Frequently Asked Questions: Companies/Corporate

In Indonesia, foreigners can establish several types of business entities, each with its own characteristics and requirements:

1. PT PMA (Perseroan Terbatas Penanaman Modal Asing)
   • This is the most common form for foreign investment
   • A limited liability company with foreign shareholders
   • Subject to the Negative Investment List (DNI) restrictions
   • Minimum capital requirements apply
2. Representative Office
   • Types include:
     • Foreign Company Representative Office (KPPA)
     • Foreign Trade Company Representative Office (KP3A)
     • Foreign Construction Services Representative Office (BUJKA)
   • Cannot engage in direct commercial activities or generate revenue in Indonesia
   • Useful for market research, liaison, and promotional activities
3. Branch Office
   • Only available in certain sectors (e.g., banking, oil and gas)
   • Directly controlled by the foreign parent company
   • Limited availability and subject to specific regulations
4. Foreign Investment Limited Partnership (CV PMA)
   • A partnership between foreign and local investors
   • Less common and more restricted than PT PMA
5. Foundation (Yayasan)
   • Non-profit organization
   • Can be established by foreigners for social, religious, or educational purposes
   • Cannot engage in commercial activities
6. Foreign Company Domicile (Badan Usaha Tetap - BUT)
   • A permanent establishment for tax purposes
   • Not a separate legal entity
   • Typically used for specific projects or contracts

When considering which entity to establish, foreigners should:

• Consult the latest Negative Investment List (DNI) to check sector restrictions
• Consider the nature and scope of their intended business activities
• Evaluate minimum capital requirements and investment plans
• Assess long-term business goals and expansion plans in Indonesia

It’s important to note that regulations and requirements can change, so it’s advisable to consult with a professional service provider like Okusi Associates for the most up-to-date information and guidance tailored to your specific business needs.

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A PMA (Penanaman Modal Asing) company is a foreign direct investment entity in Indonesia that allows foreign investors to own and operate a business in the country. Key points about PMA companies include:

• Legal structure for foreign investment in Indonesia
• Allows foreign ownership of businesses, subject to certain restrictions
• Regulated by the Indonesian Investment Coordinating Board (BKPM)
• Must comply with the Negative Investment List (DNI) which outlines sectors open or restricted to foreign investment
• Requires a minimum investment amount, typically around USD 700,000 (though this can vary)
• Offers benefits such as the ability to sponsor foreign work permits and conduct business activities across Indonesia
• Subject to specific tax regulations and reporting requirements for foreign-owned entities
• May require local shareholders in certain business sectors, as per the DNI
• Provides a formal structure for foreign investors to participate in Indonesia’s growing economy

Setting up a PMA company involves several steps, including investment approval, company registration, obtaining necessary licenses, and ensuring ongoing compliance with Indonesian regulations. It’s advisable to seek professional assistance when establishing and managing a PMA company to navigate the complex regulatory environment effectively.

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The minimum capital requirements for a PMA (Penanaman Modal Asing) company in Indonesia are as follows:

• Total Investment Value: The minimum total investment value for a PMA company is IDR 10 billion (approximately USD 670,000), excluding land and buildings.

• Issued and Paid-up Capital: The minimum issued and paid-up capital is IDR 2.5 billion (approximately USD 167,000).

• Foreign Ownership: If the company is 100% foreign-owned, the entire IDR 2.5 billion must be paid up.

• Joint Ventures: For joint ventures with Indonesian partners, the foreign portion of the IDR 2.5 billion must be paid up in proportion to the foreign ownership percentage.

• Exceptions: Some business sectors may have higher minimum capital requirements. It’s essential to check the specific regulations for your industry.

• Proof of Capital: The paid-up capital must be deposited in an Indonesian bank account under the company’s name and verified by a public accountant.

• Gradual Investment: The total investment of IDR 10 billion can be realized gradually over time, typically within 1-3 years, depending on the business plan submitted to BKPM (Investment Coordinating Board).

• Capital Increases: Companies can start with the minimum required capital and increase it later as needed.

It’s important to note that these requirements may be subject to change, and certain business sectors or special economic zones might have different capital requirements. Always consult with a qualified professional or the relevant Indonesian authorities for the most up-to-date information regarding your specific business case.

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The process for setting up a PMA company in Indonesia involves several key steps:

• Investment Permit: This involves document research, review, and preparation for investment approval.

• Company Incorporation:

  • Preparation of Articles of Incorporation
  • Drafting and notarization of the Deed of Establishment

• Obtaining Operating Licenses and Other Permits:

  • Domicile Certificate
  • Tax Number (NPWP)
  • Company Registration
  • Submission of all required documents and follow-ups

• Document Translations: English translations of all important company documents are provided.

