Key Jurisdictional Requirements for Company Registration in Indonesia
When registering a company in Indonesia, entrepreneurs generally have three main options: establishing a Local Company (PT), a Foreign-Owned Company (PT PMA), or a Representative Office. Each structure comes with its own requirements, benefits, and limitations, making it essential to carefully evaluate which option best aligns with your business goals.
The process of company registration in Indonesia varies depending on the chosen entity type and involves specific legal and regulatory steps. Before proceeding, it is crucial to comprehend the country’s corporate framework and compliance requirements to ensure a seamless and successful incorporation.
Local Company (PT)
You can opt to open a local company in Indonesia if you want to run the business from within the country. Foreigners can also run a local PT, but they need to relocate or enter into a formal agreement with an Indonesian national. There are two types of Local PT companies in Indonesia: the local nominee, and the shelf company. To open a local company, you should fulfil the following obligations:
- The company should have at least one resident director.
- The company should have a commissioner.
- In the case of a Local PT company, there should be at least two shareholders.
Foreign-Owned Business
In the case of the previous type of company, you didn’t have a lot of freedom as a foreigner; however, Indonesia also has different provisions for foreign investors. A foreign-owned company in Indonesia is permitted to have 100% foreign ownership. However, keep in mind that some business fields may still require a foreigner to work with a local representative to manage the business.
Foreign investors are required to prepare a minimum investment plan of IDR 10 billion (approximately USD 650,000–700,000), excluding land and buildings. The paid-up capital must also meet the IDR 10 billion threshold, with at least 25% injected into a local bank account after incorporation to meet licensing requirements. Investors must submit a business plan demonstrating how the investment will be utilized and how it contributes to the Indonesian economy. While certain high-capital sectors may require higher paid-up capital, the previously cited figures of USD 1 million investment and USD 250,000 paid-up capital are no longer accurate under current regulations.
Representative Office
As the name suggests, a Representative Office is intended for companies that are already established in other countries and wish to establish a presence in Indonesia. However, it is important to note that a representative office cannot engage in direct business transactions or enter into contracts with local Indonesian companies. Its activities are generally limited to market research, promotion, and liaison functions.
A representative office in Indonesia is more of an office that coordinates the business tasks from the country. They are not allowed to make sales or generate profit; they are only supposed to perform administrative tasks. Thus, a representative office suited to companies who want first to monitor the market before they complete the company registration in Indonesia.
Financial and Investment Requirements
- Minimum Investment: A PT PMA (Foreign-Owned Company) must present an investment plan of at least IDR 10 billion (approximately USD 650,000 – 700,000), excluding land and buildings.
- Paid-up Capital: The paid-up capital is set at IDR 10 billion, with a minimum of IDR 2.5 billion (25%) to be deposited into a local bank account upon incorporation. This amount is a prerequisite for licensing and can be utilised for operational expenses.
Licensing and Registration via the OSS System
- Company Name & Deed of Establishment
- A unique company name must be reserved with the Ministry of Law and Human Rights (MOLHR).
- A notary drafts the Articles of Association (AoA), outlining the company structure and business activities (based on KBLI codes), which are then included in the Deed of Establishment.
- Investment Approval
- The notary submits the Deed to the MOLHR for ratification.
- The Indonesian Investment Coordinating Board (BKPM) issues the initial investment license, aligned with the proposed business activities.
- Business Identification Number (NIB)
- Applications are processed through the Online Single Submission (OSS) system.
- Once approved, the company receives an NIB, which also acts as a business license for low-risk business activities.
- Risk-Based Licensing
- Companies are classified by risk level based on their KBLI code:
- Low risk: Only the NIB is required.
- Medium risk: Requires a Standard Certificate in addition to the NIB.
- High risk: Requires specific licenses from the relevant ministry.
- Companies are classified by risk level based on their KBLI code:
- Tax Identification Number (NPWP)
- The corporate Tax ID (NPWP) must be registered with the Directorate General of Taxes.
- This is necessary for fulfilling tax obligations and opening a corporate bank account.
Post-Registration Compliance
Once incorporated, companies must meet ongoing compliance requirements, including:
- Opening a corporate bank account for capital injection and daily operations.
- Submitting quarterly investment reports to BKPM.
- Ensuring foreign directors and employees obtain valid work permits (KITAS) to reside and work in Indonesia legally.
- Registering employees with the national social security programs (BPJS).
- Maintaining accurate bookkeeping and filing monthly and annual tax reports.
Get in Touch With Us
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