A Complete Guide to Start A Business in Indonesia
Procedures and Processes Involved for Indonesia Company Incorporation
Starting a business in Indonesia is not as complicated as one might think. This guide to start business in Indonesia will shed light on the key information you need to help you make the best decision for your Indonesia business.
Why not start business in Indonesia? Indonesia’s economy is growing every year, and that makes it a great place to start a business in Indonesia. Home to 18,307 islands in total and the fourth largest population in the world, Indonesia is an archipelago of abundance. From gold, coal, nickel, copper, tin, natural gas, natural resources are aplenty. Not to mention the minerals and petroleum source that is available.
Key Factors to Consider
Before you begin your Indonesia incorporation process, there are some key factors you need to consider:
- Do Your Research – Will the nature of your business activity be well-suited in the country?
- Understanding Potential Customers – Who they are and what do they need?
- Following Proper Procedure – Getting started in a foreign country is always challenging. Enlisting the help of an experienced consultant like 3E Accounting can ease the process.
- Registering Your Business – You will need to get your Indonesia business registered with the relevant authorities.
- Local Religion, Customs and Beliefs – Indonesia is home to a melting pot of different religions, customs and beliefs. From Catholicism, Buddhism, Hinduism, and Islam, understanding and respect for the local beliefs is crucial.
Indonesia recently implemented some changes to the way it does this. One notable difference is in the friendlier business policies it now has to improve its investment climate. Starting a business in Indonesia is now much easier.
Registering a Indonesia company previously took an average of 2 months before the process was complete. Now, your Indonesia business can be up and running within one to 1.5 months. Since May 2019, the Company Domicile (SKDP) for businesses in Jakarta is not required anymore. Indonesia Shelf companies can easily be incorporated within a week, if you want a faster solution.
Foreign investors now have the option of Investor KITAS too. This applies if the investor wants to take on the role of director, shareholder, or commissioner. You can start work immediately and a major benefit is the work permit waiver fee (DPKK) and easy application process. Investors may apply for a 2-year KITAS. This allows for multiple entries in and out of the country within the validity period. To qualify for this option, you will need a minimum investment of at least Rp1 billion. This will be investors in shares. As for capital investment for the company, this needs to be more than Rp 10 billion to qualify.
Steps to Start a New Business
The first step to starting a business in Indonesia is to choose your preferred company structure. The options available include:
- Foreign Limited Liability Company (PT PMA)
- Local Limited Liability Companies (PT)
- Representative Offices
PT PMA’s are the preferred option for foreign investors in Indonesia. 100% foreign ownership is allowed with this structure and you get to employ foreign workers too. To set up a PT PMA, you will need to meet the following requirements:
- Have one director (at least) and one commissioner. Either one must be a local Indonesian. You will also need two shareholders (they can either be local or foreign individuals or corporations, or a combination of both).
- Rp 10 billion in capital investment. Paid-up capital must be at least 25% of the total required capital.
- A local office address to obtain your domicile letter. Residential addresses are not allowed.
Registration of the Indonesia company must be done online via the local OSS system. From there, you will obtain your NIB and any other licenses you may need. You will need to go through the following steps:
- Obtain approval for the name of your company
- Acquire your Deed of Incorporation (including Articles of Association). A notary needs to be present.
- Obtain approval of your legal entity. Approval will be granted by the Ministry of Law and Human Rights.
- Register for your Tax ID (NPWP). This is required to secure your business licenses, meet your tax obligations and to conduct banking activities.
- Obtain domicile letter which identifies your business location.
- Obtain your unique company profile number (NIB), business license and any local permits required.
- Apply for any other necessary licenses you may need.
- Obtain your work permits
- Open your bank account
Before You Arrive in Indonesia
You will need to secure the necessary work permits before arrival. Once in Indonesia, you can then proceed to open your bank account for your Indonesia Company. An experienced agent like 3E Accounting can streamline this process and make it much easier for you.
There are some potential changes coming to Indonesia soon too. One such change is the Positive Investment List. The aim of the list is to encourage even more investment by foreigners. This is geared towards sectors that have either been fully or partially closed under the Negative Investment List. Among the proposed sectors under the Positive List are coal gasification, automotive, electronics, import-substitution and export-oriented sectors.
The second change is the Omnibus Law, which will amend thousands of laws in Indonesia. This includes laws pertaining to labour and taxation matters. The aim is to make it less complicated for investors.
Setting Up Your Office Location
Once you’ve decided Indonesia is the place for you, you need an office. An office location is a requirement to obtain the domicile letter. Besides the traditional office space options, there is another solution available. When starting a business in Indonesia, why not consider virtual office solutions too? A virtual office will still allow you to get a registered address and obtain your domicile letter. The only difference is, you don’t need to rent a physical office space, which makes it significantly cheaper.
3E Accounting has a range of virtual office solutions available. Your company logo will still be displayed on the door entrance. The 3E Accounting associate’s team will be there to handle any mail or phone calls you receive on behalf of your business.
Ready to Incorporate?
Investors around the world are now looking to Indonesia for their new business venture. You should be too. For more information about our company incorporation services, contact our team today.