Updated steps for Foreign-Owned Organization Registration in Indonesia

Did you realize that in Indonesia, corporations with even 1% of foreign possession are considered foreign organizations (PT PMA)?

In this article, you’ll discover a complete overview of foreign-owned company registration in Indonesia, which includes:

    • Foreign possession barriers
    • Minimum paid-up capital and different requirements
    • The step-by-step method of setting up a PT PMA
    • Options to registering a company in Indonesia

What is a foreign-owned organization in Indonesia?

All foreign corporations inside Indonesia are Perseroan Terbatas Penanaman Modal Aging (PT PMSA) which means a restrained legal responsibility organization with foreign direct investment.

An organization is a pma as long as any of the shares are held by an overseas national or an overseas organization. Therefore, it doesn’t rely if it’s 100%, 51% or maybe 1% – if there are foreign shareholders, you’re a foreign-owned organization.

But, in case you aim to only represent an overseas organization in Indonesia, and you’ll not generate any earnings from local sports, you could set up a representative office alternatively. In case you only need to hire a few employees in Indonesia, you could alternatively use the employer of record services.

Foreign Ownership barriers

The most allowed foreign ownership relies upon on your business category. It could range from 100% open up closed to foreign investment.

The document regulating the limited industries is the negative investment list (DNI), and additionally it is revised every 3 years.

Negative Investment list in Indonesia

Even though Indonesia every so often revises the bad investment list, it does not have an effect on the companies that are already registered. Indonesia applies the grandfathering precept, and also you don’t updated sell your shares to a domestic shareholder, to your enterprise fall under stricter regulations in the future.

Requirements for putting in place a PT PMA

#1 Paid-up Capital

The minimum paid-up capital for a foreign-owned organization in Indonesia is RP. 2,5 billion (~175,000 USD). As a part of the incorporation method, there are two methods to the paid up capital.

The primary one is by signing a capital declaration letter. This letter will state that the shareholders have enough funds to inject the capital after the incorporation.

The second one option is to transfer the cash in your company’s bank account. But, since your organization is still in the method of incorporation, it does not have a bank account yet. Therefore, the most effective alternative for brand new organizations might be to sign a capital declaration letter.

#2 Structure of a PT PMA

Shareholders

Each limited liability organization in Indonesia needs at least shareholders. The ones may be individual or company shareholders or both.

Commissioners and administrator

Moreover, you may need to hire at least one commissioner and one director. Commissioner is the supervisor of the director(s) and can be a non-resident.

A director can be both an Indonesian or a foreigner. But, because the director can be liable for the general operations of the organization, it is really useful to have a resident director.

If the director is a foreigner, you could continue to a work permit after the incorporation of the organization. Therefore, you have got an up to date both hire a local director or use a nominee director provider till you get your work permit.

Study more regarding commissioners and directors of a PT PMA

#3 Business location

Indonesia is a decentralized country, and plenty of government’s work takes place on the district level. For you, which means you need to determine your enterprise location already before submitting the investment application and offer a registered business address.

Organization registration in Jakarta

Local guidelines vary, and in a few areas, which includes Jakarta, the domicile letter requires to be from an office building. You can’t use your very own residence because the official address of the organization for the reason that residential addresses (which includes an rental or a residence) are not allowed.

Therefore, ensure that the address has the proper building license to function as an office.

For a brand new organization, you could use a virtual office to decrease the initial overhead expenses. Once you make a decision to have a physical office, you could keep the virtual office as the registered office address or update in your new address.

But, please be cautioned that through updating your office address, you’ll need to update most of your legal files.

To set up a PT PMA in Indonesia in June 2018, the authorities released a brand new regulation(no. 24 /2018), which made the incorporation procedure in Indonesia quicker.

Formerly, you have been required to attain earlier approval from the BKPM to set up a PT PMA. The new regulation, however, removed this requirement, and organizations can now start operating right away.

Moreover, the establishment procedure for most business lines will continue through a centralized system of 1 single submission, instead of numerous establishments as previously.

But, notice that for a few business activities, which includes power, mineral resources, and buildings, the rules fluctuate.

