This article will give you an overview of the requirements and processes of setting up a foreign-owned import company in Indonesia
In this brief video, Marlissa Dessy, the director of Straits Partners, gives you a quick overview of the most important aspects of registering a foreign company in Indonesia:
Allowed foreign ownership of import company in Indonesia
The allowed foreign ownership of companies in Indonesia is regulated by the Negative Investment List (DNI) which is revised every 3 years.
The maximum allowed foreign ownership of trading companies in Indonesia depends on the type of trading you’re going to engage in.
#1 Import-export company
If your only aim is to import and export goods, you can set up a 100% foreign-owned import-export company in Indonesia. However, take note that product stocking and distribution is not allowed under this classification.
In other words, as soon as your goods have arrived in Indonesia, they must be transferred to a distributor.
If you also plan to distribute the imported products, your company can have a maximum of 67% of foreign ownership.
This classification allows you to import, distribute and also provide after-sales service for the products.
However, take note that if you also plan to distribute medical equipment in Indonesia, you can set up an import company with only 49% of foreign ownership. The remaining 51% of the shares must be owned by local shareholders.
Indonesia does not differentiate e-commerce and brick and mortar companies. Businesses that engage in retail in Indonesia only using online media while also holding an import license are 100% open to foreign ownership.
#4 Direct selling/multi-level marketing
If your import company is also going to engage in direct selling or multi-level marketing while holding an import license, your company can have 100% of foreign ownership.
The minimum capital requirement for a trading company in Indonesia
The official minimum capital requirement for foreign-owned companies in Indonesia is IDR 10 billion (~US$ 700,000), IDR 2,5 billion (~US$ 175,000) of which should be paid up.
Also, note that if you want to set up a company under two business classifications, for example, import combined with e-commerce, you need to present an investment plan of IDR 20 billion (~US$ 1,4 million).
However, there are several ways to meet the paid-up capital requirements. For example, by signing a capital statement letter.
Find more details about when and how to inject the minimum capital in Indonesia in our previous article.
Nominee shareholders in Indonesia
Foreign ownership restrictions and minimum capital requirements are the two main reasons why some foreign investors use nominee shareholders when setting up a company in Indonesia.
A nominee shareholder is a person or an entity that is the registered owner of shares of a company on behalf of the real owner. However, note that when you use an individual nominee, especially without the correct set of legal agreements, you won’t have full control over your assets.
Therefore, make sure you use nominee shareholders in Indonesia the safe way, through a set of legal documents drafted by lawyers and provided by professional service providers such as Straits Partners.
How to set up an import company in Indonesia
After determining the type of trading, you want to engage in and the allowed foreign ownership in that classification, the process of company registration can begin.
#1 Import company registration
In 2017, the Investment Coordinating Board of Indonesia (BKPM) issued a new regulation of Head of Regulations (No. 13 2017) which exempts companies that do not need a construction period from having to acquire an Investment Approval/Ijin Prinsip before company registration.
This has made incorporation in Indonesia easier and faster also for trading companies.
To establish a Foreign Direct Investment Limited Liability (PT PMA) company in Indonesia you need to go through the following processes:
|Process||Timeline in working days|
|1. Articles of Association from Notary||1|
|2. Ratification from Ministry of Justice||1|
|3. Domicile Letter from local government||3|
|4. Tax Registry and Tax Card||5|
|5. Permanent Business License (IUT)||10|
|6. Business Registry (TDP)||5|
|7. Registration for General Importer Identity Number (API-U)||8|
|8. Customs Identification Number (NIK)||8|
Permanent Business License (IUT)
The Investment Coordinating Board will issue the IUT and you can only apply for it when your company is ready to operate.
During the application for getting an IUT, a distributor company also needs to present a copy of office and warehouse agreement to the Investment Coordination Board.
A documented location will be included to the Investment Coordination Board Principal License and Notary Deed of Establishment.
Virtual office in Jakarta
Virtual offices are an acceptable option for getting the domicile letter, but they are mostly available in Jakarta. Straits Partners consultants can help you with the virtual office.
Import license in Indonesia
The Indonesian government has made it easier to obtain import licenses. Previously, one import company was able to import products only from one product sector from 21 available sectors based on HS codes.
