The process of establishing a company in Indonesia can be done in 3 ways.
Investors can start by establishing one of these legal entities: Representative Office, Local Company, or Foreign Investment Company (PT PMA).
Local Company (PT) Establishment of PT
Foreigners can start doing business in Indonesia as residents or foreigners under local nominee agreements as companies like these only allow 100% local ownership. Unlike other legal entities, local companies do not have strict requirements and restrictions.
Foreign Company (PT PMA) Establishment of PT PMA
Foreign investment companies are legal entities that can be fully owned by foreigners. However, the maximum foreign ownership is determined by the business sector and business activities. The limits are set in a regulation called the Indonesian Investment Negative List.
Generally considered a branch of an overseas holding company, a representative office can be your first step to enter the Indonesian market. The purpose of establishing this legal entity is to carry out marketing activities, prepare for the establishment of a PT PMA, or conduct market research. Direct selling or income generation is not permitted.
The advantages of establishing a PT PMA
- Your company can join and participate in all tenders in Indonesia.
- You can apply for import licenses and other business licenses, apply for product registration under your company so that it has better terms and conditions for importing goods.
- You and the foreign employees you wish to work for can apply for a work visa (KITAS) under your company name.
- Foreign clients and visitors you invite can directly obtain a business visa sponsored by your company.
Characteristics of PT PMA
- Can be owned by foreigners up to 100%. Maximum foreign ownership depends on the business classification in the Negative Investment List. Foreign ownership can be 0 to 100% according to the business industry.
- The minimum shareholder requirement is two people. They can be individuals or companies.
- According to the new Government Regulation No. 24 of 2018 concerning electronically integrated permits, there is a new system called Online Single Submission (OSS) which is overseen by the Ministry of Economy. All permits for legal entities will be handled through OSS. All permits for legal entities will be handled through OSS. However, foreign companies cannot open a bank account until the incorporation process is complete. You are only required to submit a notary statement with the amount to be transferred once the incorporation is complete.
- Some business activities, such as running a restaurant or hotel, require special permits.
- Foreign entities and entrepreneurs who aim to establish a local company owned by foreign investors must go through all procedures in accordance with the laws and regulations in Indonesia, namely Law no. 25/2007 concerning Capital Investment and Law no. 40/2007 on PT PMA.