Starting A Business in Indonesia (Foreign-Owned Setup): FAQ 2023 

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Starting A Business in Indonesia (Foreign-Owned Setup): FAQ 2023

In this blog post you will read about on how you can start a business in Indonesia & frequently asked questions regarding it:

– What kinds of juridical entities exist in Indonesia?

– How long does it take to start a business in Indonesia?

– How to obtain a Domicile Letter?

-What are the capital requirements for starting a foreign-owned business in Indonesia?

All these questions will be answered in this blog post, for you to start your new journey in Indonesia. Are you are planning to start a foreign-owned business in Indonesia, it is important for you to familiarize yourself with Indonesia’s Ease of Doing Business (EoDB) ranking. The World Bank ranks Indonesia at 73, with a 1.4% score improvement. In the year 2022, Indonesia was also re-classified as a middle-income country due to its consistent economic growth before the COVID-19 crisis. The Indonesian government is actively digitalizing its ecosystem; it is still essential for new business owners to have a solid understanding of the regulations governing the process of setting up a business in Indonesia. To help you get started on the right track, we have put together a frequently asked questions on how to start a business in Indonesia to guide you through the process.

How to Start a Business in Indonesia: FAQ

1. What kinds of juridical entities exist in Indonesia?

In Indonesia, there are three main categories of legal company enterprises. Locally, a foreign-owned limited liability corporation is known as a PT PMA (Perseroan Terbatas Penanaman Modal Asing). A PT is the local term for a limited liability corporation that is owned locally (Perseroan Terbatas). Depending on the nature of your company, foreigners opening a branch or representative office in Indonesia (RO). Generally, the following licenses/documents are required for the establishment of a PT PMA in Indonesia:

ESTIMATED TIME (DAYS)

principle license and Business from BKPM.

Deed of Establishing(containing the articles of asssociation)

Legalization of the legal entry status of the PT PMA by the ministry of law and human rights

Domesticize letter from the local district authority

Tax identification Number and taxable entrepreneur confirmation(PXP) from the tax office.

Company registration certificate(TDP) from the agency for integrated licensing services.

Manpower report and company welfare report from the sub department of the ministry of manpower

7

1 to 2

10

3

3

14

7

2. What types of companies limit foreign ownership in Indonesia?

The current document and rule that newly established business owners must consult is the Indonesian Positive Investment List (formerly known as the Indonesian Negative Investment List, or DNI). The entity categories (e.g., PT, PT PMA, RO), business sectors, and business lines (locally referred to as KBLI) with respect to which there is foreign ownership are described in Indonesia’s Positive Investment List. It is a thorough text that lists thousands of KBLIs, each of which has a unique set of rules.

So, it’s critical to initially comprehend which KBLI your company comes under.

3. What types of companies limit foreign ownership in Indonesia?

Establishing a business in Indonesia can take anywhere between 1 and 3 months, depending on how soon entrepreneurs can give their market-entry advisers the necessary company paperwork, deeds, and reports. At the time their paperwork is filed to the Indonesian authorities, businesses who have their complete set of documents ready can begin functioning in less than 30 working days.

How Can JCSS Indonesia Help

JCSS Global is a multi-regional experienced professional firm led by an experienced team of professionals, aims at providing creativity. practical issue-based solutions. JCSS has been rendering advice to over 450 clients spread across a broad spectrum of industries ranging from Infrastructure to Manufacturing, Construction to Information Technology. Our portfolio of clients ranges from starting companies in India, Indonesia, Japan & Singapore.

4. How to obtain a Domicile Letter?

JCSS Global is a multi-regional experienced professional firm led by an experienced team of professionals, aims at providing creativity. practical issue-based solutions. JCSS has been rendering advice to over 450 clients spread across a broad spectrum of industries ranging from Infrastructure to Manufacturing, Construction to Information Technology. Our portfolio of clients ranges from starting companies in India, Indonesia, Japan & Singapore.