Now, however, the import license has been generalized and it is possible to import products from all 21 categories with only one general import license.
General Importer Identity Number (API-U)
This license allows you to import products to Indonesia for trading purposes. This is a very quick 10-day process.
However, take note that if you do not have an Indonesian director, the foreign director should first obtain a work and stay permit KITAS before applying for an API-U which can take 2 additional months to process.
For a faster process, consider using a resident director which Straits Partners can provide.
Customs Identification Number (NIK)
To enable the fulfillment of customs obligations, an importer company must also register with the Directorate General of Customs and Excise (DGCE). The DGCE will issue a Customs Identification Number (NIK) which will remain valid unless canceled by the DGCE.
The DGCE may block an importer’s NIK in the following cases:
No customs activities performed in a consecutive 12-month period
Change in data unreported to the DGCE
The importer is under investigation due to a customs issue
The business license of the importer has expired
After these eight steps, your company registration in Indonesia is completed and you can apply for specific products to be brought into the country.
#2 Licensing of specific products
The Ministry of Trade has the assignment to oversee and guarantee the quality of products coming into the country. To get licenses for your products you need to classify your merchandise from their System of Classification list, as mentioned before.
At this stage, however, you need to be more specific and find your product from product code (HS) list.
For example, if you want to import cell phones, you would search for ‘phone’ on the product code list. This will tell you that the HS code for ‘telephones for cellular networks’ is 8517120000 and there can be up to 7 different types of licenses necessary for import.
The Ministry of Trade will require you to launch license applications for the appropriate codes for import. This will happen before you can bring your products through Indonesian customs.
Additional requirements for import companies in Indonesia
The variety of products that can be imported to Indonesia is vast and the area is too heavily regulated for most nuances to be explored in our short article. We can, however, include some relatively common issues that we have come into contact.
Product conformity assessment
Be aware of the products subject to the Product Conformity Assessment (PCA) requirements. This means that your goods will be inspected already before shipment.
This involves products from the LARTAS (prohibited and limited) list. These goods require additional licenses apart from the API-U to import products under this list.
Storage charges on delays
Cargos shipped to Indonesia that cannot be imported promptly will incur storage charges, and perhaps fines. The consignee may be left with no choice but to abandon the cargo.
To avoid this, double check to make sure all procedures prior to your merchandise reaching Indonesia are complete. This is meant as a general warning due to the multitude of different bureaucratic procedures that different products incur.
Why goods get stuck in Indonesian customs
As Indonesian import regulations are often changing, it is not uncommon that foreign investors find their shipments stuck in the customs.
One of the main reasons why goods get stuck in Indonesian customs is that your consignee does not have the correct import license. Some products also need additional papers, for example, toys, food and beverages need an SNI license.
The proactive way to minimize the risk of delays and additional costs is to use an importer of record service instead.
Alternatives to setting up an import company in Indonesia
Registration of a foreign-owned import company in Indonesia can roughly take up to 4 months in Jakarta and even takes longer in other cities.
However, if you want to start importing goods to Indonesia sooner or to test the market first, there are two other ways to do so.
#1 Use an importer of record service
An importer of record service (IOR) allows you to import products to Indonesia without incorporating a legal entity or acquiring any licenses in Indonesia.
Moreover, an IOR will also take compliance with local laws, documentation and tax liabilities off your shoulders.
Using an IOR also lets you focus on your main business. You delegate the obligation to deal with local bureaucracy to a third party service provider, such as Straits Partners.
Read our previous article about the benefits of using an importer of record service in Southeast Asia to learn more.
#2 Open a representative office
If your company also wants to test the market, it is possible to open a representative office first.
This is the fastest way to get a legal presence in Indonesia. However, there are certainly more limitations on a representative office as opposed to a PT PMA.
Find more detailed information in our previous article about setting up a representative office in Indonesia.
How to start with setting up an import company in Indonesia?
When using Straits Partners’s assistance, all you need to do is to provide is with the necessary information. Our experienced consultants will take care of the paperwork as well as the communication with relevant authorities.
Feel free to reach out to us at [email protected]