Indonesia Company Formation
Indonesia is a popular jurisdiction for company formation, especially for non-residents. It offers a relatively affordable option for establishing a business presence in Southeast Asia, with a large and growing market. However, navigating the legal and regulatory landscape requires careful planning and local expertise.
- Time of Indonesia company formation takes 4-8 weeks
- Popular company type:
- Foreign Investment Company (PT PMA)
Indonesia Company Formation Main Characteristics and the basic rules of Company registration in Indonesia
Indonesia, with its burgeoning economy and strategic location, presents a compelling opportunity for foreign investors. If you’re a non-resident looking to tap into the Indonesian market, understanding the intricacies of Indonesia company formation is crucial. This guide outlines the key aspects of establishing a business in Indonesia as a non-resident, highlighting the benefits, advantages, requirements, procedures, and estimated timeframe.
A Comprehensive Guide for Non-Residents to Register a Company in Indonesia
Why Choose Indonesia for Your Business? (Benefits & Advantages for Non-Residents)
Indonesia offers a range of advantages for non-resident entrepreneurs:
- Large and Growing Market: With a population exceeding 270 million, Indonesia boasts a massive consumer base with increasing purchasing power.
- Strategic Location: Situated at the crossroads of major trade routes, Indonesia provides access to the ASEAN market and beyond.
- Abundant Natural Resources: Indonesia is rich in natural resources, offering opportunities in mining, agriculture, and related industries.
- Government Incentives: The Indonesian government actively encourages foreign investment through various incentives and streamlined regulations.
- Relatively Low Labor Costs: Compared to other developed economies, Indonesia offers competitive labor costs, contributing to lower operational expenses.
- Growing Middle Class: The expanding middle class fuels demand for a wide range of goods and services, creating diverse business opportunities.
Types of Companies for Non-Residents in Indonesia:
The most common type of company for non-residents in Indonesia is a Foreign Investment Company (PT PMA). This structure allows for 100% foreign ownership, subject to certain restrictions based on the business sector.
- PT PMA (Perseroan Terbatas Penanaman Modal Asing): This is a limited liability company with foreign investment. It’s the most popular choice for foreign investors due to its flexibility and legal protection.
Requirements for Indonesia Company Formation (PT PMA):
Establishing a PT PMA involves several key requirements:
- Minimum Investment: A minimum investment of IDR 10 billion (approximately USD 650,000) is generally required, with a paid-up capital of at least IDR 2.5 billion (approximately USD 162,500). This can vary depending on the business sector.
- Business Domicile: A registered office address in Indonesia is necessary.
- Shareholders: At least two shareholders are required.
- Directors and Commissioners: A minimum of one director and one commissioner are required, with at least one director residing in Indonesia.
- Business License (NIB): Obtained through the Online Single Submission (OSS) system.
- Tax Identification Number (NPWP): Required for tax purposes.
- Company Deed: Prepared by a notary public and approved by the Ministry of Law and Human Rights.
- Articles of Association: Outlining the company’s purpose, structure, and regulations.
Procedure for Indonesia Company Formation (PT PMA):
The process of Indonesia company formation involves several steps:
1. Company Name Reservation: Reserve your desired company name with the Ministry of Law and Human Rights.
2. Deed of Establishment: Prepare the company deed with a notary public, outlining the company’s details.
3. Approval from the Ministry of Law and Human Rights: Obtain approval for the company deed from the Ministry.
4. Obtain a Domicile Certificate: Secure a domicile certificate from the local government.
5. Apply for a Tax Identification Number (NPWP): Register the company with the tax office to obtain an NPWP.
6. Apply for a Business License (NIB) through OSS: Obtain the NIB through the Online Single Submission (OSS) system. This integrates various licenses and permits.
7. Open a Bank Account: Open a corporate bank
account in Indonesia.
8. Register with Relevant Authorities: Register with other relevant authorities depending on the specific business sector (e.g., Ministry of Trade, Ministry of Industry).
9. Obtain Necessary Permits and Licenses: Secure any additional permits and licenses required for your specific business activities.