• Bank Account Setup: Assistance in opening corporate bank accounts in Indonesia.

• Business Visa Sponsorship: Free Single Entry Business Visa sponsorships are provided while the company establishment is in progress.

• Additional Support and Advice: Guidance on staff recruitment, community relations, and government relations to help navigate the Indonesian business landscape.

Before initiating the process, it’s crucial to:

• Check the Negative Investment List (DNI) to ensure your business sector is open to foreign investment and to determine if local shareholders are required.
• Consider additional services if needed, such as:
  • Professional (“Nominee”) Shareholder Services if your sector requires Indonesian shareholding
  • Company Domicile Services in Jakarta, Bali, or Batam

After establishment, ongoing support is typically provided for:

• Regulatory compliance
• License renewals
• Accounting and tax services
• Human resources and payroll management
• Corporate secretarial services
• Business expansion support
• Immigration services (work permits and visas)

It’s important to note that the specific requirements and timeline can vary depending on the business sector and location. Working with experienced professionals can help ensure a smooth and efficient process.

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The timeline for establishing a PMA (Penanaman Modal Asing) company in Indonesia can vary depending on several factors, but generally, it takes about 2-3 months from start to finish. Here’s a breakdown of the process:

• Pre-application preparation: 1-2 weeks
  • Gathering required documents
  • Checking the Negative Investment List (DNI)
  • Preparing the investment plan
• BKPM application and approval: 3-4 weeks
  • Submitting the investment application to the Indonesian Investment Coordination Board (BKPM)
  • Waiting for approval
• Company registration: 2-3 weeks
  • Registering with the Ministry of Law and Human Rights
  • Obtaining a Domicile Certificate
  • Acquiring Tax Identification Number (NPWP) and Business Identification Number (NIB)
• Obtaining licenses and permits: 2-4 weeks
  • Applying for and receiving necessary business licenses
  • This timeline can vary depending on the specific industry and local regulations
• Bank account setup: 1-2 weeks
  • Opening a corporate bank account

Factors that can affect the timeline include:

• Completeness and accuracy of submitted documents
• Complexity of the business structure
• Responsiveness of government agencies
• Any additional requirements specific to your industry

It’s important to note that working with experienced professionals, such as Okusi Associates, can help streamline the process and potentially reduce delays. They can guide you through each step, ensure compliance with current regulations, and handle much of the paperwork and communication with government agencies on your behalf.

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Yes, there are restrictions on foreign ownership in certain business sectors in Indonesia. These restrictions are outlined in the Negative Investment List (DNI), which is a key regulation that foreign investors must consider when establishing a PMA company. Here are the main points to understand:

• The DNI categorizes business sectors into three main groups:

  • Open sectors: Fully open to foreign investment
  • Restricted sectors: Open to foreign investment with certain conditions or limitations
  • Closed sectors: Not open to foreign investment

• Restricted sectors may have limitations such as:

  • Maximum percentage of foreign ownership allowed
  • Requirements for partnerships with local companies
  • Specific location restrictions
  • Special licensing requirements

• Some examples of restrictions include:

  • Certain retail trade sectors: Limited to 67% foreign ownership
  • Construction services: Various ownership limits depending on the specific service
  • Tourism-related businesses: Some subsectors have ownership limits

• The DNI is periodically updated by the Indonesian government, so it’s crucial to check the most recent version when planning your investment

• Even in open sectors, there may be additional regulations or requirements that affect foreign investors

• Some sectors considered strategic or vital to national interests may have more stringent restrictions or be completely closed to foreign investment

• It’s highly recommended to consult with legal experts or investment advisors familiar with the current DNI and related regulations before proceeding with your investment plans

• The full DNI list and detailed explanations can be found on the BKPM (Indonesian Investment Coordinating Board) website or through authorized investment consultants

Always verify the current status of your intended business sector in the DNI before proceeding with PMA company establishment to ensure compliance with Indonesian foreign investment regulations.

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The Negative Investment List (DNI) is a crucial regulation in Indonesia that affects foreign investment in the following ways:

• Definition: The DNI is a list of business sectors that are either closed or have restrictions for foreign investment in Indonesia.

• Purpose: It aims to regulate and control foreign investment to protect certain sectors of the Indonesian economy and promote local business development.

