Establishing a Company in Indonesia: A Comprehensive Guide

Indonesia, with its burgeoning economy and vast consumer market, is an attractive destination for entrepreneurs looking to establish their businesses. However, navigating through the bureaucratic and legal landscape can be challenging. This article aims to provide a comprehensive guide on forming a company in Indonesia.

1. Business Entity Types

a. PT (Perseroan Terbatas):

• A PT is a limited liability company which is the most common type of business entity in Indonesia.
• Foreign investors can establish a PT PMA (Penanaman Modal Asing), a form of PT that allows foreign ownership.

b. Representative Office:

• Foreign companies can set up a representative office to explore business opportunities before establishing a PT.

c. CV (Commanditaire Vennootschap):

• CV is a partnership business entity, suitable for small to medium-sized businesses.

2. Legal Framework

• The Indonesian Commercial Code and the Company Law of 2007 are the primary legal frameworks governing business entities.
• The Investment Coordinating Board (BKPM) is the main regulatory body overseeing foreign investment.

3. Registration Process

a. Name Approval:

• Obtain approval for the company name from the Ministry of Law and Human Rights.

b. Deed of Establishment:

• Prepare a Deed of Establishment containing the articles of association, to be notarized by a public notary.

c. Legalization:

• Obtain legalization of the deed of establishment from the Ministry of Law and Human Rights.

d. Tax Registration:

• Register for a tax identification number (NPWP) and taxable entrepreneur confirmation (PKP).

e. Other Registrations:

• Register with the Company Registration Office, obtain business licenses from relevant authorities, and register employees with the manpower department and social security programs.

4. Capital Requirements

• The minimum capital requirement for a PT PMA is IDR 10 billion (~USD 700,000), with at least IDR 2.5 billion (~USD 175,000) paid up capital.

5. Hiring Employees

• Familiarize with Indonesia’s labor laws to ensure compliance when hiring employees.

6. Ongoing Compliance

• Ensure adherence to tax regulations, periodic financial reporting, and other compliance requirements.

7. Conclusion

Forming a company in Indonesia involves several steps and adherence to local laws and regulations. By understanding the legal landscape and following the prescribed processes, entrepreneurs can establish their businesses in Indonesia and tap into the country’s vast market potential.