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$16,950US$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

    • Multi-national Clients like to open a subsidiary in Jakarta because of access to Asia’s third-largest domestic market (after China and India) of 260 million people. Indonesia is the world’s fourth most populated country, and its economy is projected to be the world’s seventh largest by 2030. Current GDP exceeds US$ 1 trillion.
    • Indonesia is surrounded by economies from China to India, South Korea and Japan, all of which are thirsty for natural resources. Indonesia is i) the world’s largest producer and exporter of crude palm oil ii) the world’s second largest coal exporter iii) the world’s second-largest producer of cocoa and tin and iv) the world’s fourth largest natural gas exporter. This is why 44% of GDP comes from exports to Asian economies. Indonesia is also part of the free trade zone of ASEAN, which allows free movement of goods and services with 0% VAT and import and export duties. As Chinese and USA trade tensions exacerbate, China does more trade with Indonesia, increasing the health of the economy.
    • Multi-national Clients are attracted to the Indonesian consumer market because:
      • 60% of the population is under the age of 30, is IT-savvy and is interested in new international brands.
      • The middle class is expected to almost double from 88 million (in 2014) to 141 million people by December 2020. Demand from the new middle class is increasing for i) modern retail and consumer goods ii) healthcare iii) education and professional qualifications iv) information and communications technology v) fashion for clothing and footwear and vi) sportswear and vii) baby products and viii) consumer durables.
      • International surveys show that Indonesians are trusting consumers, highly receptive to advertising and keen to try new things.
      • E-commerce is limitless because Indonesia has over 100 million internet users. It is the world’s third-largest Facebook market and fifth-largest Twitter market. Indonesia is the fourth-largest mobile market in the world.
    • Indonesian business set up is easy if you know how. Company incorporation can be completed within two weeks including i) exemption from BKPM approval ii) 100% foreign ownership permitted in most sectors of the economy iii) no mandatory requirement to translate nor legalise overseas documents incorporating a foreign entity.
    • Over the coming years, the Indonesian government plans to inject US$1.5 trillion into the local economy to improve the country’s infrastructure. This presents opportunities to multi-national Clients to supply professional services including pre-feasibility studies, technical advisory, architectural design, financial and legal advisory, project management, operation and maintenance. Examples of infrastructure projects include i) the Jakarta-Surabaya rail project and ii) the Jakarta-Bandung rail link iii) Soekarno-Hatta International Airport Rail Link iv) Soekarno-Hatta International Airport terminal expansion v) Bandung Light Rail Transit vi) Surabaya Mass Rapid Transit vii) Kertajati (West Java) Airport viii) Kulonprogo (Yogyakarta) Airport ix) 15 new airports being built across the country x) the building of nine new air cargo facilities and xi) the redevelopment of 100 existing airports.
    • Foreign entrepreneurs can legally own land and other property in Indonesia.
    • If properly structured, an Indonesian LLC can legally minimise corporation tax with i) a five- to 20 year tax holiday for investments above US$34 million ii) carrying forward of business tax losses for up to 10 years iii) reduced withholding tax on dividends thanks to DTAAs with 66 countries and iv) low or zero tariffs when doing business with other ASEAN countries v) exemption from import and export duty through the Batam Special Economic Zone (SEZ) and vi) no VAT or local service tax on imported goods through the SEZ.
    • Indonesia is a low-cost manufacturing base because i) wages average US$190 per month and ii) average annual warehouse rental near Jakarta is US$1.24/square metre and iii) low electricity prices and iv) low land prices.
    • Indonesia annually imports a lot of products and services from the rest of the world including i) boilers and machinery ii) mineral fuels, oils, distillation products iii) electrical and electronic equipment iv) plastics and plastic products v) iron and steel vi) motor vehicles vii) organic chemicals viii) cereals ix) residues, food industry waste and animal fodder.
    • The Indonesian government plans to increase the use of renewable energy from 6% of the total energy mix at present to at least 23% by 2025. Indonesia has 40% of the world’s known geothermal resources. Multi-national Clients are invited to submit tenders for projects on i) biomass and biogas and municipal waste ii) hydropower and geothermal iii) solar and wind. There are Feed-In Tariff (FIT) schemes to encourage the growth of renewable energy projects.
  • Problems with doing business in Indonesia