Timeframe for Indonesia Company Formation:
The timeframe for Indonesia company formation can vary depending on the complexity of the business and the efficiency of the bureaucratic processes. Generally, it takes approximately 4-8 weeks to complete the entire process, from name reservation to obtaining all necessary licenses and permits. This timeline can be affected by factors such as:
- Completeness of Documentation: Ensuring all required documents are accurate and complete is crucial for a smooth process.
- Efficiency of Government Agencies: The speed of processing applications by government agencies can vary.
- Complexity of the Business Sector: Certain industries may require more extensive approvals and licenses, extending the timeframe.
Navigating the Complexities: How Our Professionals Can Help
The process of Indonesia company formation can be complex and time-consuming, especially for non-residents unfamiliar with Indonesian regulations and procedures. Our team of experienced professionals can provide comprehensive support throughout the entire process, including:
- Company Structure Advice: Helping you choose the most suitable company structure for your business needs.
- Document Preparation: Assisting with the preparation of all necessary documents, ensuring accuracy and compliance.
- Liaison with Government Agencies: Representing you in dealings with government agencies, streamlining the application process.
- Legal and Regulatory Compliance: Providing guidance on legal and regulatory compliance matters.
- Business Consulting: Offering strategic advice to help you succeed in the Indonesian market.
- Ongoing Support: Providing ongoing support to ensure your business remains compliant and thrives in Indonesia.
By partnering with our professionals, you can navigate the complexities of Indonesia company formation with confidence, saving time and resources while ensuring compliance with all relevant regulations. Contact us today to learn more about how we can help you establish your business in Indonesia and unlock the vast potential of this dynamic market. We offer tailored solutions to meet your specific needs and ensure a smooth and successful entry into the Indonesian business landscape. Let us be your trusted partner in your Indonesia company formation journey.
FAQ on Taxes in Indonesia
1. What is the Corporation Tax rate in Indonesia?
Corporation tax in Indonesia is generally set at a rate of 22% for most companies. However, small enterprises with gross revenue below IDR 4.8 billion benefit from a lower rate of 11% on their first IDR 4.8 billion of income. This rate applies to both resident and non-resident companies engaged in business activities in Indonesia.
2. How is Income Tax structured in Indonesia?
Income tax in Indonesia is progressive, with rates ranging from 5% to 30%, depending on the income bracket. Individual taxpayers earning up to IDR 60 million per year are taxed at 5%, while those earning above IDR 5 billion face a 30% tax rate. Non-residents are subject to a flat rate of 20% on income derived from Indonesia.
3. What is the VAT rate in Indonesia?
Value-added tax (VAT) in Indonesia is normally set at 10%. However, certain goods and services may be exempt from VAT or subject to a lower rate. Businesses with an annual turnover above IDR 4.8 billion are required to register for VAT and comply with related filing obligations.
4. How are dividends taxed in Indonesia?
Dividends paid to resident individuals in Indonesia are typically subjected to a tax rate of 10%. Non-resident individuals, however, are taxed at a higher rate of 20% unless a lower rate is applied under a double tax treaty. It is essential to check existing treaties to ensure compliance and possible tax relief.
5. Are there other taxes in Indonesia that businesses should be aware of?
Yes, besides corporation tax, income tax, VAT, and dividends tax, businesses in Indonesia may encounter other taxes such as land and building tax, luxury goods tax, and withholding tax on certain payments like royalties and services. Each of these taxes has specific rates and regulations, crucial for compliance.
FAQ: Company Formation in Indonesia for Non-residents
What is the process for company formation in Indonesia for non-residents?
The process for company formation in Indonesia for non-residents involves several steps. First, you need to choose a business entity type, such as a PT (Limited Liability Company) or a PMA (Foreign Investment Company). Following that, you’ll gather the required documents, including identification and proof of address. Once you have the documents ready, you’ll submit them to the Indonesian Investment Coordinating Board (BKPM) to obtain a business license. After receiving the license, you need to register for taxation and obtain necessary permits based on your business activities.
