Guideline: Business Incorporation in Indonesia

30 September 2019 |
25 Minutes read time
Guide Business Incorporation Indonesia

Here, you’ll find all the basic guidelines about requirements and processes you need to incorporate a business in Indonesia.

Table of Contents

Disclaimer: Information validated in September 2019. 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 incorporation or service execution.

Local Company (PT)

A company or Perseroan Terbatas (abbreviated to PT) is the most common form of business entity in Indonesia. It’s roughly similar to a Limited Liability Company in structure and function.

As a local-owned company (PT), only Indonesian citizens and Indonesian legal entities are allowed to hold shares as registered shareholders.

A local-owned company (PT) can operate a wider variety of business activities than foreign companies, both in terms of business fields and areas of operations.

Basic Requirements of a Local Company (PT)

Organizational Structure

The minimum organizational requirements to establish a local-owned company (PT) are as follows:

  • 2 local shareholders (must be individual Indonesian residents and/or other local-owned companies)
  • 1 director (at least there is 1 local director in the company)
  • 1 local commissioner

Minimum Investment Value

Setting up a local-owned company (PT) requires an authorized capital.

A local-owned company (PT) can have three different sizes depending on their total projected investment value as follows:

  • Small: IDR 50 million (±USD 3.500) to IDR 500 million (±USD 35.000)
  • Medium: above IDR 500 million to IDR 10 billion
  • Large: > IDR 10 billion

Note: To hire a foreign employee in a local PT company, your company size should medium size and we suggest with an authorized capital of above IDR 1 billion.

Document Requirements

  • Proposed company name (three words in Bahasa Indonesia) and domicile of the company
  • Purposes, objectives and business activities of the company
  • (If using a virtual office) virtual office Address and its lease agreement provided by the office provider
  • Number of shares, share classes (if any), including the number of shares in each class, rights attached
  • to each share, and nominal value of each share
  • Structure of shareholders, directors, and commissioners of the company/legal entity. The shareholders and commissioners should be local residents of Indonesia.

If the shareholder is an individual

  • Copy of Personal ID (KTP)
  • Copy of Tax ID (NPWP)

If the shareholder is a company/legal entity

  • Copy of Article of Association (AKTA)
  • Copy of Deed of Establishment (SK Kemenkumham) showing the board of directors

Steps to Register a Local Company (PT)

1Register company name with the Ministry of Law and Human Rights.
2Notarize Article of Association (AKTA Perusahaan).
3Ratify the Deed of Establishment or Corporate Legal Entity (SK Kemenkumham) with the Ministry of Law and Human Rights.
4Obtain company Tax Payer Registration Number (Tax ID or NPWP) with the local tax authority.
5Obtain Single Business ID Number (NIB) from Online Single Submission (OSS).
6Obtain the other business licenses (if the business classification requires another license) via Online Single Submission (OSS) such as Commercial License for specific business classifications.
7Register for the other respective commitments for employee requirements via Online Single Submission (OSS) such as national social security insurance (BPJS) and Employment Report (WLK).

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Foreign-Owned Company (PT PMA)

A foreign-owned company or Perseroan Terbatas Penanaman Modal Asing (PT PMA) is the common way for foreign investors to operate a company in Indonesia. It’s roughly similar to a Limited Liability Company in structure and function.

A foreign-owned company (PT PMA) does not need to have a local shareholder if their industry is not mentioned in the Negative Investment List, which means that 100% of the capital can be owned by foreigners.

If their industry is listed in the Negative Investment List, there will be a special rule where the foreign-owned company (PT PMA) must have a specified percentage of local Indonesian shareholders.

Therefore, for specific restrictions, a foreign-owned company (PT PMA) needs to be a joint venture with Indonesian citizens or Indonesian legal entities to be able to run their businesses in Indonesia.

Regarding the business location, foreign companies are allowed to use virtual offices or physical space in a registered office building as their business address.