    • Indonesian laws favour Indonesian citizens and do not adequately protect foreign investors. To exacerbate matters, there is limited enforcement of intellectual property laws.
    • Out of 188 countries, Indonesia is the world’s 72nd easiest place to do business, according to the World Bank. This means that doing business in Indonesia is difficult because:
      • The primary business language is Indonesian (Bahasa). All government documents are in Indonesian. The local courts only hear cases in the local language. It is therefore important to hire a local Commissioner to liaise with governments and banks.
      • The country is rated quite poorly in terms of technology readiness.
      • Because of an excess number of cars and a poor transport network, the average person spends 400 hours a year in traffic congestion.
      • There are foreign currency capital controls on remittances overseas.
      • Foreign companies are not permitted to establish a branch office.
      • A subsidiary must appoint at least two shareholders and one resident director and inject a high minimum paid-up share capital of US$190,000.
      • Multi-national Clients are not allowed do business in industry sectors on the negative investment list.
      • Because of government control, the majority of businesses require a special business licence from the government.
      • Indonesia is the 85th least corrupt country on the planet. Personal bribes are common. There is widespread corruption in both private and government sectors.
      • Indonesia has inefficient transport and logistics networks to facilitate international trade and handle imports/exports.
      • Frequent power cuts in major business hubs hurt manufacturing businesses.
      • Digital currencies are not allowed.
      • It is part of the local culture to not pay outstanding debts or default on legal contracts. Consequently, Balance Sheet write off of customer receivables is common, causing significant cash flow losses to some companies. Specifically, it takes on average 498 days to enforce a contract and incurs a sizeable legal cost. The same can be said of insolvency cases, where the average time is 5.5 years and the recovery rate is a lowly 14.2 cents on the dollar, compared to the OECD average of 70.6 cents.
      • Indonesia has a business culture where companies will rarely respond to emails.
    • Indonesian multi-currency corporate bank account opening is challenging and slow because i) local banks require a non-resident bank signatory to secure an Indonesian work permit (KITAS). This process may take up to two months ii) local banks may require foreign language documents to be translated into Indonesian Bahasa iii) local banks require a lot of foreign documents to be attested in the nearest Indonesian embassy in your country and iv) the initial paid-up share capital of US$300,000 must be deposited before company incorporation is complete.
    • Unfortunately, the Indonesian government limits expatriates to 20% of the company workforce. Securing quality local employees in Indonesia is difficult because i) language barriers due to very low English language proficiency and ii) the absence of highly skilled workforce because only 40% of workers in Indonesia complete high school and iii) an inefficient labour force and lack of highly motivated employees iv) high unemployment of 5.3% in 2019 v) low tertiary education of 16% vi) low computer literacy of 4.69% in 2019. The United Nations Human Development Index (HDI), for instance, ranks Indonesia 113th out of 188 countries, indicating Medium Human Development.
    • Without quality simple, practical advice, multi-national Clients can pay unnecessary Indonesian high taxes including i) corporation tax of 25% and ii) VAT of 10% iii) capital gains up to 25% and iv) withholding tax of 20%. There are a massive 51 different tax payments to be made each year, taking approximately 259 man hours.
    • Because of crime and terrorism, most expatriates live in gated compounds. Air pollution is a serious problem.
    • The health of the Indonesian economy is linked to the global price of commodities because a large % of GDP comes from local coal, tin, copper, nickel, bauxite, oil and gas. Above ground, its vast land mass grows palm oil, rubber, coffee, cocoa and rice.
    • A global depression will highlight the weaknesses of Indonesian banks health and the increased risk of bank bankruptcies.
  • Tell us what you need - we’ll send you a customised proposal in 5 hours!

    To help us engineer the optimum Indonesia corporate structure, please complete the 3-minute questionnaire below; then press the submit button below.

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  • Useful links for Indonesia

Contact us

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