This post is also available in: Indonesia (Indonesian)
Discover the Popular Indonesia Companies Available for Businesses
As soon as you and your partners decide to expand to Indonesia, have you given it enough thought? Armed with market research from wherever you are from should suffice. But do you fully understand the country’s policies and regulatory framework? Would your business culture fit theirs? Maybe it is time to find out about company types in Indonesia. It should serve as a general guideline of the business affairs in that would take in place in this highly-diversified country.
You may have heard about Indonesia’s Negative Investment List before. The essential document states the industries of which foreign investors have limited or no opportunities to do business in. If the trade industry you wish to venture is not in the list, you have high hopes of owning the company in totality. Otherwise, you may incorporate a company with specific shares between you and a local partner. There is also another standard option, which is the representative office. Though it has a low start-up, representative offices act only as promotional and communications office to the parent organisation. No business transactions are allowed. These are the common company types in Indonesia.
Now take a look at the detail of each company type. It includes requirements, benefits and deficiencies.
Foreign Investment Company
- Legally called: PT PMA.
- Business transactions: Allowed.
- Business activities: Commercial activity within allowed business fields or sector (based on Negative Investment List)
- Ownership: Up to 100% foreign, depending on the business sector.
- Paid-Up Capital: IDR 10 billion (excluding land and building value)
- Virtual office: Conditional yes.
- Set-up: Two foreign shareholders, one foreign director and one foreign commissioner.
- Perks: Legally approved to generate revenue and operate, considered as large companies, can hire foreign employees, can have foreign shareholders.
- Drawbacks: High investment value a must, not allowed for all business sectors (based on Negative Investment List)
- Legally called: PT PMDN.
- Business transactions: Allowed
- Business activities: Commercial activity for all business fields.
- Ownership: 100% local.
- Paid-Up Capital: Small PT (Between IDR 50million and 500 million), Medium PT (Between IDR 500 million and 10 billion), Large PT (More than IDR 10 billion)
- Virtual office: Yes.
- Set-up: Two shareholders, one local director, and one local commissioner. May allow a foreign director with an Indonesian tax ID number.
- Perks: Lesser paid-up capital depending on size, quicker set-up time.
- Drawbacks: No foreign ownership allowed.
- Legally called: KPPA.
- Business transactions: Not Allowed
- Business activities: Limited to market research and corporate communications.
- Ownership: No conditions.
- Paid-Up Capital: No limits.
- Virtual office: Yes.
- Perks: No minimum capital, quicker set-up time.
- Drawbacks: Not allowed to generate revenue, maximum validity is five years.
Other Company Variant
The lesser-known company types in Indonesia are State Owned Company or known as BUMN in the Indonesian language. The government can wholly or partially own them. There are two types of State-owned companies in Indonesia, namely; Public Company and Liability Company. A public company serves to make a profit while serving the public. A liability company is a commercial company providing services to the public at large. While the state owns a public company’s shares, a liability company’s capital comes from state assets.