Virtual Offices in Indonesia: Things you must know in 2021

Over the years, virtual offices have been making their mark on the Indonesian business realm. Not only do they have many benefits, but also are more attractive than traditional, physical office spaces today.

Hence, it may be a good idea to start considering virtual offices in Indonesia, especially if you are a small business looking to reduce your costs, or a larger business seeking to expand in a new location.

Quick Navigation

What is the difference between a virtual office and a registered business address?

They mean the same thing!
A registered business address would simply allow you to also have a virtual office. So, in this article, we will be using “registered business/office address” interchangeably.

How does a virtual office in Indonesia work?

A virtual office is a service that allows you to register office buildings as your official business address while still having your daily operations somewhere else. It’s very popular in Indonesia, especially for businesses that are just starting out. The Indonesian government specifically allows and regulates virtual offices to make it easier for people to set up companies. Although, there might be some business activities that might require a physical office.

To set up a legal entity, businesses in Indonesia have to register in a designated commercial area and not – for example – residences. With the registered office address, businesses can fulfill this rule while also saving costs compared to using physical offices. This is especially helpful to smaller businesses or those that focus more on fieldwork rather than office work.

For this reason, services to obtain a registered address are popular with local companies in Indonesia’s commercial areas, like Jakarta. Below, we’ll outline whether your company is allowed to use a virtual office in Indonesia, and what are the alternatives.

Are virtual offices legal?

In the past, foreign companies or PT PMA weren’t allowed to use virtual offices in Indonesia. They have to register a physical address in a designated commercial area.

However, Jakarta’s regional government released a new regulation about this in May 2019. This new regulation implicitly allows foreign companies to use virtual office services from service office providers with value-added tax (VAT) certificates - if the company is planning to become a value-added taxpayer. Previously, the company will need to obtain a domicile from the local district. Now, with this new regulation, the government waived this process. However, the company might need to obtain domicile from the building or from the service office provider

Please be informed as well that in some provinces processing a domicile letter from local districts might still be required. We suggest consulting directly with consultants or our service providers.

For foreign or restricted companies, a better option would be to use a dedicated desk or office space instead of a virtual office.
For foreign or restricted companies, a better option would be to use a dedicated desk or office space instead of a virtual office.

Note how we said “implicitly” – the new regulation didn’t explicitly rule about PT PMA, and – like many Indonesian regulations – it’s very likely that this is going to change again. For foreign companies, virtual offices are in a legal gray area right now.

In short, in big Indonesian cities like Jakarta and Bali, having a registered office instead of a physical one is recognized and acknowledged.

As such, we advise you to contact a trusted service provider to advise your company on the steps to set up a virtual office in Indonesia.

Are there companies that have to use physical office spaces?

Even though most types of local companies are free to use virtual offices, the Indonesian government requires some categories to set up legal entities with physical office spaces.

The business fields that can’t use registered offices:

Even though most types of local companies are free to use virtual offices, the Indonesian government requires some categories to set up legal entities with physical office spaces.

The business fields that can’t use virtual offices include:

While virtual offices are being made more accessible to companies, there are some restrictions in these Indonesian virtual offices to take note of.

Below are some business fields that cannot use registered offices:

E-commerce companies

If a business wants to set up a legal entity as an e-commerce company in Indonesia, they have to use physical office spaces. While Indonesia’s government supports the development of e-commerce, these companies need a physical business location to ensure accountability to their customers and lessen the risk of fraud.

Construction companies

A construction company in Indonesia needs special operating permits which they can’t get if they use a virtual office. There are logistical concerns, too; if a company operates heavy machinery, they need to store and distribute them in designated areas to prevent public disturbances.

Tourism Companies

Like construction, tourism businesses also need special permits which they can only get after a survey by the government’s Ministry of Tourism. Tourist attractions and entertainment facilities also need physical locations that pass all the government’s practical, sanitary, and safety regulations.

Transport companies

Any company that transports people or goods also needs an actual, physical office. Because transport companies are often responsible for moving other people’s property, they need a physical location that their customers can refer to if necessary.

Property developers

Because property or real estate companies frequently involve moving large amounts of money, they also need to operate with physical offices. Having an actual place where they operate helps ensure accountability for the government and its stakeholders.

Event organizers

Besides their clients, event organizing companies frequently work with many other service providers like couriers, caterers, entertainers, and logistics. Having a physical office space helps these other stakeholders coordinate with event organizers more smoothly and monitor project progress.

Companies generating huge capital

If a company is generating more than IDR 4.8 billion, then it will have to become taxable employers. This means that the company is not allowed to have a virtual office, but a physical one.


What is the cost of registered addresses in Indonesia?

Registered business addresses in Indonesia usually cost from USD 30 to more than USD 1,000 per month.

Variations in price depends also on the location of the office, the facilities, and the services available. Hence, receiving advice from trusted virtual office agencies to get clarity on the prices will be helpful.

Traditional physical office vs. Virtual offices

So, you might be asking: What are the main differences between a traditional and virtual office in Indonesia?

The main key differences are:

Location

Traditional offices have an official and physical address, while virtual offices’ addresses do not point to a physical place.

Some employees appreciate going to a physical workspace and being able to meet their colleagues face-to-face. However, this could also mean long durations of commuting time, especially in a busy city like Jakarta.

A virtual office is then able to shift operations and workspaces online, or wherever you want. This also translates to the next point of having flexible working hours.

Working hours

Without the need to physically open and lock up a traditional office, deciding when your company starts and ends work is less rigid.

This could also help improve productivity levels among employees as your employees are able to prioritize their work schedule without the feeling of being scrutinized.

Costs

Virtual offices have been helping many companies save operational costs. This is because, with virtual offices, you get to experience all the facilities and amenities that a traditional office would, but at a much lower cost. You are also still able to book conference and meeting rooms whenever you need them for company events.

What if I can’t use a virtual office?

If your type of company is restricted in some way, the best long-term option is a physical office space. A serviced office allows you to enjoy all the legal and practical benefits of your own office, with more flexibility and fewer costs.

If you feel that office spaces aren’t a suitable investment, a good alternative would be a dedicated desk in a coworking space. This fulfills the physical space requirement while also being a flexible and cost-efficient solution like virtual offices.

How to get started?

The decision to opt for a virtual office or registered business address depends on many factors like your current budget, business plan, and business field. Keeping in mind the business fields that are not allowed to use these non-physical offices, it is important to know the correct procedures to apply for a registered business address.

Registered offices have many added benefits as compared to traditional offices. However, we still advise you to consult with experienced service providers before deciding which service to use.

Greenhouse will help to connect you to pre-screened service providers who will outsource registered addresses according to your budget.


Do you need to establish your virtual office?

Greenhouse can help you connect with our pre-screened service providers who will help you obtain your registered business address.

We’ll connect you with experienced consultants on the ground who can help answer your questions about doing business in Indonesia.


Share this article: Link copied to clipboard!

You might also like...