Indonesia has become a country with rapid growth in the economy, attracting investors and business owners all over the globe. According to the Indonesia Coordinating Investment Board (Badan Koordinasi Penanaman Modal or BKPM), the number of investments received from both foreign and local economies has reached IDR 692,8 billion, a year-on-year increase of 16.4%. With numerous business ventures and startups available, starting a business in Indonesia is possible for anyone. There are several requirements that one must follow to start a legitimate company. You can follow these clear steps that can help you meet the requirements for starting a business in Indonesia.
1. Ensure the business activity is on the Positive Investment List
To start a foreign direct investment company, otherwise known as PT PMA in Indonesia, you have first to decide which business fields or sectors you want to invest in following the Indonesian Standard Business Classification (Klasifikasi Baku Lapangan Usaha Indonesia or KBLI). Then, based on the Presidential Regulation which one on the Negative Investment List, you must determine whether the business sector is open with conditions or altogether closed for foreign direct investment (Daftar Negatif Investasi or DNI).
If the business sector you’re interested in isn’t regulated and there aren’t any other restrictions from the Ministries, it’s 100% open to foreign direct investment. In 2019, several industries may have gone from being partially open to being fully open to foreign ownership. This list can assist you in determining whether or not you require a local partner.
On a more positive note, the government intends to create a “positive investment list” to promote some industries that are open to both foreign and domestic investment. Rather than banning foreigners from owning certain businesses, Indonesia will welcome foreign investors and entrepreneurs with a priority list in 2021. Read more about positive investment list.
2. Establish the right legal entity
You are one step closer to starting a new company in Indonesia after reviewing the Positive Investment List. The next step is to decide which type of company a foreigner can establish.
The first step is to form a PT PMA. A minimum of two shareholders is required to start a PT PMA. Foreign individuals or foreign entities, or a combination of both can become shareholders in a PT PMA. The minimum authorised capital required to start a PT PMA is IDR 10 billion, whereas the paid-up capital requirement is IDR 2.5 billion. A minimum of IDR 10 million (USD equivalent) is required for each shareholder.
Secondly, a foreign investor can open a Representative Office to conduct market research. An overseas company can establish a Representative Office (Kantor Perwakilan Perusahaan Asing or KPPA) to represent their company in Indonesia. Foreign Representative Offices are typically restricted from directly engaging in operational activities, such as signing contracts, issuing official invoices, receiving client payments, and engaging in other profit-generating activities.
3. Deal with the bureaucracy
Starting a business in Indonesia means, an investor must first obtain the Deed of Incorporation or the Articles of Association and legalise the company through a Public Notary.
All banking transactions (such as capital injection, loan administration, payment of capital equipment, raw material, and so on) of a newly established PT PMA must be conducted via the company bank account.
Basically, the requirements for starting a business company in Indonesia are as follows:
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Deed of Incorporation;
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Approval from the Ministry of Justice and Human Rights (SK HAM);
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Company tax identification number (Nomor Pokok Wajib Pajak or NPWP);
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Business License (Izin Usaha);
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Single Business Identity Number (Nomor Induk Berusaha or NIB)
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Commercial/Operational License (Izin Komersial/Operasional), all of which can be obtained via the Online Single Submission or OSS.
Most business licenses can be applied online via the OSS, except for those in finance, mining (oil and gas, mineral and coal, and geothermal), and real estate sectors. Licenses for these sectors can be obtained from BKPM’s One-Stop Service Centre (Pelayanan Terpadu Satu Pintu or PTSP Pusat).
Foreigners who want to work and stay in Indonesia need to apply for a KITAS. Applicants must have a sponsoring company in Indonesia to qualify for the KITAS. The application must be submitted to the Directorate General of Immigration by the sponsoring company. If you are an investor, your company can sponsor you to get the Investor KITAS.
4. Prepare the location
Another crucial step in starting a business in Indonesia is deciding where your company will be located. Specific ground rules apply to different regions and types of businesses, which you must follow. Any industrial activities must be located in industrial estates, according to Industrial Law No. 3 of 2014 and Government Regulation No. 142 of 2015.
Representative Offices can only be formed in the provincial capitals, e.g. Jakarta, Surabaya, Denpasar, and Medan and it must be housed in an office building. You can submit the domicile letter and other required documents in accordance with the office location you choose.
5. Find resources
Employers of foreign labour may only be able to hire foreign workers for a specific position and for a limited period of time.
6. Choose The Right Company Registration Consultant
As in any field of business, it is critical to be cautious about who you do business with. New businesses that are just getting started in the area are especially vulnerable to consultants. They could be offering services that are either incomplete or deceptive. Find a service provider you can trust based on their background and behaviour.
Keep an eye on the progress once you have chosen a consultant. A consultant’s failure to obtain the client’s power of attorney is a common blunder. If the consultant forges your signature, you have no control over the applications they make. It occurs more frequently than you might think.
Conclusion about Starting a Business in Indonesia
If you have all of the requirements in order and work with trusted consultants, starting a business in Indonesia is a relatively simple process. Permitindo has a long history of assisting foreigners to establish a company in Indonesia. Don’t hesitate to get in touch with us at contact@permitindo.com or fill out the form here. Our team will contact you as soon as possible.
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