• Impact on foreign investors:

  • Determines which business sectors are open, partially open, or closed to foreign investment
  • Specifies maximum foreign ownership percentages for partially open sectors
  • May require partnerships with local Indonesian companies in some sectors

• Key considerations:

  • The list is periodically updated by the Indonesian government
  • Some sectors may require a minimum investment amount for foreign participation
  • Certain sectors may have additional licensing or operational requirements

• Examples of restrictions:

  • Some sectors may be completely closed to foreign investment
  • Others may allow only partial foreign ownership (e.g., 49% or 67%)
  • Some businesses may require local partners or shareholders

• Importance for PMA companies:

  • Foreign investors must consult the DNI before planning their investment in Indonesia
  • It helps determine the feasibility and structure of a proposed PMA company
  • Compliance with DNI regulations is essential for obtaining necessary permits and licenses

• Seeking professional advice:

  • Due to the complexity and frequent updates of the DNI, it’s advisable to consult with experts like Okusi Associates for the most current information and guidance on how the DNI affects specific investment plans.

By understanding and adhering to the DNI, foreign investors can ensure their PMA company plans align with Indonesian regulations and avoid potential legal issues or investment restrictions.

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PMA companies in Indonesia have several tax obligations to fulfill:

Corporate Income Tax (CIT) * Standard rate of 22% on taxable income * Reduced to 20% for public companies with at least 40% of shares traded on the stock exchange * Progressive rates apply for small and medium enterprises

Value Added Tax (VAT) * Standard rate of 11% on taxable goods and services * Certain goods and services may be exempt or subject to different rates

Withholding Taxes * On various payments such as dividends, interest, royalties, and service fees * Rates vary depending on the type of payment and recipient’s tax residency status

Employee Income Tax * PMA companies must withhold and remit income tax for their employees * Progressive rates apply based on the employee’s income level

Annual Tax Return * Must be filed within 4 months after the end of the fiscal year * Extensions may be granted upon request

Monthly Tax Obligations * Regular filing and payment of various taxes (e.g., VAT, withholding taxes) * Due dates vary depending on the specific tax

Transfer Pricing Documentation * Required for transactions with related parties * Must be prepared annually and submitted with the annual tax return

Compliance Requirements * Maintain proper accounting records in Indonesian language * Bookkeeping must be done in Indonesian Rupiah * Financial statements must be prepared in accordance with Indonesian Financial Accounting Standards (PSAK)

Tax Audits * PMA companies may be subject to tax audits by the Indonesian tax authorities * Proper documentation and compliance are crucial to avoid penalties

It’s important to note that tax regulations in Indonesia can be complex and subject to change. PMA companies are strongly advised to seek professional tax advice to ensure full compliance with all tax obligations and to optimize their tax position within the legal framework.

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PMA companies in Indonesia have several ongoing compliance requirements to maintain their legal status and good standing. These include:

Annual Reporting and Filings * Investment Activity Report (LKPM) to be submitted to BKPM every 6 months * Annual tax returns for corporate income tax, employee income tax, and VAT (if applicable) * Annual financial statements to be submitted to the tax office * Annual report to the Ministry of Law and Human Rights

Tax Compliance * Monthly tax payments and reporting for employee income tax and VAT (if applicable) * Quarterly installments of corporate income tax * Withholding tax obligations on various transactions

Employment Regulations * Compliance with Indonesian labor laws, including minimum wage requirements * Regular reporting to the Ministry of Manpower * Work permit (KITAS) renewals for foreign employees

Business Licenses * Renewal of business licenses as required (varies by industry) * Maintaining valid Company Domicile Certificate

Corporate Governance * Holding annual general meetings of shareholders * Maintaining proper company records and minutes of meetings * Updating company information with relevant authorities when changes occur

Foreign Investment Regulations * Adherence to foreign ownership restrictions as per the Negative Investment List (DNI) * Compliance with minimum capital requirements for PMA companies

Industry-Specific Regulations * Compliance with sector-specific regulations and reporting requirements

Bookkeeping and Accounting * Maintaining proper accounting records in accordance with Indonesian accounting standards * Preparing financial statements in Indonesian language and Rupiah currency

To ensure full compliance, many PMA companies engage professional services firms like Okusi Associates for ongoing support in areas such as:

• Accountancy and taxation services
• Corporate secretarial services
• Regulatory compliance monitoring and reporting
• Work permit and visa management for foreign employees

Staying compliant with these requirements is crucial for PMA companies to operate legally and avoid penalties or operational disruptions in Indonesia.

