A Guide on Indonesia
- Overview of Indonesia
- How would you like to expand?
- How to choose the right service provider?
- How can Greenhouse help?
Here, you’ll find all the basic guidelines to enter Indonesia and choose the right service provider to help you through the process.
Disclaimer: This content is intended for educational purposes only and should not be taken as legal instructions. You should contact consultants in your target markets before making decisions related to company incorporation or service execution.
Overview of Indonesia
Indonesia is the largest economy in Southeast Asia and is the fourth most populous country in the world. The extent of its vastness is no wonder why doing business in Indonesia can sometimes be very complex. This is also seen in Indonesia ranking 72 out of 190 economies on the World Bank’s Ease of Doing Business and ranked as the most complex place to do business by TMF.
As one of the fast-growing markets in the region, entering Indonesia could create hassle for businesses. Here are some of the common reasons why:
1. Complexity
The frequent changes of the regulations and process is one of the reasons why the country ranks as the world's most complex place to do business. We recommend doing your market research and validation before entering into the market.
2. Time Consuming
Finding a reliable partner to work with in the country can also be challenging. At most times, it will take most of your time finding a service provider to help you with the necessary process before you start the process. It is common that most businesses spare at least 1 - 2 months to find a reliable source of service provider to work with before they start the process.
3. Expensive
Due to the complexity of the place, some service providers may take advantage and apply hidden fees. Hence, starting a business here can be a hassle if you cannot find a reliable partner to work with. We recommend selecting pre-qualified service providers to avoid this issue.
4. Contradicting and Confusing Information
While you conduct your own research, you would most likely find a lot of different information online. Additionally, even after you talk to some people, chances are you will hear a few different opinions. As such, this might lead to more confusion without professional help.
How to Enter
Depending on your company goals, there are several ways to enter. In the event you are still not sure about the market, most businesses typically find it useful to conduct proper market research.
Additionally, with the current situation of Covid-19 as well, most businesses also find it really helpful to connect to relevant people prior to having the business established. As such, other than doing market research, we also recommend networking extensively or have your company established directly. Greenhouse can help guide you through these processes.
1. Market Research
This method of entering is mostly suitable for companies or businesses that are still not ready to venture into the new market just yet. It is also an effective method to understand the characteristics and opportunities of the local market.
Typically, a proper research conducted by a service provider will take about 1 - 2 months, depending on the objective and the procedures. When you choose to do some market research, there are essential topics that you may need to consider and you should ask to be covered. These topics are as follow:
- Overview of the country where you plan to expand into.
- Overview of your company’s industry.
- Competitive analysis of the product or service you’ll be offering.
- Potential partners in the country.
- Market entry strategy to enter the market
In terms of the fee for proper market research, it will depend on the complexity of the research. However, the common starting fee for a research usually will start from USD 3,000.
2. Business Matching
Another popular way for foreign businesses to enter the market is by connecting with strategic people on the ground. That service is known as “business matchmaking”.
Most companies use such services to meet potential distributors, agents, resellers, strategic partners, customers, investors and other relevant people that are strategically important.
We encourage companies to gauge demand by meeting strategic partners because of the following benefits:
- No need to travel to new markets immediately (such meetings can take place online).
- No need to hire local teams so early.
- No need to spend money on corporate services.
- Attend meetings with curated prospects for partners without spending any time on research and cold outreach.
Here are a few tips if you’re not ready for business incorporation yet, but would like to be connected to relevant people.
- Work with a reputable service provider to protect your company.
- Ask them about their network in your given industry.
- Prepare documents to support the service providers like partnership/sales deck, brochure, and company profile. Preferably translated in the local language.
- Make sure the service provider shares the profiles of all companies they will meet you with.
- Ask for a list of prospective meetings before the service provider starts scheduling calls, and explain to them who your priorities are.
Incorporation and Post-Incorporation Service
When it comes to business registry in Indonesia, there are several ways you can get it done. The type of entity you choose can affect your business in Indonesia. Hence, it is important to understand well what would be the best option for your business.
These are the most common types of entities that businesses incorporate in Indonesia.
| Local Company
(PT PMDN) | Foreign Company
(PT PMA) | Representative Office
(KPPA) |
| Can generate revenue | Yes | Yes | No |
| Ownership | 100% local | Up to 100% foreign, depending on business field | No restriction |
| Minimum Capital | • ±USD 3.500 - ±USD 35.000 (small)
• ±USD 35.000 - ±USD 700.000 (medium)
• > ±USD 700.000 (large) | Minimum ±USD 700,000, 25% paid up capital | No capital requirement |
| Virtual offices | Yes | Yes, with conditions | Yes |
| Benefits | Smaller investment to generate revenue
Easier way to start business and for SME | Legal way for foreign business to generate business | Usually easier to set up
No capital requirement |
| Disadvantages | No percentage of foreign ownership allowed | Higher investment value required
Not available for all business fields | - |
| Approximate timeline | 3-4 weeks | ±10 weeks | ±8 weeks |
| Corporate Tax Rate | Current interest tax rate is at 22%. Following the omnibus law, will be further reduced to 20% starting year 2022 | - |
If you are still not sure what type of entity would be best for you, here are some essential points that can lead you to choosing the right entity:
1. Figure out the business entity structure
Questions you can be thinking about:
- What are your intended business activities?
- Are you planning to generate any revenue?
- How much capital are you going to have allocated for the Indonesian market?
- What are your internal timelines to commence operations?
- Who will be responsible for the company in Indonesia?
- Are there any local shareholders or directors involved in the company?
