Indonesia Company Formation

The main advantages of Indonesia jurisdiction include the following:

1. large population – according to this parameter, the republic is in fourth place in the world
2. G20 member – Indonesia became the only ASEAN country to join the G20
3. rapid GDP growth is an important indicator that indicates a stable economic situation
4. growing economy – every year economic development is ahead of the forecasts made by experts
5. expansion of the list of countries with which an agreement on the avoidance of double taxation has been concluded – now their number has exceeded 60
6. foreigners can participate in almost all segments – some of them allow 100% ownership of the company
7. Infonesia is a member of the WTO. This provides foreigners with reliability when building a business.

Corporate Legislation

The legislative system of Indonesia is based on European law, it is close to the Romano-Germanic legal family. But there are also norms that are dictated by Islamic traditions and adat. They operate in some areas and are especially pronounced in regional subjects. Such norms regulate mainly family relations and inheritance issues. Commercial activity is regulated by the Companies Act.

The main regulatory act is the Federal Law of the Republic of Indonesia No. 40 of 2007. In general, it should be noted that the Indonesian legislative system consists of more than 4,000 federal government decrees and more than 15,000 local government acts, some of which directly or indirectly regulate the activities of companies in certain areas and regions.

Types of companies in Indonesia:

PT (Perseroan Terbatas)

• Local company limited by shares.
• This type of company assumes 100% ownership by Indonesian citizens.
• The firm must be fully registered with a local entity. A foreigner cannot be its founder or even a director.
• There is one exception to this rule – if a foreigner has an Indonesian tax number, he can become one of the directors.
• Registration in this form is simple, the size of the authorized capital is small.
• Foreign investors will be interested in this form of company solely for the purpose of doing business in a segment closed to PT PMA.

PT PMA (Perseroan Terbatas Penanaman Modal Asing)

• A company limited by shares and attracting foreign capital.
• This type of company implies the possibility of direct participation of foreign citizens in the share capital of the company.
• A non-resident who wants to not just register a company, but wholly own it, should consider PMA. This form allows 100% participation of foreign persons. But it does not provide for the company’s entry into all economic spheres – there are restrictions for business in the direction of activity. Check the list of restricted business projects DNI (Negative Investment List) and find data about limitations to the business classification.
• The initial capital must be at least IDR 10 billion or the equivalent value in US dollar. A quarter of the authorized capital must always be in a bank account.
• PMA is ideal for large businesses, as it has the right to attract an unlimited number of foreign shareholders.
• To open, you will need one director, two shareholders and one commissioner.The main duty of the commissioner is to supervise the work of the directors of the company and to ensure that every activity is carried out in order and consistent with the goals of the company. All of them may be foreigners.
• Must rent or buy an office space and provide proof that it can function. In Indonesia, inspections of the offices of foreign companies are practiced for the actual conduct of business.
• At at least one director (FL), manager.

What documents are required to open a company:

• The company name must include 3 words.
• Not more than 5 Activities to be carried out.
• Directors/Shareholders structures.
• Registered address/ email address/ telephone number.

Permits and Licenses – specific for each selected industry.

To opening a business in Indonesia you first need to obtain a number of permits and licenses

which depend on company’s activities. Foreigners are required to obtain business licenses. Therefore, after registering the enterprise, they must apply for licensing. It is submitted to the agency that, by law, regulates the selected segment of activity. All activities in Indonesia are divided into separate licenses (KBLI) and divided into risk levels:

Low Risk – activities do not require additional permits. This segment includes trading companies, real estate companies, consulting firms and holding companies.

Medium Risk – activity involves the passage of additional licensing in the relevant department. This segment includes service companies.

High Risk – activity involves passing additional licensing in the relevant department and meeting the requirements for job creation, production volume, etc. This segment includes industrial companies, companies providing educational services and companies related to the IT field.

Reporting requirements

The reporting requirements for residents and legal entities founded by non-residents are identical. This requirement is mandatory whether the company has been in business or not. Each company must submit within the prescribed time limits:

1. Audit report

• The requirement to obtain an auditor’s report arises when one of the following conditions is met:
• The company manages the fund;
• The company issues debt securities;
• The company is controlled by the State of Indonesia;
• The company owns assets/turnover worth more than 50,000,000,000 IDR (3,280,000 USD)

2. Annual return
3. Report on all transactions carried out during the year
4. In addition to the annual report, all Indonesian companies are required to submit a monthly tax return reflecting the company’s profit for the past month and the calculation of income tax in relation to employees.
5. VAT

VAT After registering a company for VAT and obtaining a payer registration number, an Indonesian company is required to prepare and file a quarterly VAT tax return, and pay the resulting tax within 40 days from the date of the end of the reporting period.

Visa

In order to start a business activity in Indonesia, you will need a business visa.

1. 1. Single

is valid for 2 months and can be extended. The number of renewals cannot exceed 4 times, the general period of validity of the permit is set within six months.

1. 2. Multiple

Allows you to enter the country multiple times. Each period of stay is 2 months, it can be one-time extended for the same period. The general period of validity of such a visa is one year

For complete information and advice, you can contact BRIS GROUP team.