Indonesia company registration

DOING BUSINESS IN INDONESIA IN 2020

pay fee by instalmentsbusiness setup without travel

Since 2003, Healy Consultants Group PLC has been effectively assisting our Clients with i) business registration ii) Indonesian corporate banking solutions iii) resident director and iv) accounting and legal requirements.

Compare different Indonesia entitiesWholly foreign owned LLC Fast business setup solutionFree zone LLCLocal nominee owned LLC Representative Office
Also known asPMAPT-PMA conversionKPB companyPTKPPA
Best use of company?All products and servicesClose a customer deal nowManufacturing and export tradingTo secure public fundingMarketing & research
How soon can you invoice Clients/sign sales contracts?3 months6 weeks3 months6 weeksCannot
How soon can you hire staff?3 months6 weeks3 months6 weeks3 months
How soon can you sign a lease agreement?1 week1 week1 week1 week1 week
How long to supply corporate bank account numbers?4 months10 weeks4 months10 weeks4 months
How long to supply company registration/tax numbers?3 months6 weeks3 months6 weeks3 months
Corporate tax rate on annual net profits?25%25%25%25%0%
Limited liability entity?YesYesYesYesNo
Government grants available?YesYesYesYesNo
Government approval required for foreign owners?YesYesYesYesYes
Resident director/partner/manager/ legal representative required?YesYesYesYesYes
Minimum paid up share capital?US$300,000US$300,000US$300,000From US$3,745none
Can bid for Government contracts?YesYesYesYesNo
Corporate bank account location?Bank NegaraSCB Indonesia Citibank IndonesiaBank MandiriDBS Indonesia
Can secure trade finance?YesYesYesYesYes
VAT payable on sales to local customers?10%10%10%10%None
Average total business set up engagement costs?US$19,440 US$64,100US$18,100US$13,500US$19,250
Average total engagement period?4 months4 months4 months3 months4 months

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Accounting and tax considerationsWholly foreign owned LLCFast business setup solutionFree zone LLCLocal nominee owned LLCRepresentative Office
Statutory corporate tax payable?25%25%25%25%0%
Legally tax exempt if properly structured?NoNoYesNoYes
Group HQ tax incentives?YesYesYesNoNo
Must file an annual tax return?YesYesYesYesYes
Must file annual financial statements?YesYesYesYesYes
Must appoint an auditor?NoNoNoNoNo
Access to double taxation treaties?YesYesYesYesNo
Withholding tax on payments to foreign shareholders?20%20%20%20%None
Company RegistrationWholly foreign owned LLCFast business setup solutionFree zone LLCLocal nominee owned LLCRepresentative Office
Resident director/partner/manager/ legal representative required?YesYesYesYesYes
Minimum number of shareholders/partners?2222Parent company
Maximum shareholding for foreigners?100%100%100%0%100%
Minimum statutory paid up share capital?US$300,000US$300,000US$300,000From US$3,745none
Security deposit to be kept with Government?NoNoNoNoNo
Shelf companies available?YesYesYesYesNo
Time to incorporate a new entity?3 months6 weeks3 months3 months3 months
Can easily convert to a PLC?NoNoNoYesNo
Public register of shareholders and directors?YesYesYesYesYes
Can have preference shareholders?YesYesYesYesNo
Business ConsiderationsWholly foreign owned LLCFast business setup solutionFree zone LLCLocal nominee owned LLCRepresentative Office
Good entity for trademark registration?YesYesYesYesNo
Can secure an import and export license?YesYesYesYesNo