What are the key requirements for non-residents to establish a business in Indonesia?
Non-residents looking to establish a business in Indonesia must meet several key requirements. These include having a legal business structure, usually a PMA for foreign investors, and a minimum investment of approximately $1 million. Additionally, you will need to provide a deed of establishment, details of shareholders, a business license, tax registration, and any specific permits related to your business operations. Engaging a local legal expert can help navigate these requirements efficiently.
Can a foreigner fully own a company in Indonesia?
Yes, a foreigner can fully own a company in Indonesia, but this is primarily applicable to certain business sectors defined by the Negative Investment List (DNI). A PMA company allows 100% foreign ownership for businesses in sectors that are open to foreign investors. However, other sectors may require partnerships with local Indonesians. It’s crucial to review the DNI to understand ownership limits in your specific industry.
What taxes should non-residents be aware of when forming a company in Indonesia?
When forming a company in Indonesia, non-residents should be aware of several taxes that may apply. The Corporate Income Tax (CIT) is typically set at 22%, with potential reductions available for new businesses. Value Added Tax (VAT) of 10% may also apply to goods and services sold. Additionally, there may be withholding taxes on various income streams, including dividends, interest, and royalties. Consulting with a tax advisor can help navigate these obligations effectively.
How long does it take to establish a company in Indonesia for non-residents?
The time frame to establish a company in Indonesia for non-residents can vary widely based on several factors. Generally, the entire process can take anywhere from 4 to 12 weeks. This timeline includes obtaining the necessary licenses, registering with tax authorities, and finalizing local permits. Engaging with local professionals, such as company formation agents or legal advisors, can significantly expedite the process by ensuring all documentation is prepared correctly and submitted on time.
Are there any restrictions on business sectors for non-residents in Indonesia?
Yes, there are restrictions on business sectors for non-residents in Indonesia, primarily dictated by the Negative Investment List (DNI). Certain sectors, such as mining, telecommunications, and transportation, may have limitations on foreign ownership or may require partnerships with local entities. Additionally, sectors considered sensitive to national interests might be fully closed to foreign investment. It is crucial to review the DNI before initiating the company formation process to ensure compliance with local regulations.
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This publication is provided for information purposes only. This info should not be treated as a substitute for a tax or legal consultation or legislation. You should not act on the basis of the information contained in this publication without having obtained individual advice from the professional expert.
BRIS GROUP does not assume responsibility for any damage resulting from decisions made by the reader on the basis of this publication.
About Indonesia
Capital: Jakarta
Region: Indonesia is a large archipelago of nearly 20,000 volcanic islands. The country in Southeast Asia and Oceania between the Indian and Pacific oceans. It consists of over 17,000 islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Guinea.
Language: Indonesian
Currency: Rupiah (Rp)
Time Zone: GMT+7
Dial Code: +62
Abbreviations: ID /IDN
Helping Your Company Thrive in Indonesia With us, starting and running a business in Indonesia will be easy and efficient!
- Full support of the company’s registration in Indonesia: from the preparation of documents to their submission.
- Remote registration: all processes are online, wherever you are.
- Secretary and Treasurer: we can take on these important roles.
- Nominal directors and shareholders: we will ensure the confidentiality of your information.
- Help in opening a bank account: we will simplify this complex process.
- Registration for taxes, VAT and EORI: ensure all requirements are met.
- Website development: we will create a professional online representation for your business.
- Logo creation: we will design a unique and memorable logo for your brand.
- Full administrative support of the company: we will take over routine tasks.
- Mailing address organization: we provide a reliable mailing address for your business.
- Organization of the virtual office: we will ensure the professional image of your company.
- Telephone answering service: we will answer calls on behalf of your company.
- Accounting, audit and reporting: ensure accurate and timely accounting.
- Preparing and filing a VAT declaration: let’s save you the trouble.
- Interaction with local authorities: take over communication with state institutions.
- Trademark registration: protect your brand.
- More Emphasis on Customer Input.
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