Did you know that in Indonesia, businesses with even 1% of foreign shareholders are considered foreign-owned companies? Or that you have to choose your office location before submitting the investment application? In this article, we will give you a thorough overview of the process of foreign-owned company registration in Indonesia.
The laws and regulations regarding company registration in Indonesia change often and we are frequently updating this article as the changes happen. Last revision for this article is from July 2018 featuring the new one single submission (OSS).
What is considered a foreign-owned company in Indonesia?
All foreign-owned companies in Indonesia are PT PMAs which stands for a limited liability company with foreign direct investment.
A company is a PMA as long as any of the shares are held by a foreign national or a foreign company. Therefore, it doesn’t matter if it’s 100%, 51% or even 1% – if there are foreign shareholders, you are a foreign-owned company.
However, if you aim to only represent an overseas company in Indonesia and you will not generate any income from local activities, you can set up a representative office instead. If you only want to hire some staff in Indonesia then you can alternatively use employer of record service.
Foreign ownership limitations
The maximum allowed foreign ownership depends on your business classification. It can range from 100% open to closed to foreign investment.
The document regulating the restricted industries is the Negative Investment List (DNI) and it is usually revised every 3 years.
Negative investment list in Indonesia
Although Indonesia revises the negative investment list every few years, it does not affect the companies that are already registered. Indonesia applies a grandfathering principle and you don’t have to sell your shares to a local shareholder, should your industry fall under stricter regulations in the future.
Requirements for setting up a PT PMA
#1 Paid up capital
The minimum paid up capital for a foreign-owned company is Rp. 2,5 billion (~175,000 USD). As part of the incorporation process, there are two ways to “prove” the paid up capital.
The first one is by signing a capital statement letter. This letter will state that the shareholders have sufficient funds to inject the capital after the incorporation.
The second option is to transfer the money to your company’s bank account. However, since your company is still in the process of incorporation, it does not have a bank account yet. Thus, the option would be to sign a capital statement letter.
Read our previous article to learn more about the minimum capital requirements for foreign-owned companies in Indonesia.
#2 Shareholders of a PT PMA
Every limited liability company in Indonesia needs at least two shareholders. Those can be individual or corporate shareholders or a combination of both.
Commissioners and directors
Additionally, you will need to appoint at least one commissioner and one director. Commissioner is the supervisor of the director(s) and can easily be a non-resident.
A director can be either an Indonesian or a foreigner. However, since the director will be responsible for the overall operations of the company, it is advisable to have a resident director.
If the director is a foreigner, you can proceed to a work permit after the incorporation of the company. Therefore, you have an option to either appoint a local director or use a nominee director service until you get your work permit.
Read more about commissioners and directors.
#3 Business location
Indonesia is a decentralized country, and a lot of government’s work takes place at the district level. For you, this means that you need to decide your business location already before submitting the investment application and provide a registered business address.
Company registration in Jakarta
Local regulations vary, and in some regions, such as Jakarta, the domicile letter needs to be from an office building. You cannot use your own house as the official address of the company since residence addresses (such as an apartment or a house) are not allowed.
Thus, make sure that the address has the right building license to operate as an office.
For a new company, you may use a virtual office to lower the initial overhead costs. Once you decide to have a physical office, you can maintain the virtual office as the registered office address or update to your new address.
However, please be advised that by updating your office address, you would need to update most of your legal documents which will cost you legal/restructuring fees.
Straits Partners provides a virtual office service in Jakarta, located in the prime area of Mega Kuningan.
How to set up a PT PMA in Indonesia
The process of PT PMA establishment
The government recently released a new regulation, No. 24 of the Year 2018, which made the incorporation process in Indonesia more open.
Previously, you were required to obtain prior approval from the BKPM to set up a PT PMA. The new regulation, however, eliminated this requirement and businesses can now start operating immediately.
Furthermore, the establishment process for most business lines will proceed through a centralized system of One Single Submission, instead of several institutions as formerly.
However, note that for some business activities, such as energy, mineral resources, and constructions, the regulations differ.
|Step 1||Step 2||Step 3|
|Approval on the establishment of a legal entity||Identification Number to Operate/ Nomor Induk Berusaha (NIB)||Operational License/ Commercial License|
|Straits Partners will first check on your business activities as per accordance to Negative Investment List, to determine maximum % of foreign ownership||Registration of Legal Entity to OSS||Operational License/ Commercial License required to proceed after a PT PMA has NIB|
|Issuance of Deed of Establishment||Issuance of NIB, which is a unique number which identifies your Company Profile in Indonesia. |
This NIB now also serves as:
Your import license/ previously API-U
Customs Identification Number/ NIK
Your Business registry/ previously TDP
Automatically registered your PT PMA under Health and Social Security System (BPJS Kesehatan dan BPJS Ketenagakerjaan)
|The operational license/ commercial license will be issued based on the type of business activities.|
|Ratification from Ministry of Law and Human Rights on the Deed of Establishment|
Timeline of foreign-owned company registration in Jakarta
|No||Process||Timeline in working days|
|1||Approval of company name||1|
|2||Minute of the Deed of Establishment|
|3||Deed of Establishment||1|
|4||Ratification from MOLHR on Deed of Establishment||1|
|5||Domicile Letter from the district government||5|
|8||Commercial License/ Operating License||1|
The new one submission system (OSS) reduces the establishment time of a PT PMA from previous 3-4 months in Jakarta and 6-12 months in other cities to less than one month.
