Business entities in Indonesia

Business entities in Indonesia

Healy Consultants will assist our Clients to form the optimal business entity for their business needs in Indonesia. Starting a business in Indonesia is a complex and time-consuming matter for foreigners, as the registration of a foreign-invested company, the PMA, is subject to prior approval by the Indonesian authorities and a minimum paid-up capital of US$300,000. Alternatively, our Clients can also request us to incorporate a local company with nominee shareholders or to open a representative office of their foreign business.

The Indonesian limited liability company (PT)

business entity setup in Indonesia

  • The Indonesian LLC (Perseroan Terbatas) is the most commonly type of business entity used by locals to do business in Indonesia. An Indonesian PT requires i) a minimum of one director, two local Indonesian shareholders and one Commissioner. The commissioner can be a non-resident individual. The role and responsibility of a commissioner includes i) supervising the company and ii) examine the annual report and approve the budget plan submitted by the Board of Directors;
  • An Indonesia PT’s paid up share capital depends on the size of the company. There are three sizes of a local company and they are: i) a small size company with a paid up capital between US$3,745 to US$37,435, ii) medium size entity with a share capital between US$37,435 to US$748,740 and iii) a large company that requires a share capital above US$748,740. To sponsor foreign employees, the minimum size is a medium-sized company. In any case, the issued share capital must be deposited to the company bank account right after incorporation.

Foreign owned LLCs (PMA)

  • LLCs which are partially or wholly owned and controlled by foreigners are called Penanaman Modal Asing (PMA) and are governed by the Foreign Capital Investment Law. PMAs are required to obtain approval from the Capital Investment Coordinating Board (BKPM) before conducting business in the country. Furthermore, BKPM requires the stakeholders of a PMA engaged in services to present an investment plan for minimum US$1.2 million, of which 25% (US$300,000) is required to be paid up as share capital;
  • A PMA must be setup with i) a minimum of one resident director and two shareholders and ii) one commissioner (equivalent to a COO). If the PMA is fully foreign-owned, its owners are additionally required to sell a share of at least 5% of the company to an Indonesian citizen or legal entity within 15 years of commercial start up. Only PMAs initially set up as a joint venture with a local owning at least 5% of the company’s shares are exempt from this requirement;
  • There are no restrictions on where a PMA can operate in the country. Depending on the intended business activity, such type of business entity may be required to obtain multiple operating licenses from different government authorities. Certain business sectors are completely restricted to foreigners or only allow companies with partial or minority foreign ownership. For example, Clients planning to operate in the mining sector must appoint a 20% Indonesian shareholder within 5 years of commencement of its production operations.

The nominee LLC option

The use of Indonesian nominees to initially setup an LLC on behalf of foreign companies is a strategy often adopted by entrepreneurs to significantly reduce by 2 months the incorporation timelines of a PMA. This approach is recommended when our Clients have an urgent need to become legally operational in order to secure contracts or close business deals that are time sensitive. Nominee LLCs are also useful to overcome foreign investment restrictions (e.g.: purchase of Indonesian property). Our Client can either ask us to appoint an Indonesian national (individual or corporate) to the position or to provide nominee services for professional passive local shareholders.

Representative office

  • Opening a representative office (RO) is a convenient way for foreign companies to gain a market presence in Indonesia. However, such entity is only permitted to i) conduct promotional activities, ii) market research and iii) act as a country buying/selling agent for the parent company. The RO will only obtain an operating license for two years and depending on the nature of the parent company the Indonesian Government may impose additional operating license requirements;
  • Indonesia currently does not allow foreign corporations to form a branch office in the country. Consequently, it is currently impossible to convert a representative office into a branch: our Clients will have to register a PMA in order to conduct commercial operations in Indonesia.

Public companies

In accordance with Indonesian Company Law a public company is required to have at least 300 shareholders and IDR 3 billion as paid-up capital. A public company is subject to more stringent regulatory provisions than an LLC. In Indonesia, it is not necessary for a public company to be listed on the national stock exchange IDX (PT Bursa Efek Indonesia).

Table of comparison between Indonesia entities

Detail
PMA Company
Rep Office
Total company set up costsUS$18,100US$19,250
Subsequent annual costs (excl accounting and tax fee)US$2,600US$2,800
How long to set the company up?3 months3 months
How long to open company bank account?4 weeks3 weeks
Issued share capital requiredUS$300,000None
Types of business permittedNo restrictionMarketing, research, advertising
Allowed to sign sales contracts with Indonesian ClientsYesNo
Allowed to invoice Indonesian ClientsYesNo
Corporate tax payable in Indonesia25%None
Corporate bank accountSCB IndonesiaSCB Indonesia
Can rent office premises in IndonesiaYesYes
Tenancy agreement required before incorporation?YesYes
Allowed to import raw materials?YesNo
Allowed to export goods?YesNo
Can the entity hire expatriate staff in Indonesia?YesYes
Do you visit Indonesia for company incorporation?NoNo
Resident director required?YesNo
Resident shareholder required?NoNo
Minimum number of directors1None
Minimum number of shareholders2None
Minimum number of Commissioner1None
Indonesia resident company secretaryNoNo
Tax registration certificate requiredYesNo
Individual shareholders allowedNoNo
Corporate shareholders allowedYesYes
Corporate director(s) allowedYesNo
Public register of shareholders and directorsYesNo
Indonesia employment visa feesUS$3,950US$3,950
How long to get work permit approved3 months3 months
Statutory audit requiredYesNo
Annual tax return to be submittedYesNo
Access to Indonesia double tax treatiesYesNo
Draft invoicedraft invoice for Indonesiadraft invoice for Indonesia

Frequently asked questions

Contact us

For additional information on our business setup services in Indonesia, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Ms. Chrissi Zamora, directly: