Indonesia is the 4th country with the largest population in the world so yes its always a good idea to register a foreign company as it is one of the most emerging promising markets in the world. The population of 267 million still has a comparatively low competition in the business sector.
Still only 1% of the foreign owned companies are considered foreign companies (PT PMA). If you are looking to register a company in Indonesia you have to be aware of the several factors.
Definition of Foreign Owned Company in Indonesia
Foreign companies in Indonesia are known as PT PMAs (Perseroan Terbatas Penanaman Modal Asing). This means “limited liability company with foreign direct investment.”
Any company where a foreign national holds any share is classified as PMA. The value of share doesn't matter it can vary from 1% to to 100%. A common misconception is that foreigners believe that partnering up with locals make the process smoother however the truth is it only makes a different if the local owns the 100% of the shares.
Another misconception is considering PMA the only option for conducting business in Indonesia. You can open a representative business office instead if you do not intend to generate any revenue from local activities. If you’re looking to just hire employees in Indonesia, you can use an employer of record service.
Limitations and Negative Investment For Foreign Ownership
Foreigners can own 100% of the company shares depending on the type of business however foreigners can only own selective business lines. Some of the business lines are not open for them. DNI aka the negative investment line lists the restricted industries however they are usually revised after a few years.
The negative investment list has a grandfather clause. This means revisions to the negative investment list are not retroactive. Any changes made will not affect already registered companies. Even if regulations for your industry change, you will not have to sell or transfer your shares to a local shareholder.
Essentials for Setting up PT PMA in Indonesia
#1 Minimum Capital Requirement
You have to pay a minimum capital of 175,000 USD (2.5 Billion IDR) up front for a foreign owned company. A signed letter by the shareholders for the capital statement is required. Representative office do not require the capital but they can not generate revenue either.
#2 Designed Structure of Foreigner Owned Companies.
At least two shareholders are required for each limited liability company in Indonesia. Shareholders can either be individuals, corporate shareholders or both.
Requirement of at least one commissioner and director is mandatory. Commissioner is the supervisor of the Director and can be a non resident as well.
One of the director should be Indonesian resident and have a tax card (NPWP). Resident director can either be a local or non resident.
Foreigner Director can apply for the work permit once the company is incorporated till then Company needs to appoint a local Director or use a nominee director service.
Indonesia is a decentralized country. A lot of the government’s work takes place at the district level. Because the local district is in charge of local permit approvals, it is important to choose your business location before starting the registration process.
Company Registration in Jakarta
Indonesian regulations do not allow residences to be used as company address so your company needs to be located somewhere that has a building permit allowing it to be operated as an office.
While virtual office can reduce overhead costs and no worries of building permits and if you can use your address as an office.
Setting up PT PMA in Indonesia
The registration goes through a centralized system, One Single Submission. This has made registration easier and faster. From about 10 weeks, now registration can be completed in 1 to 2 weeks if your business does not need additional licenses.
Process Guide Step by Step
Deed of Establishment
Discuss with your legal team on the best classification of your business as it is important so you do not run in to any issues in future. Also business classification with least restrictions is not always the right choice. The deed should be ratified from The Ministry of Law and Human Rights. Registration of Tax
After the establishment of the company you have to register for ax Identification Number (NPWP) from your local tax office for your company.
Identification Number to Operate/Nomor Induk Berusaha (NIB)
After tax registration you have to register your legal entity in the OSS (One Single Submission) system to receive your company's NIB to operate.A NIB is a unique number that identifies your company profile in Indonesia. It also serves as:
- Your import license (previously API-U)
- Customs Identification Number (NIK)
- Your business registry number (previously TDP)
The NIB also automatically registers your PT PMA under Health and Social Security System (BPJS Kesehatan dan BPJS Ketenagakerjaan)
Step 4: Operational License/Commercial License
The operational license/commercials license is normally issued on the same day as NIB.
This is applicable if there are no other requirements for your business, for instance, with trading and consulting businesses.
However, other business activities may need additional fulfillment. In cases like this, it can take months before the government grants your business a license.
Timeline of foreign-owned company registration in Jakarta
| Process | Timeline in working days |
| Approval of company name | 1 |
| Minute of the Deed of Establishment |
| Deed of Establishment | 1 |
| Ratification from MOLHR on Deed of Establishment |
| Tax card | 1*-5 |
| NIB and Commercial License/Operating License | 1 |
| Total | 4-8 |
The mentioned timeline is applicable to registered business in Jakarta. Other places take longer to register and dependent on local government of the area. Please also note that the timeline above may change depending on the specifics of your business.
Once the registration is complete and the business is incorporated you can start your operations in business and can conduct activities as:
- Buy property and other assets on behalf of your company
- Start other preparations for your operation, such as but not limited to hiring staff, preparing office renovations, etc.
- Proceed to obtain work and stay permits for foreign employees in your company