’s bank account

 

All the shareholders will need to place their signature on the Articles of Association. The document must be signed in the presence of a notary public. If a shareholder is unable to sign the Articles of Association in the presence of a notary public, the shareholder can appoint a power of attorney to act for him/her. The Articles of Association will be submitted to the MOLHR by the notary public. Upon approval, you will be issued with the Deed of Establishment with the MOLHR approval.

If you need to amend any information in your company’s Articles of Association after the Deed of Establishment with the MOLHR approval are obtained, you will need to prepare a Deed of Amendment for approval at a shareholders’ meeting. You must engage the services of a notary public to prepare the Deed of Amendment.

If you are a foreigner, before you incorporate a business in Indonesia, you need to determine the best legal entity suitable for your business. You will also need to identify the industry your business will be involved in. To determine if the industry is open to foreign investment and the percentage of foreign ownership requirement, you can refer to the Indonesia Negative Investment List (“DNI”), which is made to protect Indonesian economy as well as to provide more business chances to investors. It is a set of business sectors list which let investors know which sectors are they allowed to invest in, and its regulations, especially regarding shares ownership. If your company is a Foreign Investment Company (“PMA”) with 100% foreign ownership but is involved in any business that is listed in the DNI, which requires you to have a local shareholder based on the percentage requirement mentioned in the DNI, you will need to hold a general meeting of shareholders (“GMOS”) to approve the deed of amendment with the following agenda:

  1. Change the shareholders composition
  2. Change the authorised capital, issue and paid-up capital (if necessary)

 

If your company is a local company and a foreign investor would like to put a share/invest as a shareholder in your company, you will also need to hold a GMOS to approve the deed of amendment with the following agenda:

  1. Change the company status
  2. Change the shareholders composition
  3. Change the authorised capital, issue and paid-up capital

 

For both situations above, you may need to change your business licences as well.

An official business name in Indonesia must fulfil certain criteria such as it must be written in roman letters; it is not the same or substantially the same with a company name which is lawfully used by another company; it is not contrary to public order and/or morality, it is not the same or similar to the name of the state bodies, government bodies, or international bodies, unless it obtained permission from such bodies; it does not consist of numbers or series of numbers, letters or series of letters that do not form a word; it contains at least three words, etc. A PMA is allowed to have English word for their company name. Official company names are only used for legal purposes. You may choose to register another name that is more distinct to your product or brand if needed.

For a PMA company, it is possible that the director and commissioner members are all foreigners. However, for the practicality of business operations, it is recommended that the company also appoint a local director. In the absence of a local director and if the foreign directors do not have work permit and Tax ID, the business operation in Indonesia including the signing of documents such as for bank account opening, Electronic Tax filing system (“EFIn”) registration, etc, will be limited.

The registration of EFIn will require that the foreign director has a TAX ID and Personal EFIn which can only be obtained if the foreign director has a Work Permit. With a work permit, the foreign director will need to obtain a personal Tax ID (Tax resident). With the Tax ID, the foreign director can enjoy local tax rate for his/her income tax in Indonesia. A foreigner who does not have a Tax ID will have 20% more tax cut on his/her personal income tax.

If the foreign director or commissioner will not be stationed in Indonesia to work, it is recommended that one of them apply for a KITAS after all the processes have been completed if they would like to visit Indonesia frequently to supervise and monitor their business. Otherwise, they may face entry issues at the Indonesia custom.

If you are a foreign director, the identification documents required include:

  • Passport
  • Tourist Visa only if you will rarely visit to Indonesia
  • Business Visa if you already have potential clients and will have several meetings in Indonesia
  • KITAS (Temporary Permit) if you already established a company in Indonesia and want to have regular such as weekly meetings in Indonesia
  • IMTA (Working Permit) if you sit and work daily in your office/company in Indonesia

 

Types of Companies in Indonesia

Indonesia considers all foreign companies as PT PMAs (Perseroan Terbatas Penanaman Modal Asing). A common misconception is that foreign ownership means a smoother registration process. However, this is untrue because only if there is a local partner with 100% share ownership, the registration process will be smoother.

