The Process of Company Formation in Indonesia for Expats

Today, Indonesia’s economy is on the rise and has become a destination for foreign investments. The government’s constant amendment to business policies opened innumerable opportunities to invest in the country. Hence, many foreigners, including expatriates, are looking into exploring the Indonesia business environment.

Being hailed as Southeast Asia’s biggest market, it is undeniable that Indonesia is a fresh and exciting venture for foreign start-ups. To get you the advantage of an early start, this blog will provide a company formation guide in Indonesia.

Understanding Offshore Company Formation Process in Indonesia

Business structures that are available to foreign entrepreneurs are Representative Office and a Foreign Direct Investment Company (PT.PMA). The former is ideal for companies who do not have any profit-making activities; however, the latter is ideal for companies who receive payment for their sale of services/products.

If you are keen to expand your line of products/ services to Indonesia marketing, it is important to understand the PT PMA registration and licensing process. The next sections will discuss the requirements and the licenses necessary for an offshore company setup.

Guide on Offshore Company Registration and Licensing

Foreign ownership of a company would depend on the business sector you are operating in. Some business sectors allow 100% foreign ownership, whilst some are totally closed for foreign investments which is reflected in the Negative Investment List [BKPM].

Furthermore, here’s a guideline on the requirements to register a company in Indonesia:

Investment Plan

The Investment Coordinating Board of Indonesia (BKPM) requires foreign-owned companies to have an investment plan for at least USD700,000 for each applied business classification. This will show the sustainability of the company.

Paid-up Capital

For foreign-owned companies, the minimum paid-up capital is USD175,000. This can be done by signing a capital statement letter or transferring the funds to the company’s bank account.

Appointing of PT.PMA Shareholders

PT.PMA companies need to have at least two shareholders.  Plus, the number of shares that the shareholders will hold should be stated in the investment application. Note that the minimum amount a shareholder can hold is USD700.

Business location

Because Indonesia is a decentralized country, it is important to decide the business location before the application process. Each region has its own set of rules on establishing an office address.

Acquire a Business License

Business licenses are mandatory for all business operations in Indonesia. During the incorporation process, a principal license (izin prinsip) is issued. As for the permanent business license (izin usaha), it will be issued once you are fully operating in Indonesia. Here are the conditions to meet when applying for an Izin Usaha:

  • Physical office
  • Submission of investment activity reports every 3 months
  • Proof of investment

Venture in the Indonesian Business Climate

Truly, Indonesia is an exciting place for foreigners looking to explore a new business environment. With the policy amendments and growing opportunities, who wouldn’t be enticed to invest in the country? But before hastily moving into a new mark, it will be wise to seek for an advice from experts in regard to the company formation process. That way, you will be well assured that you have made a sound decision and fulfil the necessary requirements for the procedure.

Book a FREE consultation today to get your offshore company ready for the Indonesian business climate.



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