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Yes, foreigners can serve as directors or commissioners in Indonesian companies, including PMA (foreign-owned) companies. However, there are some important considerations:

Directors: * Foreigners can be appointed as directors in Indonesian companies. * At least one director must be an Indonesian resident (not necessarily an Indonesian citizen). * Foreign directors require a valid work permit (KITAS) and stay permit to reside and work in Indonesia.

Commissioners: * Foreigners can also serve as commissioners in Indonesian companies. * There is no residency requirement for commissioners. * If a foreign commissioner performs active duties in Indonesia, they will need a work permit.

Key points to note: * The composition of the board of directors and commissioners must comply with the company’s Articles of Association. * Some business sectors may have specific requirements or restrictions on foreign directors or commissioners. * The appointment of directors and commissioners must be approved by shareholders and properly documented. * Foreign directors and commissioners must have a tax identification number (NPWP) in Indonesia.

Work permit considerations: * Foreign directors working in Indonesia need to obtain: * Limited Stay Visa (VITAS) * Limited Stay Permit (KITAS) * Work Permit (IMTA) * The company must sponsor these permits for the foreign director.

Tax implications: * Foreign directors and commissioners may have tax obligations in both Indonesia and their home country. * It’s advisable to consult with a tax professional to understand the specific tax implications.

Professional support: * Due to the complexities of Indonesian corporate law and regulations, it’s recommended to seek professional assistance when appointing foreign directors or commissioners. * Okusi Associates can provide guidance on compliance requirements and assist with the necessary documentation and permit applications.

Remember to always check the latest regulations, as requirements may change over time.

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Foreign companies operating in Indonesia must adhere to specific regulations when hiring foreign workers. Here are the key points regarding employment regulations for foreign workers:

Work Permit Requirements

• Foreign workers must obtain a work permit (IMTA - Izin Mempekerjakan Tenaga Kerja Asing) before starting employment.
• The company must first obtain approval for its Foreign Manpower Utilization Plan (RPTKA) from the Ministry of Manpower.
• After RPTKA approval, the company can apply for individual work permits for each foreign employee.

Position Restrictions

• Foreign workers can only be employed in positions that cannot be filled by Indonesian nationals.
• Certain positions, particularly in Human Resources, are restricted and cannot be held by foreigners.
• The company must demonstrate efforts to transfer knowledge and skills to Indonesian staff.

Ratio Requirements

• For every foreign worker employed, the company must employ at least 10 Indonesian workers.
• This ratio may vary depending on the specific industry and position.

Time Limitations

• Work permits are typically issued for a maximum of 12 months and can be extended.
• Some positions may have restrictions on the total duration a foreign worker can hold them.

Compensation and Benefits

• Foreign workers must be paid in Indonesian Rupiah (IDR).
• Salaries must meet or exceed the minimum wage requirements for the region.
• Companies must enroll foreign workers in the national social security program (BPJS).

Language Requirements

• Foreign workers are expected to have a basic understanding of Bahasa Indonesia.
• Companies may be required to provide language training for foreign employees.

Reporting Obligations

• Companies must submit regular reports on their foreign workers to the Ministry of Manpower.
• Any changes in employment status must be reported promptly.

Penalties for Non-Compliance

• Failure to comply with foreign worker regulations can result in fines, business license revocation, or legal action against the company and the foreign worker.

It’s important to note that regulations can change, and specific requirements may vary based on the industry and location. Companies should consult with legal experts or professional services firms like Okusi Associates to ensure full compliance with current Indonesian employment laws for foreign workers.

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Yes, specific licenses and permits are often required for certain business activities in Indonesia. The requirements can vary depending on the nature of the business. Here are some key points to consider:

• Basic Licenses: All companies, regardless of their business activity, need to obtain:

  • Domicile Certificate
  • Tax Identification Number (NPWP)
  • Company Registration (TDP)

• Sector-Specific Licenses: Depending on the industry, additional licenses may be required:

  • Trading companies may need an import license
  • Manufacturing companies often require industrial business licenses
  • Construction companies need construction services business licenses
  • Hotels and restaurants require tourism business licenses
  • Financial services companies need approval from the Financial Services Authority (OJK)

• Environmental Permits: Businesses that may have an environmental impact often need to obtain environmental permits or conduct environmental impact assessments (AMDAL).

• Location-Based Permits: Some regions or special economic zones may have additional licensing requirements.

• Professional Licenses: Certain professions (e.g., lawyers, doctors, architects) may need individual professional licenses in addition to company licenses.

• Online Business Permits: E-commerce businesses may require specific permits related to online transactions and data protection.

• Foreign Investment Considerations: PMA companies may face additional licensing requirements or restrictions based on the Negative Investment List (DNI).