To incorporate a business in Indonesia, you can choose from the following types of entities:

Company Type and Structure Suitable For Advantage Disadvantage
Local Company (PT) Foreigners who want to do business in Indonesia. They have the option to conduct business as a local or a foreign investor using a local director.

 

Requires a minimum of 2 shareholders (individuals or companies).

 

Licensing handled through Online Single Submission (OSS).

 

Not subject to strict limits and requirements like foreign entities. 100% local ownership only
Foreign Owned Company/Limited Liability

(PT PMA)

Foreigners who want 100% ownership of the company.

 

Requires a minimum of 2 shareholders (individuals or companies).

 

Licensing handled through Online Single Submission (OSS).

100% foreign ownership allowed. You have the same rights and responsibilities like local companies.

 

Able to participate and join tenders locally.

 

Able to apply for business licences and import.

 

Able to apply for product registration.

 

Foreign employees able to apply for KITAS (a limited stay permit in Indonesia or a temporary residency permit that is valid for six months to one year) or a work visa.

 

Able to sponsor business visas for visitors and foreign clients under your company.

 

Even 1% foreign ownership can be considered a PT PMA.

 

Maximum ownership (foreigners) will be decided by the business activities and sector through the Negative List

 

Restrictions provided in the Indonesia Negative Investment List.

Representative Office A branch of the overseas parent company. The first step for investors who want to enter the local market.

 

Set up for marketing activities purposes, preparing to establish a PT PMA or for market research.

Ideal option for testing the local market. Focus on research to help you determine the next step forward.

 

No minimum capital.

 

No shareholder and director required.

 

No commissioner required.

Direct selling or revenue generation is not permitted.

 

Coordinator, supervisor, or representative has limited role.

 

Alternatively, there are other options to consider besides the three primary entities above. These options include:

  • Nominee Company – The nominee company will act as the registered owner on behalf of the real owner. It is important to source for a partner who will have your best interests at heart if you go with this option.

 

Generally, the cost of setting up an Indonesia company starts from US$1,500. This is for a local company (PT company) that is based in Jakarta. The cost will differ based on the type of business entity, the location you choose and service provider who you engaged.

 

Registration Timeline and Procedure

In Indonesia, there are three entity options for investors to register their Indonesia company:

  • Representative Office
  • Local Company (PT)
  • Limited Liability Company (PT PMA). This entity is also referred to as a Foreign Direct Investment Company

 

Your company can be registered within a month or 1.5 months. Once fully registered, you can immediately commence business operations. You can open a bank account under the company’s name by submitting your Deed of Establishment and all your completed business licences to the preferred bank.

Most businesses in Indonesia can be established through the OSS system, which makes the process quicker and easier. To establish a PT PMA in Indonesia, these are the requirements involved:

Step 1 –  Approval of Company Name and Acquiring Deed of Establishment Choosing the right type of classification for your business is an important first step. This will ensure you don’t encounter problems later.

 

Company name approval takes one business day. The place of domicile, or your office registration address is required.

 

You will need to execute a Deed of Establishment. This can be done in two – three days.

 

The Deed of Establishment must be certified by the Ministry of Law and Human Rights.

 

3E Accounting will assist with the checking of your intended business activities. From there, we will recommend the best route that you can take.

 

Step 2 – Processing the Domicile in Local District Office Requires Deed of Establishment, MOLHR Approval, rental office agreement, ID of director. This takes 2-3 days.

 

Step 3 – Registering for Taxes Acquire a Tax Identification Number (NPWP). This can be done at the local tax office.

 

A tax card can be acquired in 1.5 days.

 

Step 4 – Registering for Business Identification Number To operate in Indonesia, you need an Identification Number or Nomor Induk Berusaha (NIB).

 

You will need to register your company with the OSS. Once done, you will receive your NIB. This can be done in one day.

 

NIB will serve as your Import Licence, Customs Identification Number (NIK), and Business Registry Number.

