Comparison of different Legal Entity Formats in Indonesia

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

TypeLimited Liability Company with Foreign Direct Investment Local limited liability companyRepresentative officeRepresentative office for trading
Indonesian abbreviationPT PMAPTKPPAK3PA
Allowed activitiesCan conduct all business activities within the business field it got approval forCan conduct all business activities within the business field it got approval forMarket researchLocal representationLocal representation
Best option forForeign companies and investors looking for full or partial ownership in a company operating in IndonesiaLocal investors who are not involving any foreign shareholdersForeign 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 restrictionForeign 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 restrictionsNo restrictions
Minimum capitalInvestment 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 requirementNo capital requirement
Key benefitsCan operate fully as an independent limited liability company within the business classificationSmaller 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 disadvantagesLarge capital requirement

Ownership restricted or forbidden in some industries

No foreign shareholdersCannot 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 foreignersAll 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 requiredPermanent 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
ComplianceMonthly 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 PartnersPT PMA company registration Buat PTRepresentative officeRepresentative office 

 

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