When using Straits Partners’s assistance, however, you can set up your company in Indonesia in only one week.
Straits Partners also has a special arrangement with several banks, and we will open a bank account for your company as part of the company registration service. Your presence at the bank is not necessary.
EXAMPLE: setting up a health supplement business in Indonesia
Let’s say that your company will be importing and distributing health supplements to Indonesia and will be domiciled in Jakarta. With the new company registration process, the incorporation timeline will be significantly shorter:
|Old System||New System|
|Incorporation||6 weeks||Issuance of Deed of Establishment and MOLHR approval||2 working days|
|Operating License/ Ijin Usaha Tetap||4 weeks||NIB (import license, customs ID)||1 day|
|Import License/ APIU||2 weeks||Cosmetics Registration Number||6 weeks|
|Custom Identification Number||2 weeks||Operational/ Commercial License||1 day|
|Cosmetics Registration Number||6 weeks|
|Time of establishment with the old system: |
|Time of establishing a health supplement company in Indonesia with the new system: |
After incorporation in Indonesia
After your company is established, you can start running your business in Indonesia and conduct activities such as:
Buy property and other assets on behalf of your company
Start other preparations for your operation, such as but not limited to hiring staff, preparing office renovations, etc.
Proceed to obtain work and stay permits for foreign employees in your company
Alternatives to company registration in Indonesia
Buying a ready-made shelf company
To speed up the process, you can purchase a shelf company which will allow you to issue invoices, sign contracts or participate in tenders immediately.
However, note that shelf companies may not always have the necessary licenses for your business classification. Straits Partners can assist you and verify whether the shelf company you wish to buy has all the required permits.
Learn more about shelf companies in our previous article about buying a shelf company in Indonesia.
Foreign companies that cannot or choose not to meet the foreign ownership requirements can set up a nominee company instead.
Using a nominee company enables you to operate in Indonesia without having to comply with the minimum capital requirements for foreign-owned companies.
You can set up a locally-owned nominee company with only 600 million IDR (~45,000 USD) capital (instead of 10 billion IDR) but still have full control over the company.
A set of legal agreements which will be drafted by lawyers will protect your rights. You will also have the right to change the shareholders whenever you wish.
Find out more details about our nominee company service or how to use nominee shareholding the safe way.
Outsourced operations model
Setting up a legal entity is not always the fastest or the most cost-effective way to enter a new market. If you wish to start operating immediately or to test the market first, using an outsourced operations model would be the best option for you.
It allows you to earn revenue, provide services, conduct sales, etc. without establishing a local company or meeting the minimum foreign investment requirements.Some of our most common services include:
Accounting and tax reporting
Employer of record
Importer of record
Read more on how to enter emerging markets by using outsourcing services.
How to start with company registration in Indonesia
If you have any additional questions, feel free to reach out to our consultants via [email protected] or by filling in the form below. Or proceed straight to company registration.
For further reading, have a look at our previous articles ten reasons why to invest in Indonesia and seven common mistakes to avoid when setting up a company in Indonesia.
Company Registry in Indonesia:
Investigating your potential partners is an indispensable step before committing to any investments. Learn how to access and use Straits Partners’ s new company registry in Indonesia to check the background of your chosen entities.
What information does the company registry in Indonesia include?
Company registry in Indonesia contains specific data about Indonesian entities and grounds on the Indonesian Company Law 40 of 2007 for Limited Liability Companies. As a foreigner who is planning to conduct business in Indonesia, you can use this platform to carry out research or do some background check. For example, before you close deals with new partners or sign agreements.
Company profile provides valuable data
Accessing the main company information is simple, and you can even request further reports. The data is accessible to the public, and you will find it useful for several purposes. Straits Partners’s company registry database allows you to look up the following information:
Name and domicile
Purpose and business activities as well as its address
The number and date of the deed of establishment and the Minister’s Decree concerning the ratification of the company
Original documents are commonly in Indonesian. However, from Straits Partners’s database, you can request the information in English instead of having to translate the materials yourself.
In addition to the above, you can also look up the following:
The number and date of deeds of an amendment to the articles of association (AoA)
The name and domicile of the notaries who wrote the deed of establishment and deeds of amendment of the AoA
Contact details of company shareholders, members of the board of directors and board of commissioners
The number and date of the deed of winding up, or the number and date of the order of the court concerning the winding up of the company
Information on legal entity status expiration
Besides analyzing a company profile, you can access reports on due diligence. This way you may calculate the risks and do your homework before the actual investment. We’ve dedicated an entire blog post on the importance of due diligence in emerging markets.
How to access the company registry?
By typing in relevant keywords in the field ‘search for a company,’ you will have results from our database appearing within seconds:
Finding information from Straits Partners’s company registry is proven effective and user-friendly especially due to the short process cycle:
Accessing the above data usually takes place by inserting an information request and buying a voucher from BKPM. Since it’s not convenient for foreign companies, we make requests on behalf of our customers. If you already know the company you want to search for, fill in the form and get a report submitted to you within one working day.
If you have additional questions, let us know by sending an email to [email protected]