Here’s everything you need to start a business in Indonesia.
Indonesia, the equatorial archipelago that spans over 17,000 islands, holds one of the best opportunities for starting a business and growing it. Here, you’ll meet over 264 million people, giving you the largest market in Southeast Asia. Following the omnibus law, the Indonesian government has significantly reduced the bureaucracy needed to set up your business.
By registering your business in Indonesia, you’ll then be able to open local bank accounts, hire local and foreign employees, issue work permits, and obtain a physical space in registered office buildings. Depending on which type of business entity you want to set up, having professionals on the ground to help you through the process will make the process easier.
In this article, we will be going through how to register your company in Indonesia for foreigners in 2021.
- Short summary of types of business entities
- How to set up a foreign company (PT PMA)?
- How to set up a representative office (KPPA)?
- Before you start...
- How do I start?
Short summary of types of business entities
There are several types of business entities in Indonesia, which can be categorized into two main headings - private-owned company and a state-owned company.
Most foreign businesses that enter the Indonesian market will be categorized as private-owned companies. They then need to be registered as a Foreign Limited Liability Company (Perseroan Terbatas Penanaman Modal Asing - PT PMA) to be able to conduct any commercial activities.
Also read, the top three types of Company Registration in Indonesia 2021 (Updated List)
How to set up a foreign company (PT PMA)?
A foreign investment company, or PT PMA in Bahasa, is the standard way for foreign investors to operate a company in Indonesia. You would need to register your company as a PT PMA at any amount of foreign shareholders, even 1 percent.
Business registration and incorporation of your company might seem complicated, but it’s easy to get a handle on things if you understand the regulations and have qualified assistance. Here’s what you’ll need to do to register and start a business in Indonesia.
Step 1: Getting a Deed of Establishment
Proposing a company name
First, Indonesian regulations state that official company names should consist of at least three different words. These three different words should be in the local language for local companies (PT Local), meanwhile for foreign companies (PT PMA) can be in English. Keep in mind that this official company name is only for legal purposes so that you can have another distinct name for your brand or product.
The company name can be booked through a registered notary.
Drafting Articles of Association
Once you’ve picked a company name, the registered notary will draft the articles of association for your company. According to Indonesian law, this document will consist of:
- Your company’s name and location,
- Your company’s objective and business activity,
- Details about your amount of capital,
- The amount and value of your company shares,
- The titles, amount of members, appointment and discharge procedures of your Board of Directors and Commissioners,
- Methods and locations to hold your shareholder meetings, and
- Procedures for using and distributing your company’s profit and dividends.
Submitting your Deed of Establishment
Next, you need to sign the Article of Association. All your shareholders need to sign the document in the presence of the notary. If a shareholder can’t attend, they’ll have to use a power of attorney provided by the notary.
Then, your notary will submit the Articles of Association to the Indonesian Ministry of Justice and Human Rights for approval. The Ministry will then issue your Deed of Establishment; this signifies that the government has registered your company as a legal entity.
You’ll need these two documents – your Article of Association and Deed of Establishment – to apply for other licenses and a business registration number.
Step 2: Getting a company tax ID (NPWP)
After you get your Deed of Establishment, you will need to apply for the company tax ID. This can be done through a tax online system or at a tax office.
However, please keep in mind that some provinces in Indonesia might still require to apply for the tax ID through the local tax office. The government will send your original tax ID directly to your company’s address.
Previously, after you get your tax ID, you also had to get a domicile letter from the regional government. However, the local government in Jakarta released a new regulation in May 2019 that made domicile letters unnecessary for new companies in this city.
Step 3: Getting a Business Registration Number
In 2018, the Indonesian government launched the Online Single Submission system that makes the remaining steps of company registration simpler. By using the system, you can obtain the remaining documents – which right now known as a business registration number (NIB) – all at once. These documents include:
- Your import license (previously known as API-U),
- Customs Identification Number (previously known as NIK),
- Your business registry number (previously known as TDP)
Additionally, you can automatically register your company with the government’s Health and Social Security System (BPJS Kesehatan and BPJS Ketenagakerjaan).
Generally, trading and service companies will be able to start doing business right away after this. However, some industries, like manufacturing and healthcare, will need additional licenses before they can operate. Business activities in Indonesia can vary widely, hence you should consult an experienced professional to discuss what you need here.
Work permits such as your KITAS, ITAS, and VITAS will need to be applied for after the company has been established. Here’s all you need to know about how to get a KITAS.
How to set up a representative office (KPPA)?
A representative office (RO), or Kantor Perwakilan Perusahaan Asing (KPPA) in Bahasa, is a simpler way for foreigners to establish a presence in Indonesia. However, an RO is not allowed to not generate revenue and is only limited to market research and promotional activities.
Read more to learn how to set up a representative office (KPPA) in Indonesia.
Before you start…
The technical aspects are of great importance when thinking about the formation of your company and the registration process in Indonesia. Yet, just this archipelago itself holds a melting pot of culture including a multitude of religions, various ethnic groups, and Indonesians taking huge pride in their cultural heritage.
It is paramount that you conduct market validation rigorous enough to know your target market, how to segment them, and how to position your own company to your customers. Greenhouse connects you to pre-screened service providers on the ground who will be of great help when you set up your company in Indonesia.
So now, how do I start?
The registration process has gotten a lot more accessible for companies. However, it can still be overwhelming for people who aren’t familiar with the system; not to mention the lack of ground support. It’s essential to know the basics of every step; however, consulting with a professional to help guide the process is still the better way to do it.
Greenhouse can connect you to pre-screened service providers to help incorporate your company in Indonesia. Learn more about our business registration solutions.
This article is not intended to and does not constitute legal or tax advice, recommendations, mediation, or counseling under any circumstance. This webpage and your use thereof does not create an attorney-client relationship with Greenhouse or our service providers in Indonesia. The article solely represents the thoughts of the author and is neither endorsed by nor does it necessarily reflect Greenhouse’s belief. Greenhouse does not warrant or guarantee the accurateness, completeness, adequacy, or currency of the information in the webpage. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular problem.