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How to set up a company in Indonesia


Setting up a business in Indonesia, a transcontinental country situated mainly in Southeast of Asia can be a suitable and successful option for entrepreneurs seeking to expand their activities in a stable and reliable country with solid economic ties around the world. There are varied forms of Indonesian companies an investor can choose from, such as limited liability company, partnership, nominee limited liability company, foreign-owned LLC or branch. With a comprehensive understanding of the corporate, the commercial and the civil laws in Indonesia, our company formation agents in Indonesia can help any businessman, whether local or from abroad, preparing the incorporation documents and registering the firm.
 

Limited liability company in Indonesia


Indonesian LLC is known as Perseroan Terbatas (in Indonesian, the local language) and is the most preferred type of business form in the country. The condition of the minimum share capital set for an LLC in Indonesia encourages small and medium entrepreneurs to open businesses in the country. With about $ 3,789 (American dollars), one can start his/her activities in Indonesia. Please consider that such entity is available for local entrepreneurs. At least one director needs to be appointed and a commissioner who can be of any kind of nationality. One should know that the budgets, business plans, and company control are among responsibilities of a commissioner appointed for an Indonesian LLC.
 

Nominee LLC in Indonesia


This kind of company regards foreign entrepreneurs who want to establish their operations in Indonesia as fast as possible, due to the incorporation time of about several days. Furthermore, a nominee LLC allows the owner to acquire all kinds of properties in Indonesia. A local representative for a nominee LLC in Indonesia must be selected. 
 

Foreign-owned LLCs in Indonesia


Penanaman Modal Asing (PMA) are limited liability companies which can be partially or entirely owned by individuals from abroad, considering the provisions of the Foreign Capital Investment Law. These kinds of entities can be registered in Indonesia only if the Capital Investment Coordinating Board approved the business. One should know the minimum share capital in this matter has been recently set at around $ 3.789 from which at least 25% should be paid when registering the company in Indonesia.
 

Opening a subsidiary in Indonesia


Foreign companies seeking to have a presence in Indonesia can register subsidiary companies, as the branch office is not recognized as a business form in this country.

The subsidiary company will operate just a foreign-owned limited liability company in Indonesia, therefore it will need to comply with the same registration requirements as this type of company. The following documents must be provided when registering a subsidiary company in Indonesia:
 
  • information about the shareholders, which must contain the Articles of Association of the parent company in this case;
  • information the company’s managers must also be filed with the Investment Coordinating Board;
  • the minimum share capital must be deposited in an Indonesian bank account opened for this purpose;
  • the tax identification number of the company is also required – this must be obtained prior to the company registration procedure.

The parent company must inform the Indonesian Investment Coordinating Board about its legal address in the foreign country, its identification number (if the home country’s Trade Register issues such number) and its objects of activity. With respect to the subsidiary’s managers – at least one must be an Indonesian resident. For details about setting up a company in Indonesia, please contact our agents.
 

Representative office in Indonesia


Foreign companies have the possibility of entering the Indonesian market for promotional activities and market research by establishing a representative office with a license available for two years. For the moment, this is a suitable option instead of opening a branch, as foreign companies are not allowed to implement their activities in the Indonesian market. There is no need for a minimum share capital for establishing a representative office in Indonesia and such entity can be registered with the help from our Indonesian company formation specialists who have a vast experience in this field. Our advisors can act as representatives of your businesses if a power of attorney is issued.
 
We invite you to watch our video on the company incorporation process in Indonesia:


Steps to set up a company in Indonesia


Foreign investors who want to register companies in Indonesia must complete the following steps:
 
  1. Draft and investment plan which must be submitted with the Indonesian Investment Coordinating Board;
  2. Deposit the share capital with a local bank (the amount to be deposited will depend on the type of company);
  3. Appoint the shareholders and the directors of the company (in certain cases, a commissioner must be nominated too);
  4. Choose and register the local address of the company (the address must also be written in the company’s incorporation documents);
  5. Prepare the Memorandum and Articles of Association of the company and file them with the Trade Register;
  6. Applying for the business and the operational licenses with the relevant authorities;
  7. Registering for taxation and value added tax (VAT) purposes with the tax authorities.
Our local agents can help with the preparation of the documents related to registering any type of company in Indonesia and business consulting for setting up a company in Indonesia.


Company incorporation requirements in Indonesia


Before setting up a business in Indonesia, the shareholding structure of the company must be established. The local legislation provides for:

- local companies which can be registered by Indonesian citizens;
- foreign-owned companies.

The company registration requirements depend on the owners of the Indonesian company. The minimum share capital related to starting a company in Indonesia depends on the size of the company and spans between 3,700 USD and close to 38,000 USD for local limited liability companies. In the case of foreign-owned companies, the minimum amount of money required implies an investment plan worth at least 1,2 million USD. Out of these, at least 25% of the amount must be deposited as an initial share capital.

Opening a company in Indonesia also implies having a minimum number of 2 shareholders, at least one resident director and a commissioner. The commissioner may be a foreign citizen no matter the type of company registered.

Our company formation agents can offer more information on the additional requirements related to setting up a company in Indonesia.


Company registration timeframe in Indonesia

 
The following timeframe must be considered when incorporating a company in Indonesia as a foreigner:

 
 Procedure  Time
 Company name reservation   1 day
 Approval of the incorporation documents   10 days
 Drafting of the Articles of Association   2 days
 Obtaining approval from the Ministry of Law   1 day
 Obtaining a registered address   1 day
 Tax and VAT registration   5 days
 Obtaining the business license   5 days
 Obtaining a permanent license   10 days

 

Why set up a company in Indonesia?

