Indonesian Company Act No. 40 of 2007
We will be briefly discuss about how to set up business in Indonesia based on Indonesian Law
Indonesia, connector country to two continents and to two oceans Australia and Asian continent , Indian and Pacific ocean, paradise for global investors. The land underneath your feet are fertile to run agricultural based business such as rice, corn, spices, coconut oil , you dig a little further you found gold, oil, gas if you are interested in mining. Its beautiful landscape of 127 mountains, lakes and jungle are not less beautiful then their temples Borobudur or Prambanan, business inspiration for nature or culture lovers. You look up its sky its sun consistently rise and setting on time all year around make their black- white and pink beaches, ocean enjoyable for relaxing mind or to exercise the adrenaline by surfing its small or gigantic waves, your best choice for running hospitality and tourism business. Moreover, its government inviting, their people welcoming and we their lawyer here to make your journey enjoyable and successful
Let’s get started.
To start the journey, decide what business sector are you interested in, here are the list based on sector and based on location
Take a look which sector you are interested https://www.bkpm.go.id/images/uploads/investasi_indonesia/file/FDI_Realization_Based_on_Location_Q2_2021.pdf
https://www.bkpm.go.id/images/uploads/investasi_indonesia/file/FDI_Realization_Based_on_Sector_Q2_2021.pdf
Type of Company
By Indonesian company law number 40 of 2007 article 1 company define as a legal entity which constitutes an alliance of capital established pursuant to a contract in order to carry on business activities with an authorised capital all of which is divided into shares and which fulfils the requirements.
There are 3 type of company in Indonesia. I am going to display them all for you to understand and make best the decision based on your need, business models and budget.
1. Local Company (PT)
This type of company are reserved for Indonesian citizenship holders however foreigners can also register this type by partnering with Indonesian shareholders. It is safe and legal. To established this type relatively easy, conjoint with one of Indonesian citizen partner, pay capital requirement of minimum ranger Rp. 50,000,000 (fifty million Rupiah) – 10.000.000.000 IDR with at least 25% (twenty five per cent) of authorized capital paid up in full with a proven by lawful evidence of deposit, your business registered and legally protected. The negative side however this company is limited to employ foreign workers, will be define based on the size of the capital.
How to Set Up PT
For a company to be fully legal, it must meet both formal and informal (material ) requirements
Here is the formal procedures to follow
1. Decide what the name of the company and submit to ministry of law and human rights
2. Set up the article of the association with presence of notary
3. Deed of the establishment approved by ministry of law & human rights.
4. Certificate of domicile acquisition from region government
5. Apply for tax payer registration (NPWP)
6. Business identification number , applicable via online single submission system
7. Have TDP company registration acquisition
8. Published in state news paper
2. Penanaman Modal Asing ( PT. PMA)
Foreign direct investment is a 100 percent owned by foreigners. This type of company is opposite to PT, it is designed specifically for foreigners and investors who intend to run business in Indonesia in a limited liability foreign-owned company. However, it is important to know that not all sectors are open to foreign investment in Indonesia. Some business activities are fully closed to non-domestic investors, and some are partially limited. For clarity of the sector, here is the Negative Investment List, it is a document that regulates foreign ownership of businesses based on business sectors they operate in https://www.investindonesia.go.id/en/article-investment/detail/indonesia-negative-investment-list
How to Set Up PMA
1. Obtain a principle license & business license from Law and Human Right Minister ( Usually takes 7 days to maximum 10 days)
2. Deed of Establishment ( Articles of Association, consist of the regulations for a company’s operations, the company’s purpose, objective business activities, how tasks be conducted within the organization, the company’s organ, director, GMS, Commissaries and the handling of financial records signed by a public notary, which is filed with BKPM (usually takes 3 days)
3. Legalisation of the legal entity status of the PT PMA must be filed with the Ministry of Law and Human Rights (MOLHR) — 10 days
4. Domicile Letter issued by local district authority ( three days )
5. Obtain a tax identification number (NPWP) and taxable entrepreneur registration number (PKP) from Tax department bank needs ( three days)
6. Company Registration Certificate (TDP) from the agency for integrated licensing services (BPPT) —14 days
7. Manpower Report and Company Welfare Report from the sub-department of the Ministry of Manpower — seven days