Company Registration in Indonesia- An Overview
Indonesia comprises of large number of small islands which form a part of one territory. This country is known for its heritage and diverse culture. It is located between the Indian Ocean and the Pacific Ocean. In Asia, it is the fourth largest economy. Also it has the fourth largest population in the world. Hence there are lot of opportunities offered for investors in Indonesia.
It has the largest domestic markets in Asia after China and India. Recently the government of Indonesia has developed the services sector. Hence different forms of services in Indonesia are thriving.
The GDP is constantly growing at a rapid pace. Currently the GDP of Indonesia is 6.1 %. This shows positive status for investors coming to Indonesia. Hence an investor should consider all the above reasons for company registration in Indonesia.
Cost of living in Indonesia is quite cheap, in terms of daily expenses, rent and utilities. Hence investors can easily set up a company in Indonesia. There are different double taxation treaties which Indonesia has with other countries which include India, China and Japan.
In terms of competitiveness, Indonesia is ranked 34th place in the world for being competitive. This would also include local manufacturing services and cheap labour which are available in Indonesia to carry out business.
Hence an investor should consider all the above benefits before going for Indonesia company registration.
Benefits of Company Registration in Indonesia
The following are the benefits of Company Registration in Indonesia:
- Diverse Culture
Indonesia has diverse heritage and culture. The country has different cultures due to migration of different ethnic groups. Hence an investor can easily carry out business in Indonesia.
It has the largest domestic markets in Asia after China and India. Recently the government of Indonesia has developed the services sector. Hence different forms of services in Indonesia are thriving. Currently the GDP of Indonesia is 6.1 % and is constantly rising. This shows positive status for investors coming to Indonesia. Hence an investor should consider all the above reasons for company registration in Indonesia.
- Special Economic Zones
There are several SEZ established in Indonesia. These SEZs provide different forms of benefits to investors such as tax incentives different forms of subsidies and manufacturing benefits. Tax exemptions would also be available such as exempt from VAT and reduction of corporate income tax.
- Cheap Labour
Indonesia is comparatively cheap in terms of labour costs, when compared to other Asian Countries. Hence labour can be recruited to carry out work. Apart from this, the labour force is diverse in Indonesia; which would offer multiple opportunities in Indonesia.
Eligible Business Structures for Company Registration in Indonesia
The following are the eligible business structures for Company Registration in Indonesia:
- Wholly Foreign Owned Entity
This form of business entity is also known as ‘Penanaman Modal Asing (PMA)’. This form of entity can be owned by a foreign shareholder. This would be for a period of first 15 years. After this period is complete, the company has to appoint a resident Indonesian. The resident Indonesian must be a 5% shareholder in the company. This type of business structure is beneficial for a foreign company to establish. For establishing this form of entity, one resident director must be appointed. Apart from this, two shareholders must be appointed. The minimum paid up capital for this type of entity is USD 300,000.
- Limited Liability Company (LLC)
This form of business entity is also known as ‘Perseroan Terbatas’. An LLC is the most commonly type of business that is used in Indonesia. An LLC can have a foreign shareholder. Before staring the business of an LLC, prior approval must be secured from the e Capital Investment Coordinating Board (BKPM).
- Branch Office
A branch office set up in Indonesia is a mere extension of the parent company. A branch office would carry out operations under the parent company. There is no separate limited liability for the branch office.
- Representative Office
A representative set up in Indonesia is a mere extension of the parent company. A representative office would carry out liaising work and non-project type of work. This will include work related to marketing services. However, any sales which generate profit cannot be carried out.
- Nominee Trading Company
Usually, this form of entity would purchase a property using foreign investment. The land which is acquired would be under the name of the nominee trading company. Through this form of entity, a company can overcome any restrictions related to foreign investment. To form this type of entity, there has to be two shareholders, two directors and minimum capital of 50 Million Rupiah is required. This type of entity requires to have a registered office address to operate.
- Joint Venture
An applicant going for company registration in Indonesia can choose the joint venture to carry out business in Indonesia. The government of Indonesia supports joint venture investment between a local Indonesian company and a foreign company. When a joint venture is established in Indonesia, then it would be formed as a PMA company. To form this type of entity, minimum of two shareholders and directors must be appointed.
- Public Limited Company
This form of company can offer shares to the public. Offering shares to the public can be carried out through an Initial Public Offering (IPO). If the paid up capital is equal to 3 Billion Rupiah and has more than 300 shareholders, then the company is known as a public limited company.
Minimum Eligibility Criteria for Company Registration in Indonesia
- Minimum Share Capital
Minimum share capital is required for registering a company in Indonesia. The share capital would be different for every company. For example the minimum share capital required for forming a PMA is USD 300,000. Like this, the minimum share capital which is required to form a Public Limited Company is 3 Billion Rupiah. The minimum capital required for an LLC in Indonesia is 50 Million Rupiah.
- Minimum Number of Shareholders
Again such requirements would be different based on the type of company. For example, for registering the PMA, one director and one shareholder must be required. However, for establishing other companies minimum of two shareholders are required.
- Registered Office
There is a requirement to have a physically registered office for company registration in Indonesia.
- Minimum Number of Directors
Again such requirements would be different based on the type of company. For example, for registering the PMA, one director must be required. However, for establishing other companies minimum of two directors are required.
- Residency Requirements
There are particular business structures where shareholders have to be a resident of Indonesia. However, there are particular entities where residency requirements are not mandatory.
Procedure for Company Registration in Indonesia
The following procedure has to be considered for company registration in Indonesia:
Foreign Limited Liability Company
The procedure followed below is for setting up Foreign Limited Liability Company under Company Registration in Indonesia.
- Name Reservation
First and foremost, the applicant for company registration in Indonesia has to reserve the name of the company. The name of the LLC must be reserved with the Ministry of Law and Human Rights (MOLHR). To suffice the name requirements, such name has to be in Indonesian. The requirements for name registration are set out in Government Regulation No. 43 of 2011 which is dated 4 October 2011.
- Approval related to the Articles of Association
The articles of association must be submitted to the MOLHR through electronic means. This can be carried out by the respective notary. Submitting the above must be carried out within 60 days. This must be 60 days from the time of execution of the deed of establishment which contains the articles of association.
- Approval of Company
The MOLHR will review the application online and provide approval if the company can be registered as an LLC within 14 days. This approval would act as formal evidence that the company is established.
- LLC domicile
Once the above step is carried out, the domicile of the company would be obtained from the respective Sub-District Office.
- Tax Registration Number
The taxpayer’s registration number Nomor Pokok Wajib Pajak (NPWP) would be secured from the respective tax authority.
- Securing Ministry of Trade Approval (MOT)
Once the MOLHR provides approval, then the company must be registered with the companies’ registry. This can be carried out at the respective MOT regional office, within three months of incorporating the business. After this, the application would be integrated through the Online Single Submission (OSS) system. With this a business registration number would be provided for company registration in Indonesia. The OSS would issue the Nomor Induk Berusaha or NIB which is the business registration number for the company.
After securing the above approvals, the Articles must be submitted to the State Printing Office to publish this registration in the State Gazette. This will be carried out by the notary. Such process would be carried out 14 days from approval.
Post Compliance requirements for Company Registration in Indonesia
Once a company is registered in Indonesia, there are respective post compliance requirements which have to be followed by the company:
- Shareholder Meetings
Annual General meetings have to be held within 6 months of the end of the financial year. This must be carried out by LLC. However, the company can also hold EGM as per the discretion.
- Board of Directors Meeting
LLC would not have to carry out Board Meetings until it is stated in the articles of association of the company. Public limited companies require to hold board meetings.
- Corporate Tax
A corporate tax of 25% is levied in Indonesia. The annual tax return has to be submitted to the official tax authority. This can be carried out through the MOLHR online system related to tax.
- Business Registration Compliances
LLC’s have to carry out initial registration in three months with the ministry of trade. After this the establishment would have to go for a renewal which is carried out after 5 years.
Documents for Company Registration in Indonesia
The following document are required for company registration in Indonesia:
- Deed of Appointment
- Articles of Association
- Memorandum of Association
- Notarised Company Documents
- Approval Regarding the name of the company
- Akta Notaris (Notarial Deed)
- Approval from ministry of Law and Human Rights
- Domicile Letter
- Copy of Valid Passports
- If shareholders and directors are foreign resident then copy of their passports
- Letter of Appointment (for directors and shareholders) from foreign parent company (This would be required for specific entities such as the branch office and representative office)
- Registration at the Chamber of Commerce of the foreign parent company
- Letter of intent (for starting a branch office and representative office).