Incorporation and Compliance

Incorporation and Compliance

Foreign Ownership

Foreign entrepreneurs can set up a foreign direct investment company in Indonesia (commonly known as Penanaman Modal Asing, or PMA) either by setting up:

A limited liability company which is 100% foreign owned or

A limited liability company through a joint venture with Indonesian partners

In the case of a joint venture, the Indonesian partner is required to hold at least 5% of the shares while the foreign owner can have 95% shareholding in the company.

Additionally, the Indonesian government regulates the fields of business activity that are open to foreign investment. At present there is a list of business fields:

Closed to foreign investment

Open to foreign investment with certain conditions

Open to foreign investment only by way of a joint venture

Open to 100% foreign investment

Minimum Statutory Requirements

Foreigners who wish to incorporate a company in Indonesia must comply with the following requirements: a local registered address; at least 1 director (need not be a local resident); minimum of 2 and maximum of 50 shareholders (natural persons or corporates) and a commissioner. In addition, there is a minimum authorized capital requirement of USD 1.000.000 while the issued and paid-up capital requirement is 25% of the authorized capital.

Incorporation Procedure

Incorporation Procedure

Company incorporation in Indonesia is tedious and time consuming, taking up to 6 to 10 weeks to complete all formalities. The incorporation process involves the following steps:

Submit a company incorporation application along with supporting documents to the Capital Investment Coordinating Board (BKPM). Application processing takes around 2 to 5 weeks, upon which the BKPM will issue an in-principle business license valid for 3 years. During this period the foreign entrepreneur must make the necessary investment and begin commercial operations in Indonesia. Execute a Deed of Establishment (AktePendirian) which contains the company’s Articles of Association before a notary. The company is not a limited liability company at this stage. Obtain a Letter of Domicile from the landlord of the office premises and the regional government office (SKDP), which states the address of the company. Register with the tax office for a tax registration number (NPWP) and obtain VAT (an indirect tax of 10% applied to the selling price of goods and services). Submit the executed deed, letter of domicile, tax registration number and bank statement to the Ministry of Law and Human Rights (MOHLR) and receive approval within 4 to 6 weeks. Upon approval the company is considered a limited liability company. Register the approved deed with the Department of Trade (TDP). Obtain other relevant business licenses and permits, if applicable. Open a corporate bank account. Obtain a Business License (IU) from BKPM valid as long as the business viable.