Indonesia’s political stability and robust economic growth are becoming the key factors for its developing business climate. In addition to its improving business environment, business policies are also becoming favourable to foreigners. And, there are many lines of businesses where foreigners can participate. Hence, Indonesia is a burgeoning opportunity for foreign investors and entrepreneurs.
So, when starting a company in Indonesia, knowing about the laws and business policies is helpful. This blog will narrow down the factors to consider during company formation in Indonesia.
What to Consider When Starting a Company in Indonesia
Company registration in Indonesia is mostly processed under the Investment Coordinating Board (BKPM). Additionally, as showcased in the previous blog, each legal entity has different registration procedures. It also goes to show that the governing laws are different per entity and will affect the business flow.
The next section will discuss the governing business policies when registering an offshore company.
Learning About Business Vehicles in Indonesia
Business policies when forming a company in Indonesia can be narrowed down by learning about the two business vehicles. Here’s an overview of these business vehicles and the governing laws in each type:
Foreign Direct Investment Company (PT. PMA)
Establishing a PT.PMA in Indonesia requires businesses to conform to the Negative Investment List [PDF] regarding foreign ownership. Do note that the authorities involved in establishing a business are the Ministry of Law and Human Rights and Capital Investment Coordinating Board. Additionally, this is the list of laws governing PT.PMA setup:
A representative office can be established if a foreign investor wants to explore business opportunities. Generally, the four types of representative offices follow BKPM Regulation No. 15 the Year 2015 [PDF].
However, it should be considered that each type of representative office also follows some regulations outside of BKPM. Here’s a chart showcasing the representative offices and the regulations it follows:
|Foreign Representative office||BKPM Regulation No. 15 Year 2015|
|Foreign Trade Representative office||BKPM Regulation No. 15 Year 2015
Minister of Trade decree No.402/MPP/Kep/11/1997
Minister of Man Power Decree No. Kep 682/MEN/85
|Foreign Construction Representative office||Minister Regulation number 10/PRT/M/2014|
|Foreign Bank Representative Office in Indonesia||Decree of Director of Bank Indonesia No. 32/37 /KEP/DIR dated 12 May 1999|
Deciding on the best business vehicle for a company requires in-depth knowledge of the governing laws. Specialists on offshore company setup have the necessary expertise in this field.
Evaluating Your Options for a Company Formation
Assessing Indonesia’s business policies for offshore business is important to get a clear view of how you would want to establish your company.
Time is a valuable asset for every business. Therefore, weighing between doing everything on your own or entrusting your business setup to a company formation agent really depends on your choice.
Ultimately, ensuring your business has the right structure in accordance with Indonesia’s law is fundamental.
How to Setting Up Representative Office in Indonesia, Smartcolaw.com
Key benefits, Eltoma-global.com
The Emerging Tiger, Invest-islands.com