The step-by-step procedure of PT PMA registration

  • Deed of Establishment
    • Approval on the Establishment of a legal entity
    • Issuance of the Deed of Establishment
    • Ratification from the MOLHR
  • Domicile and Tax Registration
    • Domicile Letter from the district government
    • Tax Identification Number (NPWP) from the local tax office
  • Identification Number to Operate (NIB)
    • Registration of your company in the One Single Submission System
    • Issuance of NIB which identifies your company profile in Indonesia
  • Operational License / Commercial License
    • Additional licenses, if necessary

Step 1: Deed of Establishment

We are able to first check your business activities after the bad investment list to decide the foreign ownerships most recommended percentage of to your field.

Your organization’s cause and activities should be stated in its articles of association in the deed of establishment, which have to be carried out in the presence of a notary. The deed of established order needs to additionally be ratified with the aid of the ministry of law and human rights.

Step 2: Domicile and Tax registration

As soon as your organization is set up, the subsequent step is to collect domicile letter from authorities and tax identification number (NPWP) from local tax office.

Step 3: Identity number to function/ Nomor Induk Berusaha (NIB)

The following step is the registration of your legal entity within OSS and then you’ll receive your organization’s identification number to function (nib).

A nib is a completely unique number that identifies your organization profile in Indonesia, and it additionally serves as:

    • Your import license (formerly API-u)
    • Customs identity number (Nik)
    • Your business registry number (formerly tdp)
    • Automatically registers your PT PMA under health and social security system (bpjs kesehatan dan bpjs ketenagakerjaan)

Step 4: Commercial License/Operational License if necessary

A few corporations also require extra licenses, primarily based on kind of business sports. As an example, fintech organizations in Indonesia need an o.K.License and an operator business license.

Foreign-owned company registration in Jakarta Timeline

ProcessTimeline in working days
Approval of company name1
Minute of the Establishment Deed1
Establishment Deed1
MOLHR Ratification on Deed of Establishment1
District Government Domicile letter5
Tax card5
NIB1
Commercial License/Operating License1

The OSS (one submission system) lessen the time establishment of a PT PMA from preceding 3 to 4 months in Jakarta, 6 to 12 months in other cities to 1 month. But, numerous public vacations and common authorities system downtimes can postpone the process so you need to assume the complete procedure to take about 6-8 weeks.

We also have a unique arrangement with numerous banks, and we are able to open a bank account for your organization as part of the organization registration provider. Your presence at the bank isn’t always essential.

After Incorporation in Indonesia

After your organization is set up, you may begin running your business in Indonesia and conduct activities which include:

    • Purchase assets and different property on behalf of your organization
    • Begin other arrangements for your operation, which includes however not restricted to hiring body of workers, preparing office renovations, and so on.
    • Proceed to acquire work and stay allows for foreign employees on your organization

Options to Company registration in Indonesia

Shopping for a ready-made shelf organization

To fasting the procedure, you should buy a shelf organization in order to permit you to issue sign contracts, invoices, or take part in tenders right away.

But, ensure the shelf organization has important licenses for your business type. We will offer you shelf organizations or confirm whether or not the shelf organization you want to buy has all of the required permits.

Study more about shelf organizations in our previous article regarding shopping for a shelf company in Indonesia

Nominee organization in Indonesia

Foreign organizations that cannot or choose not to fulfill the foreign possession necessities can set up a nominee company as an alternative.

Using a nominee organization allows you to perform in Indonesia without having to conform with the minimum capital requirements for foreign-owned organizations.

You could set up a domestically-owned nominee company beginning with IDR 51 million IDR (~3,500 USD) capital (in place of 10 billion IDR) however still have complete control over the organization.

A set of legal agreements in an effort to be drafted via lawyers will defend your rights. You may also have the right to change the shareholders on every occasion you want.

Discover more information about our nominee organization service or the way to use nominee shareholding the secure way

Outsourcing Business strategies in Indonesia

Setting up a legal entity is not usually the fastest or the most cost-effective way to go into a brand new market. If you wish to begin working straight away or to check the market first, using an outsourced operations version will be an excellent alternative for you.

It permits you to earn revenue, offer services, conduct sales, and so on. Without setting up a local organization or meeting minimal foreign investment necessities.

Feel free to reach out to us at [email protected]

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