It’s important to note that licensing requirements can change, and it’s advisable to consult with a professional service provider or relevant government agencies to ensure compliance with the most up-to-date regulations for your specific business activity.

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The costs associated with setting up and maintaining a PMA company in Indonesia include:

Initial Setup Costs: * IDR 30,525,000 for the complete PMA company setup package, which covers: * Investment Permit * Company Incorporation * Operating Licenses and Other Permits * English Translations of Important Documents * Bank Account Assistance * Free Single Entry Business Visa Sponsorships

Additional Costs: * Professional Shareholder Services (if required): IDR 14,430,000/year * Company Domicile Services: * Available in Jakarta, Bali, and Batam * Starting from IDR 12,000,000/year * Accounting and Tax Reporting: * VAT companies: IDR 35,500,000/year * Non-VAT companies: IDR 27,500,000/year * Work Permits and Visas: * Complete package (KITAS, MERP, IMTA): IDR 10,750,000/year

Ongoing Maintenance: * Costs for maintaining regulatory compliance * Expenses related to accounting and tax services * Human resources and payroll management fees * Corporate secretarial services charges

It’s important to note that these costs may vary depending on the specific needs of your company and any changes in regulations. For the most up-to-date and detailed pricing information, it’s recommended to consult the Okusi Associates price list and website directly.

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Okusi Associates can provide comprehensive assistance in setting up a PMA (Penanaman Modal Asing) company in Indonesia through the following services:

• Investment Planning: Checking the Negative Investment List (DNI) to ensure your business sector is open to foreign investment and advising on any ownership restrictions.

• Document Preparation: Assisting with the preparation of required documents such as Articles of Incorporation, Deed of Establishment, and Investment Plan.

• Application Submission: Helping submit the investment application to the Indonesian Investment Coordination Board (BKPM).

• License and Permit Acquisition: Guiding you through obtaining necessary licenses and permits, including:

  • Investment Permit
  • Company Registration (TDP)
  • Tax Identification Number (NPWP)
  • Business Identification Number (NIB)

• Bank Account Setup: Assisting with opening a corporate bank account in Indonesia.

• Social Security Registration: Helping register your company and employees for BPJS (social security and health insurance).

• Ongoing Compliance Support: Providing services for:

  • Accounting and Tax Reporting
  • Payroll Management
  • Corporate Secretarial Services

• Work Permits and Visas: Assisting with obtaining KITAS, MERP, and IMTA for foreign employees.

• Professional Shareholder Services: Offering nominee shareholder services if required.

• Company Domicile Services: Providing virtual office services for company registration purposes.

• Post-Establishment Support: Offering ongoing assistance with:

  • Legal and regulatory compliance
  • License renewals
  • HR consultancy
  • Business expansion strategies
  • Product registration
  • Intellectual property protection

By leveraging Okusi Associates’ expertise, you can navigate the complex process of establishing and operating a PMA company in Indonesia more efficiently, ensuring compliance with local regulations and optimizing your business operations.

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Setting up a business in Indonesia offers several benefits for foreign investors:

• Large and Growing Market: Indonesia is the largest economy in Southeast Asia with a population of over 270 million, providing access to a vast consumer base.

• Strategic Location: Positioned at the crossroads of the Pacific and Indian Oceans, Indonesia offers excellent access to other Asian markets.

• Rich Natural Resources: The country is abundant in natural resources, including oil, gas, minerals, and agricultural products.

• Young Workforce: Indonesia has a large, young, and increasingly skilled workforce, providing a valuable talent pool for businesses.

• Improving Infrastructure: Ongoing infrastructure development is enhancing connectivity and logistics across the archipelago.

• Economic Stability: Indonesia has maintained relatively stable economic growth over the past decades.

• Government Incentives: The government offers various incentives for foreign investors, including tax holidays and allowances in certain sectors.

• Digital Economy Growth: Rapid adoption of digital technologies is creating new business opportunities, especially in e-commerce and fintech.

• Tourism Potential: Indonesia’s diverse culture and natural beauty make it a prime destination for tourism-related businesses.

• ASEAN Membership: As part of ASEAN, Indonesia provides access to a broader regional market through various free trade agreements.

• Improving Ease of Doing Business: Recent reforms have aimed at simplifying business processes and reducing bureaucracy.

• Cultural Diversity: The country’s cultural richness can be leveraged for various business opportunities, from creative industries to niche markets.

Before proceeding with any investment plans, it’s crucial to consult the Negative Investment List (DNI) to ensure your intended business activity is open to foreign investment and to understand any applicable restrictions or local partnership requirements.

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