Basic Requirements of a Foreign-Owned Company (PT PMA)

Organizational Structure

The minimum organizational requirements to establish a foreign-owned company (PT PMA) are as follows:

  • 2 foreign (individual or foreign corporation) or combination with local shareholders
  • 1 director (at least there’s 1 local director)
  • 1 commissioner (can be a foreigner or local)

Minimum Investment Value

While local companies can be more flexible, a foreign company needs to have an investment plan valued at minimum IDR 10 billion.

To be exact, 25 percent of this – IDR 2.5 billion – needs to be paid-up capital upfront.

This means that foreign companies have to be categorized as large companies according to Indonesian laws.

Document Requirements

  • Proposed company name (three words in Bahasa Indonesia) and domicile of the company
  • Purposes, objectives and business activities of the company
  • (If using a virtual office) virtual office address and its lease agreement provided by the office provider
  • Number of shares, share classes (if any), including the number of shares in each class, rights attached
    to each share, and nominal value of each share
  • Structure of shareholders, directors, and commissioners of the company/legal entity. The shareholders and commissioners should be local residents of Indonesia.

If the shareholder is an individual

  • Copy of Personal ID (KTP)
  • Copy of Tax ID (NPWP)

If the shareholder is a company/legal entity

  • Copy of Article of Association (AKTA)
  • Copy of Deed of Establishment (SK Kemenkumham) showing the board of directors

Steps to Register a Foreign-Owned Company (PT PMA)

1Register company name with the Ministry of Law and Human Rights.
2Notarize Article of Association (AKTA Perusahaan).
3Ratify the Deed of Establishment or Corporate Legal Entity (SK Kemenkumham) with the Ministry of Law and Human Rights.
4Obtain company Tax Payer Registration Number (Tax ID or NPWP) with the local tax authority.
5Obtain Single Business ID Number (NIB) from Online Single Submission (OSS).
6Obtain the other business licenses (if the business classification requires another license) via Online Single Submission (OSS) such as Commercial License for specific business classifications.
7Register for the other respective commitments for employee requirements via Online Single Submission (OSS) such as national social security insurance (BPJS) and Employment Report (WLK).

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General Representative Office (KPPA)

A general foreign representative office is also called a Kantor Perwakilan Perusahaan Asing or KPPA in Bahasa Indonesia. They’re usually created for you to have a market presence with no capital requirements, before starting a business in Indonesia with a PT PMA.

As a representative office, keep in mind that you can’t generate local revenue or issue invoices. According to the Indonesian Investment Coordinating Board, a KPPA is a local branch of a foreign parent company has two main responsibilities:

  • Representing the parent company’s interests in Indonesia, and/or
  • Preparing the founding of a Foreign Investment Company (PT PMA).

Contrary to the foreign-owned company (PT PMA), which is subject to the Negative Investment List, foreign investors can set up a representative office in most sectors or industries in Indonesia.

This means that any business entity can open a representative office in Indonesia and makes it perfect for foreign investors who want to evaluate the market or communicate with Indonesian stakeholders.

Basic Requirements of a General Representative Office (KPPA)

A KPPA can only be set up in the capital city of a province

It also should be set up in an office building (not in a virtual office). Alternatively, a custom solution is working from the dedicated desk in an office building. A dedicated desk gives you access to thriving coworking spaces, a network of professionals, and all the amenities at location, while also saving costs.

A KPPA license is issued with a validity period of three years

You can extend it twice, each for a period of one year, to a total of 5 (five) years. After that point, it can’t be extended unless the representative office can prove that its activities are different from its earlier activities. When the validity period expires, the investor has the choice between setting up a PT PMA or exiting Indonesia.

A KPPA must employ at least one chief representative officer

The Chief Representative Officer in Indonesia needs to be appointed by the director of the parent company abroad. They can be either an Indonesian national or an expat, and they need to be appointed by the director of the parent company abroad.

The same person can not fill both positions; the foreign director needs to appoint someone else as Rep Office Head in Indonesia (or the director of the parent company abroad needs to step down from his position first, appoint a new director for the foreign parent company, and then can become the Rep Office Head in Indonesia).

General guidelines are that he/she holds at least a Bachelor’s degree and 3 years of working experience in the related field.

The recommended ratio between a foreign and local employee in Representative Office is 1 foreigner to 3 local employees.

Document Requirements

  • Letter of Appointment to the Chief Representative Officer by the foreign parent company legalized by a public notary and Indonesian Embassy in the resident country
  • Letter of Intent and Letter of Statement concerning the commitment to stay, and only work in the position as a Representative Office Executive without conducting other business in Indonesia legalized by a public notary and Indonesian Embassy in the resident country
  • Letter of Reference from the Indonesian Embassy in the resident country
  • Articles of Association of the foreign parent company that show the board of directors including amendment(s) in English
  • Chief Representative Officer’s documents:
    i) Passport (of foreign national), or,
    ii) Personal ID (KTP) and Tax ID (NPWP) (of Indonesian national)
  • 2 passport-sized photographs (4x6cm)
  • Power of Attorney to sign the application if being represented by another party

Steps to Register a General Representative Office (KPPA)

1Obtain SIUPA (Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing) Approval of Representative Office from Investment Coordinating Board (BKPM)
2Obtain Company Tax ID (NPWP) from local tax officer
3Obtain Single Business ID Number (NIB) from Online Single Submission (OSS)

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Trading Representative Office (KP3A)

A trading representative office (Kantor Perwakilan Perusahaan Perdagangan Asing or KP3A) is led by one or more foreigners or Indonesian citizens appointed by the parent company as Representative Executives in Indonesia.

The functionality of trading representative office (KP3A) is limited to:

  • Introduce, promote and market the goods produced by a parent company, as well as providing information, or directions for use and importation of goods to companies/users in Indonesia
  • Conduct market research and surveillance in Indonesia for domestic sales of goods produced by the parent company
  • Conduct market research on the items required by the companies/users in Indonesia as well as providing information about the terms of the export of goods to companies in Indonesia
  • Closing and signing of contracts for and on behalf of the company that is appointed by the parent company in Indonesia for the export of goods.

There are three types of trading representative office (KP3A), namely:

  • Selling Agent, performing promotional or liaising activities
  • Manufactures Agent, performing market survey activities
  • Buying Agent, performing supervising or liaising activities

As with all representative offices, a trading representative office (KP3A) isn’t allowed to issue any invoices and all transactions should be under the parent company’s name. trading representative office (KP3A) is allowed to open a branch office (this is not possible under a KPPA) and may be located in provincial capital cities or in any other city/district within Indonesia.

Basic Requirements of a Trading Representative Office (KP3A)

Document Requirements

To apply for KP3A, a license called SIUP3A is required. There are several different kinds based on the function of your representative office.

Head Office SIUP3A – valid for 1 year from the date of issuance

  • Original KP3A approval letter from Indonesia Investment Coordinating Board (BKPM)

Temporary SIUP3A – valid for 2 months from the date of issuance

  • Letter of Appointment in regards to the Chief Representative Officer by the parent company
  • Letter of intent concerning commitment to stay and work without any trading activities as well as selling transaction
  • Letter of reference from a Commercial Attaché
  • Representative Office Work Plan
  • Head of Representative Office documents:
    i) Curriculum Vitae or CV
    ii) *If Foreign citizen:
    – copy of passport or identity card
    – copy of foreign work permit (IMTA)
    iii) *If Indonesia citizen:
    – copy of Personal ID (KTP)
    – Tax ID (NPWP)
  • Letter of domicile of KP3A from building management or local official
  • Power of Attorney to sign the application if being represented by another party

Steps to Register a Trading Representative Office (KP3A)

1Apply for SIUP3A temporary license from Online Single Submission (OSS)
2Obtain company Tax Payer Registration Number (Tax ID or NPWP) with the local tax authority
3Obtain Single Business ID Number (NIB) from Online Single Submission (OSS)
4Obtain SIUP3A permanent license from BKPM, if necessary

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Construction Representative Office (BUJKA)

A construction representative office (BUJKA) is a type of Indonesian representative office for foreign construction companies working in the field of construction planning, implementation and/or supervision.

