Overview about company registration in Indonesia
17 July, 2014
Indonesia is a member of G20 country, which represents major economies in the world. With a population of nearly 250 million people, Indonesia becomes the 4th largest population in the world. These promising conditions place Indonesia as a very attractive market for investment.
Government regulations in Indonesia could be classified as a high bureaucracy. In relation with foreign investment, it is regulated and monitored by government institution named BKPM (Badan Koordinasi Penanaman Modal or also Indonesia Investment Coordinating Board). All legal arrangements include company registration, business license, and other licenses shall be conducted through BKPM.
Foreigners intending to establish a business in Indonesia should be aware of few points in the following:
1. What type of legal entity; a foreign direct investment company or representative office?
2. What line of business your legal entity will be engaged in; is it open to foreign investment? If yes, what is the percentage of ownership that is open to foreign participation?
3. Regulatory framework; minimum capital, organization structure, tax regulations, Indonesian staff, activity reports, and more.
Foreign Direct Investment Company (PT. PMA)
Foreign investor has basically two general options, either establish a representative office, which gives a company a legal presence in Indonesia and can be useful mainly in the early stages of business or set up a limited liability company called PT in Indonesia.
Foreign investor is only allowed to establish a company in Indonesia as the Limited Liability Company, which is called as PT. PMA (PerseroanTerbatas Penanaman Modal Asing).
As the first step, it is necessary to verify the exact business field according to the Negative Investment List (DNI) issued by BKPM to confirm if the business field is open for foreign investment, close for foreign investment, or open with requirements. The most recent DNI was issued in April, 2014.
The laws governing PT. PMA establishment according to the Indonesian laws that are UU No. 25 / 2007 of Capital Investment as well as UU No. 40 / 2007 of Limited Liability Company. The characteristics of PT. PMA are in the following:
· Foreign ownership up to 100% (according to business field)
· Minimum 2 shareholders
· Minimum 1 Director and 1 Commissioner
· Minimum investment plan is USD 1,000,000; with minimum paid-in capital for 25% which is equal to USD 300,000
· Require business license and other licenses according to the business activities
The process of PT. PMA registration will take around 2 months.
For foreign investors interested in to explore business opportunity in Indonesian market, a representative office might be an efficient way to begin. To open a representative office, there should be an existing parent company overseas to manage its representative office in Indonesia. Majority of representative office focuses in conducting market research activities as well as marketing and promotion purposes through selling or buying agents, but does not allow a firm to conduct business transactions, take payments for sales or register required products under company. Some foreign investors prefer to set up a representative office first to grow the market in Indonesia before establishing a PT. PMA.
Advantage of representative office:
· Can be owned 100% by foreign investors
· No minimum capital requirement
· No shareholder, director, commissioner requirement
· Set up process is relatively easy and quick for around 1.5 months
Disadvantage of representative office:
· Limited role as supervisor, coordinator, and representative of parent company in Indonesia
· Not allowed to conduct direct sales and generate revenue in Indonesia, thus all financial transactions shall be conducted through the parent company overseas
How to establish a business in Indonesia?
Setting up a business in Indonesia shall be conducted correctly and carefully. Considering the changes in regulations and bureaucracy in Indonesia, it is crucial to engage a professional assistance which understand about the local regulations and culture in Indonesia. Cekindo Your Business Partner in Indonesia is a market entry consulting firm providing one-stop services for foreign companies and entrepreneurs from various industries to enter Indonesian market. Our dynamic multinational team based in Jakarta to understand the local market and utilize our extensive network to support your business and operation in Indonesia. Cekindo will assist you in setting up your business in Indonesia, supporting your daily operations and administrations, and representing your company in Indonesia. It is important to start your business with the right partner, thus you can focus on your main business to grow in Indonesia.
Feel free to contact us and get a free quotation for Company Registration in Indonesia.
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