When you conduct business in Indonesia there are various options for setting up a legal entity. Most common is to register a limited liability company (PT PMA) but there are also alternatives in case your capital is limited or you can handle transactions via a foreign entity.
Most common legal entity formats in Indonesia
| Type | Limited Liability Company with Foreign Direct Investment | Local limited liability company | Representative office | Representative office for trading |
| Indonesian abbreviation | PT PMA | PT | KPPA | K3PA |
| Allowed activities | Can conduct all business activities within the business field it got approval for | Can conduct all business activities within the business field it got approval for | Market researchLocal representation | Local representation |
| Best option for | Foreign companies and investors looking for full or partial ownership in a company operating in Indonesia | Local investors who are not involving any foreign shareholders | Foreign companies studying the market Foreign companies who don’t need to earn revenue from Indonesia | Foreign trading companies that don’t need to earn revenue to their Indonesian entity |
| Foreign ownership restriction | Foreign ownership can be anything from 0% to 100% depending on the business classification. Classifications that are not in Negative Investment List can be owned 100%. | Cannot have foreign shareholders. Limited amount of work permits for foreigners depending on size of capital | No restrictions | No restrictions |
| Minimum capital | Investment plan: Minimum $1.2 million USD.Paid-up capital: at least 25% of investment plan.For some industries required capital is higher. | Micro: Less than Rp.50 million Small:Rp. 50 – 500 millionMedium: Rp. 500 – 10 billionLarge: above 10 billion | No capital requirement | No capital requirement |
| Key benefits | Can operate fully as an independent limited liability company within the business classification | Smaller capital requirement and faster process as long as no foreign shareholders are involved. | No capital requirement Easiest way to have a legal presence in Indonesia | License can always be extended every 3 years |
| Key disadvantages | Large capital requirement Ownership restricted or forbidden in some industries | No foreign shareholders | Cannot seek or earn revenue in Indonesia Valid for maximum 5 years, and cannot be extended | Not allowed to earn any revenue |
| Issuing work permits and visas for foreigners | All shareholders, directors and commissioners eligible for work permit Unlimited amount of business visa sponsorships Work permits can be issued to foreign experts | Only Medium Size PT can apply work permit for its foreign worker Unlimited amount of business visa sponsorships | Work permit for the chief representative Unlimited business visa sponsorships 3 Indonesians for every foreigner hired | Work permit for the chief representative Unlimited business visa sponsorships 3 Indonesians for every foreigner hired |
| Additional licenses required | Permanent Business License from BKPM Import license for importers Additional operating licenses needed for some industries | Import license for importers Additional operating licenses for some industries | Representative office needs to be extended every 3 years | |
| Compliance | Monthly withholding tax report Quarterly/semi-annual investment reporting | Annual tax reporting Monthly withholding tax report Annual tax reporting | Monthly withholding tax report Annual Activity report to BKPM | Monthly withholding tax report Annual Activity report to BKPM |
| Time to register | ~10 weeks | ~8 weeks | ~6 weeks | ~6 weeks |
| Set up with Straits Partners | PT PMA company registration | Buat PT | Representative office | Representative office |
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