 
If you want to open a company in Southeast Asia and have not decided on a country yet, here is why you should choose Indonesia:
 
1.       Indonesia has made significant progress in easing the company registration procedure;
2.       foreign citizens and investors are now allowed to buy land plots in Indonesia;
3.       Indonesia has one of the fastest growing middle classes at a global  level which indicates a good state of the economy;
4.       Indonesia is the largest economy in the region with a GDP that grows annually.
 

Opening a company bank account in Indonesia


One of the most important steps of setting up a business in Indonesia is the opening of the company’s bank account. The documents required for opening the account are:
 
  •  the company’s tax identification number;
  •  a copy of the company’s lease contract which indicates its legal address in Indonesia;
  •  a copy of the documents issued by the Investment Coordinating Board which approves the establishment of the company;
  •  the company’s incorporation documents;
  •  copies after the shareholders and managers’ identification papers;
  •  copy of the approval obtained from the Ministry of Law which approved the opening of the company.

If any of the documents mentioned above was not issued at the time of starting the bank account opening process, these can be submitted within one month after the account was set up.
It should be noted that starting with 2015, the opening of bank accounts for both foreign citizens and companies was eased by the National Bank of Indonesia.

Our company formation representatives in Indonesia can guide foreign investors throughout the procedure of creating corporate and merchant accounts


Taxation of companies in Indonesia


Companies in Indonesia are subject to several taxes, among which the most important ones are the corporate tax and the value added tax. The corporate tax is levied based on the income generated and the type of company. The corporate tax rates are:
 
  • the standard corporate income tax is levied at a flat rate of 25%;
  • public companies which are owned by the state in a proportion of 40% are subject to a 20% tax rate;
  • small companies with an annual income of maximum 50 billion Rp benefit from 50% of the standard corporate tax;
  • companies with an annual income of maximum 4,8 billion Rp benefit from a tax rate of 1%.
The standard VAT rate in Indonesia is 10%.


The most recent credit ratings for Indonesia


Fitch, Moody’s, Standard and Poor’s and DBRS are just a few of the credit rating agencies which evaluate Indonesia on a regular basis. In the last few years, Fitch, Standard and Poor’s and Moody’s have gradually upgraded Indonesia’s credit ratings thanks to its good economic results.

Local and foreign enterprisers who want to set up businesses in Indonesia and want to know how the local economy performs can rely on these ratings:

-  BBB- with a stable outlook from Standard and Poor’s issued this year in May;
-  Baa3 with a positive outlook from Moody’s issued at the beginning of 2017;
-  BBB- with a positive outlook from Fitch issued in July 2017.

If you are interested in starting a business in Indonesia, our local company formation consultants can guide you.
 

Why are credit ratings important for Indonesia?


Credit ratings play two important roles in Indonesia:

- the first one is related to the evaluation of the country’s economy;
- the second one outlines the business confidence of foreign investors who open companies here.

Credit ratings have also helped the government with the implementation of policies which attract foreign direct investments (FDI), one of the most important contributors to the economy.
As mentioned above, Indonesia’s credit ratings have followed an ascending pace during the last few years, especially with respect to the outlook offered by the agencies which announce a stable economy for the next period.


Frequently asked questions

 

1. Can a foreign citizen start a company in Indonesia?

Yes, foreign citizens have the same rights as local investors when it comes to opening a company in Indonesia.
 

2. Do I need a visa if I want to start a company in Indonesia?

A business visa or a residence permit is required for those who want to start a company in Indonesia. Our local consultants can explain the visa requirements for foreign investors.
 

3. What are the steps to open a company in Indonesia?

The steps related to setting up a business in Indonesia are not many and can be completed in a relatively short time. Our company formation consultants in Indonesia can explain these steps.
 

4. What are the main types of companies in Indonesia?

There are a few business forms a company can take in Indonesia, however, the most employed one is the limited liability company which can also be fully-foreign owned.
 

5. What documents do I need to start a business in Indonesia?

The most important documents related to starting a business in Indonesia are the memorandum and articles of association. These can be drafted by our Indonesian company formation consultants.
 

6. What is the minimum share capital in Indonesia?  

The minimum amount of money required to set up a company in Indonesia is around 3,700 USD. However, depending on the company’s size, activities and shareholding structure, the share capital requirements can increase to up to 1,2 million USD.
 

7. How long does it take to register a company in Indonesia?

Opening a company in Indonesia takes less than in other Southeast Asian jurisdictions. Because of this aspect, many foreign investors are attracted to starting a business here.
 

8. What are the taxes that I have to pay in Indonesia?

The tax rates in Indonesia are not high; however, the government imposes various taxes which must cause some problems to recently settled foreign citizens. You can rely on our accountants in Indonesia on tax consultancy matters.
 

9. How can I open a bank account in Indonesia?

Foreign citizens and investors must provide several documents when opening bank accounts in Indonesia. Among these documents, utility bills in the case of foreign employees and the certificate of incorporation in the case of companies are a must.
 

10. Why should a foreign investor open a company in Indonesia?    

The prosperous economy, the swift and simple company registration procedure and the special legislation favoring foreign investments are just a few of the reasons why it is worth considering Indonesia for starting a business in.

Setting up a company in Indonesia can be an easy process if the preparation of the documents is supervised by our team of company incorporation agents in Indonesia. For complete support in registration matters and related services, we invite you to contact us. We can also help you if you want to open companies in other countries, such as Qatar

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