Business Establishment – Who is it for and what are the benefits?

Indonesia truly is a fantastic place to have a business. With the emergence on the world stage becoming more and more prominent, a large population that is predominantly under 30 years old, a burgeoning middle class and a variety of natural resources and manufacturing options; it’s no wonder why so many people are flocking to the country to start or expand their businesses.To start a company in Indonesia can be done in 3 ways, all with pluses and minuses depending on the individual business and its needs, they are:

• A local company (PT)

• A foreign owned company (PMA)

• A representative office

In this article we will look at the different sorts, the pluses and negatives of each and hopefully provide you with the answers to help ensure you are well equipped to make the correct decision.

Local Company (PT)

Setting up a PT is the most popular company type in Indonesia, although it is fully intended for Indonesian citizens.

Please note, that if you are a foreigner looking to set up a business in Indonesia, we would not suggest this type of business as it will not be in your name, but that of a local who will have ownership of your business. There are only 2 advisable times whereby setting up a PT is preferential – 1. If the business field is closed to foreign ownership or 2. If you have someone you can trust.

The minimum requirements to set up a local PT are:

• 2 Local Shareholders

• 1 Local Director

• 1 Local Commissioner

In addition, there are 3 different sized companies you can make, each requiring a different amount of investment/paid in capital. They are:

1. Small: Above IDR 50.000.000 – 500.000.000

2. Medium: Above IDR 500.000.000 – 10.000.000.000

3. Large: Above IDR 10.000.000.000

Please note, that if you want to employ foreigners, in a PT, the company size must be at least Medium with a paid in capital above IDR 1.100.000.000.

The steps involved creating a PT are:

1. Approval of company name
2. Preparation of Association Article
3. Obtain Deed of Establishment
4. Obtain Certificate of Domicile
5. Tax Registration Number (NPWP)
6. Obtain Trading Business License (SIUP)
7. Obtain Company Registration Certificate (TDP)

Overall, setting up a PT Company is not easy. If you have any questions about setting one up, please contact us.

6 steps to Set Up Your Company with OSS System:

1. Provide and qualify all relevant documentation for company establishment processing
2. Register company name to the Ministry of Law and Human Rights
3. Prepare and legalize Company Deed of Establishment from the Public Notary and obtain the ratification from Ministry of Law and Human Rights
4. Apply Domicile Certificate from Local Sub-District authority and obtain company Tax Identification Number (NPWP)
5. Obtain a Business Identification Number (NIB) which will also apply as Company Registration Certficate (TDP), Import License (API), and custom access from local government.
6. Obtain the permanent business license

Foreign Owned Company (PMA)

A PMA (Penanaman Modal Asing) is the safest way to start up a business in Indonesia and it will ensure the investor has full control over the direction of the company. There are no restrictions where the company can operate and it reduces the risk in finding a suitable local partner.

Being a foreign owned company the investment value is significantly higher than that of a PT. The investor should invest above USD 1 million / 10 Billion IDR as their investment plan, with a paid-up capital above USD 250.000.000 / 2.5 Billion IDR. The Investment plan can either be cash or fixed assets, such as machinery.

The paid up capital, however does not need to be paid until after the company is established.

The steps involved creating a PMA are:

1. Approval of company name
2. Principle License (BKPM Approval) – Temporary approval
3. Article of association (Akta Perusahaan) – Foreign Owned Company Establishment
4. Legalisation of Legal Entity (SK Kehakiman) – The Article of Association being legalized
5. Certificate of Domicile – Obtaining the Certificate of Domicile from the landlord of the office premises and from the sub district
6. Tax Registration Number (NPWP)
7. Company Registration Certificate

Setting up a PMA in Indonesia is extremely challenging and time consuming. If you have any questions or would like anything clarified, please feel free to speak to one of our friendly consultants who will be able to help.

A Representative Office

If your business is international and you are looking to potentially expand to Indonesia then this is the perfect company establishment type for you.

As a representative office, you will be able to supervise and coordinate business or do market research without the risk of large investments. A representative Office is an ideal option for businesses that are exploring business opportunities in the Indonesian market.

As a representative office, you will not be allowed to generate revenue, make business transactions, import or export goods however you are entitled to obtain work permits for expatriate managers as well as obtain Multiple Business Visas for personal.

Generally, businesses pick this option if they are conducting market research or seeing whether their business model will work before setting up a PMA.

The main advantages of setting up this business entity include:

• Its relative ease to set up

• There is no need for large investments or paid up capital

There is significantly less paperwork as you will only need to report income tax for the employees as well as office space tax. 

If you require any more information on how to set up a Representative office or any of the above, then feel free to contact the Yinnivisa Team, we will be happy to help.