Facts about Company Formation in Indonesia for Expatriates

Indonesia has continued strong pace for economic growth brought upon by constant reforms. The government’s persistent amendments to their business laws and policies have improved their investment climate. In 2018, the GDP growth is expected to rise by 5.3%. This makes it a lucrative business opportunity for many foreign investors and entrepreneurs [WorldBank].

For an expatriate, Indonesia’s steady economic growth and diverse market are valuable opportunities to start a business. Read through this blog to learn more about company formation and the ideal business structure.

Expatriate’s Basic Guide on Company Formation in Indonesia

Indonesia is brimming with impressive business opportunities. Its salient points lie in the country’s stable GDP growth, abundant resources and flourishing urban life. Its large population, diverse culture and wide pool of productive workers give businesses a lot of opportunities. Plus, the growing number of consumer class offers great profitability for businesses.

The country’s abundance of natural resources and varied commodities give foreign investors diversified choices to conduct business. Furthermore, Indonesia’s tourism sector, coupled with its lush biodiversity, are ideal industries that foreigners can capitalise on. These reasons make Indonesia a remarkable business prospect to the international business community.

Foreign entrepreneurs looking to start a business and form a company in Indonesia would have to know the business structures. The next sections will provide an overview of the different business structures available to foreigners.

Ideal Type of Business Structure for Expats

Choosing the appropriate business structure for a company is important since this will be the backbone of its entire operations. There are three types of companies in Indonesia that are available to foreigners:

Usaha Dagang (UD)

It is essentially a sole proprietorship and the easiest to establish. It is also fairly inexpensive, but this type of structure is only available if a foreigner has an Indonesia spouse.

Commanditaire Vennootschap (CV)

This is basically a limited liability partnership. This is possible for foreigners if they will have an Indonesia spouse. This type of company structure would require two individuals: a managing partner and a limited partner.

Perseroan Terbatas – Penamanan Modal Asing (PT PMA)

This type of business structure is also known as Foreign Capital Limited Liability Company. Foreigners would not require a spousal KITAS/KITAP visa to engage in this type of business entity. One of the advantages of using this type of business vehicle is that foreign ownership varies between 0% – 100% depending on the Negative Investment List. Many would opt for this structure because the company can operate as an independent limited liability company.

Advice for an Easier Company Registration Process in Indonesia

As Indonesia’s economy prosper, many opportunities for foreign business ownership in different sectors is allowed. Seen in year 2016, where the government made amendments to the Negative Investment List.

With the ever-changing businesses landscape, consulting a company formation agent is valuable. They are able to provide you better advice in regard to your business objectives.

References:

The archipelago economy: Unleashing Indonesia’s potential, Mckinsey.com

Where should you invest next, Alux.com

Forming a company in Indonesia – How can foreigners play a role, Expatindo.org

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