Sponsorship by a local citizen required?No, except for a PT company
Our Client needs to travel to Indonesia for business set up?No
Temporary physical office solutions available?Yes
You need a local resident as bank signatory?Yes
Can be wholly foreign owned?Yes
The entity will likely be regulated by?BKPM
Minimum number of directors/managers?1
Monthly VAT reporting to the Government?Yes
Must sign an office lease agreement during incorporation?Yes
Shareholders & directors documents to be attested/translated?Yes
Each foreign director needs a personal income tax number?No
Foreign director needs a residence visa?No
Maximum number of staff allowed?No limit
Expatriate to local staff ratio?1:4
Can secure residence visa for business owner?Yes
Other useful information
What will be included in my customer sales invoice?Click link
This country has signed free trade agreements?Yes
This country is a member of WIPO/TRIPS?Yes
This country is a member of the ICSID?Yes
Average custom duties suffered?9.5%
Government foreign investment approval required?Yes
Average monthly office rental? (US$ per sq m)27
Minimum statutory monthly salary?US$252
Average monthly US$ salary for local skilled employees?US$1,200
US$ deposit interest rate? (1 year average)4.5 - 6.5%
Overseas remittance currency controls?For transactions above or equivalent to US$100,000
Banking considerations
Multi-currency bank accounts available?Yes
Corporate visa debit cards available?Yes
Quality of e-banking platform?Excellent
Crowd funding available in this country?Yes

Indonesia business setup summary

Press the link headings below to read detailed, relevant, up to date information.

  • Benefits of doing business in Indonesia

    • Foreign investors registering a company in Indonesia have access to Asia’s third-largest domestic market (after China and India);
    • The Indonesian government is keen to attract investment in manufacturing, healthcare, agribusiness, digital economy and tourism. Tax incentives and subsidies include:
      • 100% corporate income tax exemption for between five and 20 years from start of commercial operations for investments above IDR500 billion (US$34 million);
      • 50% corporate income tax reduction for five years from start of commercial operations for projects valued between IDR100 billion and IDR500 billion;
      • Further tax incentives are available to foreign-invested businesses that develop local talent (e g apprenticeships, work experience, vocational programs and learning activities).
    • Indonesia is a low-cost manufacturing base:
      • Sector wages averaging US$190 per month. The minimum monthly skilled wage in Jakarta is US$303;
      • Average annual warehouse rental near Jakarta is US$1.24 per square metre, lower in other regions/provinces;
      • Electricity prices are globally low.
    • Currently, Indonesia has signed Double Taxation Avoidance Agreements (DTAA) with 65 countries, including USA, UK, Germany, China, Singapore and Australia. DTAAs minimise withholding tax on repatriation of profits out of Indonesian subsidiaries;
    • Batam Special Economic Zone (SEZ) offers tax incentives for export-orientated manufacturing industries. For example, raw material imports are duty free, while there is no VAT or local service tax.
  • Problems with doing business in Indonesia

    • Doing business in Indonesia is difficult because:
      • Multi-national Clients’ investments in Indonesia are unprotected because of i) poor commercial law that favours Indonesian citizens and ii) ineffective enforcement of intellectual property laws iii) a lack of regulatory transparency;
      • Indonesia business set up requires i) a paid-up share capital of US$300,000 ii) multiple layers of government approval. For example, most types of businesses in Indonesia require a special business licence, which takes time to secure;
      • Opening a multi-currency corporate bank account is slow;
      • Indonesian taxes are high including i) corporation tax of 25% and ii) VAT of 10% and iii) capital gains up to 25% and iv) withholding tax of 20% on outgoing funds transfers to the non-resident parent company;
      • There is a skills shortage in Indonesia (the best and brightest Indonesian talents move overseas) and it is difficult and time consuming to obtain work visas for foreign talent. As a result, Indonesian companies are disconnected from the global supply chain;
      • Indonesia’s labour force is inefficient compared with nearby Malaysia, the Philippines, Singapore and Thailand;
      • Employing quality Indonesian labour is difficult because of i) low English language proficiency ii) less than one fifth of Indonesians having received a tertiary education and iii) low digital literacy iv) lack of ambition among many workers, leading to poor work ethics v) hierarchies in the workplace where employees prefer not to speak up;
      • The primary business language is Indonesian and all government documents are in Indonesian;
      • It is common for foreign investors to deal with corrupt government departments;
      • Foreign investors cannot repatriate profits from Indonesia in rupiah currency. Instead, the Indonesian subsidiary must action outgoing funds transfers in any other currency;
      • Indonesian infrastructure is poor with i) the island of Java, and the capital city Jakarta, experiencing frequent power cuts, hurting manufacturing businesses ii) inefficient transport and logistics networks, including a lack of large-capacity ports to facilitate international trade and handle imports/exports.

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For additional information on our company registration services in Indonesia, please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi