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Company Establishment in Indonesia – Your Questions Answered

Company Establishment in Indonesia – Your Questions Answered

In this article, Mega Rizkiani (MR), LetsMoveIndonesia’s in-house Company Establishment Specialist, answers some of your most commonly asked questions about setting up a company in Indonesia.

Mega Rizkiani
What are the different company establishment options?

MR: There are a few possible ways to do this depending on your nationality and business model. If you are a foreigner, the best option is to set up a PT PMA. A PMA allows the foreigner to possess 100 percent ownership of the business.  If you are Indonesian or have Indonesian partners, you may obtain a Local PT whereby the ownership will be 100 percent Indonesian owned. Please note that with some industries, foreign ownership is not allowed, so you may have to establish a Local PT.

In addition, you may find information regarding which business sectors can be owned by foreign investors in the Negative Investment List (latest revision done is through the Presidential Regulation No. 44/2016). If the sector requires partial domestic ownership, then you will need a local partner. Business fields which are not included in the Negative Investment List are 100 percent open for foreign investment unless regulated differently in other regulations.

What does the PT stand for and are there any limitations to my business name?

MR: PT is basically the Indonesian equivalent to Limited, Pte or Ltd. In Indonesia, Local PT Companies must register the company name in Indonesian using a minimum of three words. For example, Klub Rumah Baru. Please note, this is just your company establishment name, you may brand your business with an English name if you prefer. PMA Business entities, however, can choose the language.

When setting up a business, do you need an actual office or can you use a residential location?

MR: Before processing of incorporation, you need to choose the location of your business and have a registered address in an office building. You cannot use your home address as it is not possible to register a company with a residential address.

What is paid-up capital and how does this affect the business set up?

MR: Paid-up capital is the amount of money the shareholder invests into the business. The amount varies depending on whether the business is a PT or a PMA and the proposed size of the business.

There are two ways to prove the paid-up capital; one being to send a copy of your company bank statement which shows the investment amount and the second option is to sign a statement letter acknowledging that you will invest the capital in the future.

Company Establishment in Indonesia – Your Questions Answered

The paid-up capital amounts are as follows:

PT

Small: Above Rp50 to 500 million

Medium: Above Rp500 million to 10 billion

Large: Above Rp10 billion

Please note, if you want to employ foreigners in a PT, the company size must be at least Medium, with a paid-in capital above Rp1.1 billion.

PMA

Being a foreign-owned company, the investment value is significantly higher than that of a PT. The investor should invest above US$1 million or Rp10 billion as their investment plan, with a paid-up capital above US$250 million or Rp2.5 billion. The investment plan can either be cash or fixed assets, such as machinery.

According to the Indonesia Company Law (04/2007), every limited liability company in Indonesia requires at least two shareholders, one commissioner, and at least one director. The shareholders can be individuals, corporations, or both.

Are there any standard compliances you need to know before establishing your company in Indonesia?

MR: Apart from taxes, companies must also register for the social and health security program (BPJS) by the government. For PT PMA companies, it is mandatory to report investment four times per year which is commonly known as the “LKPM Report.”

How does the taxation process work in Indonesia?

MR: All companies in Indonesia must pay and report taxes on a monthly and annual basis. The main corporate taxes imposed on companies in Indonesia are corporate income tax (CIT), value-added tax (VAT), and land and building tax. The general corporate income tax rate imposed in Indonesia is 25 percent. Medium-sized companies with annual revenue of less than Rp50 billion can apply for a reduced income tax rate of 12.5 percent, and small companies with annual revenue of less than Rp4.8 billion are eligible for corporate income tax of 0.5 percent.

Can the director or commissioner be a foreigner in a PT or a PMA?

MR: Directors and commissioners of a PT PMA can be foreigners or Indonesians. Please note that non-resident directors will not have the authority to sign documents on behalf of the company. Please also note that foreign directors should apply for a KITAS once the company is established so they are able to operate the business.

In regard to a local PT, you may have a foreign director, but you should still have a minimum of one local director, as well as a local commissioner.

How many foreigners can you hire once the company has been established?

MR: A PT PMA may hire as many foreigners as required, as long as you have a minimum of ten Indonesian employees per one foreigner. For a Local PT, you can hire one foreigner as long as you have a minimum paid-up capital of Rp1.1 billion.

What are the responsibilities of the director and the commissioner?

MR: The director’s responsibilities are to manage the company pursuant to its Articles of Association and the Indonesian Company Law. The commissioner’s responsibilities will be to supervise the company’s activities.

Once the company is established, do you need to renew any licences every year?

MR: There are no validity restrictions or renewals that are mandatory every year, as long as the company is still running and there are no amendments required from either the business structure or new governmental regulations.

If we would like to change the office address later, is this possible?

MR: If you would like to change your office location, the first thing you need to know is whether your new address is still in the same district as the previous one. If this is the case, then all you will be required to do is report your new company address to the tax office so they can change your tax ID card.

Unfortunately, if your new address is in a different district, you will need to amend numerous documents and permits such as the location permit which will need to be signed by the district and subdistrict heads, as well as revise your Article of Association, Domicile Letter, Business Licence, Company Certificate Number and finally, advise the tax office so they that change your tax ID card.

If I need help setting up a business or have any questions, how can I contact you?

MR: If you would like to set up a business or would like a free consultation, then feel free to contact me either by +62 21 300 297 27, [email protected] or visit me in the LetsMoveIndonesia office located in The Bellagio Mall, Mega Kuningan – the only walk-in Visa and Company Establishment Agency in Jakarta!

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