- Are you planning to hire any local employees in the company?
Having clarity on those topics is essential in choosing the right legal structure for your business and most probably any service provider will ask them anyway. Do contact us if you are thinking of how to set up a PT company or a representative office in Indonesia, we will be happy to share and connect you with the relevant service providers.
2. Pick the right company name.
In Indonesia, you will need to pick and provide 3 options of company name that consist of a minimum 3 words. This official company name is only for legal purposes so, you can have another distinct name for your brand or product.
e.g : PT Service Analyst Indonesia, PT Analyst Services Indonesia, PT Advances Services Indonesia
3. Choose the right business address for the company.
When incorporating in Indonesia, securing a business address is quite important as it may slow down the entire process. Additionally, if you want to change the address at a later point, you may need to change your company documents, so think carefully about which address to choose.
Most companies go ahead with a coworking space or a serviced office located in a central business district. If you are planning to incorporate in the capital city Jakarta, you may consider Sudirman district, Kuningan, Thamrin or TB Simatupang district.
How much to register a company in Indonesia?
Typically the range of setting up a company in Indonesia starts from USD 1,000 for a local company and representative office. Whereas for a foreign-owned company, it commonly starts from USD 1,750. All these will depend on the service provider you choose to work with. Additionally, the nature of your business may also affect the fee for your company incorporation as it may require additional licenses.
How to Choose a Service Provider?
After you have decided which way you would like to enter the market, it is also important to choose a service provider that you can work with. There are many reasons why businesses hire a service provider to help them with. It is also important to carefully choose a service provider, lest the process might be delayed or the project you’re working on might not be successfully completed.
However, how do you know which service provider is right for you? What should you look for when seeking a service provider?
Although the right fit is highly dependent on your project plan, here are five things that can help you figure out if the service provider is worth working with.
1. Track record
You should always ask who they have previously worked with and what project they have worked on. Some service providers may be great at pitching without having a track record of success.
Always make sure that the service provider you’re talking to can refer you to past clients who can confirm a successful project they have assisted. Actual client references will help you determine which service provider can address your issue more efficiently.
2. An experienced team
You can learn about a service provider based on how they pitch to you as a client. The best service provider will care about your time and focus on your problems. Whoever presents to you at the beginning should also be who your team actually works with in the long run.
3. Get a reference or talk to others
Ask around to find out about the service provider and other successful businesses that have been working with them. Here at Greenhouse, we will give you contact prior to signing an agreement with the service provider.
4. Don’t fall for name-dropping
It is easy to be impressed by large service providers with many years of experience and offices around the world. But every company has different needs.
Consider what kind of service, responsiveness, and support you will need given your unique circumstances. At times, it may make more sense to work with smaller service providers where you will be their number 1 priority rather than with a large brand that works with hundreds of companies at the same time.
5. Reasonable cost-structure
The cost structure is especially important when determining which service provider you would like to work with. Everyone is looking for a vendor that can offer great value for money.
Determining a reasonable cost requires more than simply finding the cheapest vendor. An inexperienced consultant who is cheaper may take a longer time to get the job done which will result in further costs for your business.
If you are in doubt about what’s a reasonable cost, get in touch with our team and we will provide examples.
Additionally, here’s a few questions you can address to the service provider before deciding to sign an agreement with them:
- How many projects (specifically what kind of projects: incorporation of foreign-owned businesses, market research, accounting, tax, etc.) have they worked on in the past years?
- Who are their clients?
- What is their service specialization? (Be mindful when service provider mention how they can do all kind of services, it is better to work with a service provider who has a one strong service instead of ‘can do everything’)
- How big is their team or employee?
- Will there be any main PIC for the project?
- To whom should you address if there’s any issue in the middle of the project?
- Will there be any compensation for any damage caused by the service provider?
How Greenhouse Can Help
Choosing the right service provider can be a hassle. On average, it takes months to research specific regulations. Not to mention the contradicting information, comparing service providers, and negotiating the fees before you agreed to work with a service provider.
Greenhouse takes care of these steps, so you don’t have to.
Whether you need market research, business matching or company formation, Greenhouse’s platform provides a simpler, more transparent way for you to source the services you need to launch your business across the region.
Here's a few simple steps you can take :
Sign up as a client on our platform here.
1. Sign up as a client on our platform here.
2.Login as a client here.
3. Select the scope of services you need. Choose services you need on the marketplace.
4. Select your preferred service provider. Click and select your preferred service provider on the marketplace.
5. Confirm payment. Confirm and pay using your credit or debit card, or bank transfer.
6. Service rendered. The service provider will receive notification and confirm to work on your case.
In any case, if you still have any doubt in the middle of the process, our in-house consultant can always help to guide you in the process here.
Greenhouse will manage the invoicing process with no additional fees and be the 2nd point of contact throughout your entire process to make sure you understand the process.
Dictionary
Now that you will be undergoing the process of incorporating your company, we would like to regularly keep you up to date with information that would be useful for this process.
When incorporating in Indonesia, you may hear a lot of words that are not familiar to you. Here you go a few examples of important terminology you will encounter:
- Perseroan Terbatas Penanaman Modal Asing (PT PMA) - Foreign Investment Company
- Perseroan Terbatas (PT) - Local Limited Liability Company
- Kantor Perwakilan Perusahaan Asing (KPPA)
- Akta Perusahaan (AKTA) - Article of Association
- SK Kehakiman (SK) - Deed Establishment
- Nomor Pokok Wajib Pajak (NPWP) - Taxpayer Identification Number
- Nomor Induk Berusaha (NIB) - Business Registration7