Legal evidence that you have registered your company’s office location or address is a Domicile Letter, also known locally as a Surat Keterangan Domisili. Legally speaking, any foreign-owned company must have an office while being incorporated. An office leasing agreement is all that is needed to receive a domicile letter. Both Kecamatan, the subdivision of the city or region, and Kelurahan, the administrative village, issue Domicile Letters. It is important to remember that a residential address cannot be used as a business address. To make things as easy as possible, you should write a Surat Permohonan (see here if you don’t know how). You should also include all the information that will be contained in the Surat Domisili. For your reference we have given a sample how it looks below:

Nama : (name)

Tempat / Tgl. Lahir : (place and date of birth)

Jenis Kelamin : (gender)

Agama : (religion)

Pekerjaan : (job)

Kebangsaan : (nationality)

Paspor : (passport number)

Alamat : (address)

The Kepala RT will refer to this while typing out his letter of introduction. This takes a few minutes you can wait for a while until this is being done.

For entrepreneurs wishing to launch a small firm, a virtual or serviced office offers a complete option for acquiring your domicile letter as well as a place for compact teams to work effectively.

5. What are the capital requirements for starting a foreign-owned business in Indonesia?

Business owners must put down a minimum of IDR 10 billion (about USD 680,000+) as paid-up capital to establish a PT PMA in Indonesia. This paid-up capital, which excludes assets like as land and buildings, is necessary at the time of the company’s establishment. There are no specifics on the penalties that would apply should a firm fail to comply with this rule, which was approved in June 2021.

Micro, Small, and Medium-Sized Businesses (MSMEs) make up the majority of the economy of Indonesia, which contributes 50% of the region’s GDP and has the most MSMEs (58 million or so) overall. It is frequently seen as the foundation of Indonesia’s economy and depends on the sector’s success.

6. What activities are allowed for a Representative Office?

A Branch or Representative Office in Indonesia is commonly used for but not limited to, market research of investment opportunities, building early-stage market presence, building vendor relations, branding, and promotions, research, and development. A Rep Office is also suitable for companies who are looking to set up a back or support office (e.g.: call centers or design houses).

From the examples listed above, the common thread that lies between them is, these business activities do not generate revenue for the business – this remains the key characteristic of a Rep Office. To provide a clearer idea, here are some activities a Representative Office in Indonesia cannot carry out.

-Engagement in any trading (including export and import), and commercial activities that can generate profits

-Entering a business contract on behalf of the parent company or providing a service for a fee

-Participation in the management or operation of any of its branches, subsidiaries, or affiliates in Indonesia

-Issuance of invoices and receipt

7. Can a foreigner start a PT local company?

The answer to your question lies in Indonesia’s Positive Investment List (previously referred to as Indonesia’s Negative Investment List – DNI).

8. Can a foreign-owned company hire a foreigner?

Yes, a foreign-owned company can employ foreigners and sponsor their work permits (locally referred to as a Work KITAS). However, it is important to note, some sectors do not permit foreign employment. Here are

-Supply Chain Management (including procurement and logistics)

-Human Resource

-Legal & Compliance

-Quality Control and Inspection

-Health, Safety, and Environment

-HR is often the main obstacle for newly set up companies, find out how we can help recruit, select, and draft employment contracts with our HR consulting capabilities.

9. What is the exact process of starting a foreign business in Indonesia?

The following are the essential stages to starting a business in Indonesia.

For PT PMA, a foreign corporation, to be established in Indonesia, the following paperwork must be filed to BKPM:

-Both a business license and a principal license

-Residence letter

-Establishment Act

-Getting a business registration number approved (NIB)

-Identification number for taxes (NPWP)

-Confirmation of the taxable entrepreneur (PKP)

-Reports on employee well-being and manpower

-Evidence of the capital requirement’s deposit (IDR 10 billion)

A President Commissioner and a President Director are the minimum number of shareholders needed to formally incorporate a PT PMA. There must be at least one foreign person or foreign company among the stockholders.

10. What is OSS (Online Single Submission) System in Indonesia?

OSS is a new license application managed by BKPM, Indonesia’s Investment Coordinating Board. It is an online platform created to make conducting business in Indonesia easier by consolidating all company-related information into one place. This makes it easier for business participants to quickly get the licenses necessary for their firm and industry. Moreover, the General Law Administration System, the Indonesia National Single Window (INSW), and the Information System of Population Administration all use it as a major hub for communication.

Also read: https://jcss.co.id/top-10-challenges-of-doing-business-in-indonesia/

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