 

NIB will automatically register your business under the Health and Social Security System (BPJS Kesehatan dan BPJS Ketenagakerjaan), which you can process it at a later stage.

 

Step 5 – Acquiring Operational and Commercial Licence This is usually issued on the same day as your NIB.

 

Applicable if your business has no further requirements. Certain business activities may need additional fulfilment, in which cases licences can take months to be approved.

 

 

This registration timeline procedure applies to businesses based in Jakarta as an example. For other areas of Indonesia, the registration may take longer times. The timeline above is merely an estimate, as the nature of your business may affect the speed of registration too.

 

Post-Registration Formalities Involved

Once successfully registered, you can start business operations in Indonesia. You will be able to conduct the following activities on behalf of your company:

  • Opening a bank account under your company
  • Purchase assets and property
  • Hire staff
  • Join a tender
  • Obtain permits for any foreign employees
  • Obtain operating business licences (if needed)
  • Obtain company regulation (“PP”) when you have permanent employee already
  • Report your investment report to BKPM on a quarterly basis (it’s called LKPM – Laporan Kegiatan Penanaman Modal)

 

Anytime you would like to change the company information that was stipulated on your Deed of Establishment, you will need to engage a Notary public to do the amendment. All shareholders of the company are to sign on the form of amendment at the General Meeting of Shareholders, and the Notary will process the Deed of Amendment.

For your easy reference, please see table below for a summary of the requirement to set up a company in Indonesia.

Type of Company Position Local /Foreigner Requirement Document Document to Sign Presence Absence
Local Director Indonesia Citizen KTP & NPWP (ID & Tax Card) Statement Letter

Opening bank account

No need
Director Foreigner (possible, but this is not preferable since you might find obstacle when your company apply for business licence also depends on your authorised capital and line of business from your company) Passport Statement Letter No need
Commissioner Indonesia Citizen KTP & NPWP (ID & Tax Card) Statement Letter No need
Shareholders Indonesia Citizen KTP & NPWP (ID & Tax Card) Notary Deed &

Statement Letter

Physical in front of Notary for signing the Notary Deed Provide power of attorney, the attorney needs to provide ID
Shareholders Local Company ·     Deed of Establishment & MOLHR Approval

·     Each Deed of Amendment & MOLHR Approval

·     Business Licences (domicile, NIB, NPWP)

Notary Deed &

Statement Letter

Physical in front of Notary (One Director of the Local  Company) for signing the Notary Deed Provide power of attorney, the attorney needs to provide ID
PMA (Foreign Company) Director Foreigner Copy of Passport Statement Letter No need
Commissioner Foreigner Copy of Passport Statement Letter No need
Director Indonesia Citizen KTP & NPWP (ID & Tax Card) Statement Letter & Opening Bank account No need
Commissioner Indonesia Citizen KTP & NPWP (ID & Tax Card) Statement Letter No need
Shareholder Private individual (Indonesia Citizen) KTP & NPWP (ID & Tax Card) Notary Deed & Statement Letter Physical in front of Notary for signing the Notary Deed Provide power of attorney, the attorney needs to provide ID
Private Individual (Foreigner) Copy of Passport Notary Deed & Statement Letter Physical in front of Notary for signing the Notary Deed Provide power of attorney which notarized by Public Notary overseas, the attorney needs to provide ID
Local Company ·     Deed of Establishment & MOLHR Approval

·     Each Deed of Amendment & MOLHR Approval

·    Business Licences (domicile, NIB, NPWP)

Notary Deed & Statement Letter Physical in front of Notary (One Director of the Local Company) for signing the Notary Deed Provide power of attorney, the attorney needs to provide ID
Foreign Company ·     Eg. Singapore ACRA BizFile

·     Memorandum And AoA

Notary Deed & Statement Letter Physical in front of Notary (One Director of the Foreign Company) for signing the Notary Deed Provide power of attorney which notarized by public notary overseas, the attorney needs to provide ID

 

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Guide to Indonesia Company Registration