A construction representative office (BUJKA) is best suitable for larger foreign construction companies since they are only allowed to engage in large-scale construction projects while small size projects are reserved for local construction companies.

The functionality of a construction representative office (BUJKA) is limited to:

  • Collect information regarding available construction in Indonesia and contact companies/institutions
  • Work on construction projects together with a local construction company with acquiring a construction license (SIUJK)
  • Take part in tenders
  • Hire overseas professionals and Indonesian team of workers
  • Apply for a limited stay permit for its foreign executives
  • Open a bank account in Indonesia

Basic Requirements of a Construction Representative Office (BUJKA)

  • Joint Operation: A construction representative office (BUJKA) must form a joint operation with a 100% Indonesian-owned construction company to execute projects.
  • Criteria of Work: A construction representative office (BUJKA) must be classified as ‘large-scale’ and is involved in complex, high-risk, and/or highly technical construction projects.
  • Permit: The permit is valid for 3 years and is extendable.

For Construction Contractor (Implementation and Integrated Constructed Services)

  • Net Worth Requirements: A construction representative office (BUJKA) must have a net worth of at least IDR 50 billion or ±USD 4 million.
  • Experience Requirements: A construction representative office (BUJKA) must have experience in construction work over the past 10 years with a total cumulative value of at least IDR 250 billion or ±USD 20 million or it must have been involved in a construction project with a minimum value of IDR 83.33 billion or ±USD 6.8 million in the last 10 years.

For Construction Consultant (Planning & Supervision)

  • Net Worth Requirements: A construction representative office (BUJKA) must have a net worth of at least IDR 2.5 billion or ±USD 180.000.
  • Experience Requirements: A construction representative office (BUJKA) must have experience in Construction Planning and Supervision Services Business for sub-qualification work with a total cumulative value of at least IDR 2.5 billion or ±USD 180.000 obtained within 10 (ten) years.

Document Requirements

  • Copy of the company’s Article of Association that has been notarized from the country of origin
  • Construction Services Business License form the country of origin in accordance with Indonesian law
  • Letter of recommendation from the Indonesian Embassy which states that the construction company is legally registered in the country with a good reputation.
  • Copy of valid and certified construction service permit of the parent company
  • Copy of equalization certificate legalized by an Institute of national level
  • Letter of Appointment in regards to the Chief Representative Officer by the parent company
  • Record of the latest and audited financial statements of the parent company
  • Head of Representative Office documents:
    i) Curriculum Vitae or CV
    ii) Copy of passport for foreign citizens or copy of Personal ID (KTP) and Tax ID (NPWP) for Indonesian citizens
  • Letter of domicile from building management or local official
  • Power of Attorney to sign the application if being represented by another party

Steps to Register a Construction Representative Office (BUJKA)

Obtain Preliminary Licenses

In order to be able to start with BUJKA registration process, you must first get a preliminary permit which consists of 3 sub-licenses:

Preliminary PermitDetails
Membership of Indonesian Contractors Association

(Kartu Tanda Anggota/KTA)		Proof of being an officially approved entity, issued by an association in relations to the applied classification in Construction Services Development Board (LPJK).
Certificate of Expertise

(Sertifikat Keahlian/SKA)		As BUJKA may only carry out the large classification construction work, thus BUJKA shall have 5 experts (which can either be local or foreigner) as per classification applied and proceed the certification.
Certificate of Business in Constructions

(Sertifikat Badan Usaha/SBU)		Confirmation of your classification and subclassification, whether as a construction planner and construction supervision service or construction service

Obtain the BUJKA permit

After you have obtained all the required initial licenses you can proceed with registering your BUJKA:

1Review of application and issuance of government levy to be paid
2Obtain BUJKA License from BKPM (Investment Coordinating Board)
3
Receive all other licenses such as Domicile Letter, Company Tax ID (NPWP), as well as Company Registration Certificate (TDP)

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