Types of business in Indonesia - What are my options for investing?
In order to create a legal presence in Indonesia, you have two possibilities. It may be done in the form of a Limited Liability Company (PT PMA) or a Representative Office.
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Further, prior to setting up we also recommend studying the new Positive Investment List (PIL) to see which business sectors are unavailable or restricted for foreign ownership. The general principle under the positive investment list is that a business sector is open to 100 percent foreign investment unless it is subjected to a specific type of limitation. The regulation presents one of the greatest liberalizations in foreign ownership limitations in Indonesia since the negative investment list was first introduced in the 1980s.
Establishing a foreign investment company or PT PMA, is the preferred structure for companies looking to have a legal presence in the country. Foreign investors will need to have a minimum paid-up capital equivalent of 10 billion rupiah (US$696,000), up from the previous 2.5 billion rupiah (US$174,135), as the government aims to attract more high-value investments into the country.
Foreign companies can open a representative office in one of Indonesia's province capital cities. The operation, however, is restricted to supervising and coordinating. Representative offices are not permitted to conduct business directly with other companies or people. They can obtain a work permit and a visa for the expatriate manager.
[tips title="Important Tip"]Investors should assess their specific needs carefully before deciding which corporate structure to operate from. Using a reliable local advisor is recommended for first-time investors in the country, as they find it easier to remain compliant with applicable regulations.[/tips]
Key considerations when starting a business
Opening a bank account
Corporate bank accounts are essential for any company in Indonesia as it is part of the incorporation process. A company cannot share its corporate account with another company.
In Indonesia, there are various sorts of accounts that can be opened depending on the use but businesses will generally be required to open a corporate bank account. Read more about how to open a bank account in this section.
Deregistering a company
The company dissolution process in Indonesia can be voluntary or non-voluntary. The voluntary dissolution occurs when the owners or investors of the business choose to close the business, due to a variety of reasons from low cash flow to the mismanagement of business operations to excessive company liabilities.
According to the Article 142, paragraph 1 of the Company Law, liquidation of the company occurs if one of the following cases is met:
- Based on a resolution of the GMS (General Meeting of Shareholders) – In other words, voluntary winding-up
- Due to the expiry of the company, as prescribed in the articles of association.
- Based on a court order (because of any non-compliance with the law)
- Due to a revoked bankruptcy statement, etc.; or
- Due to the revocation of the company’s business permit, so that the company is obliged to conduct liquidation according to prevailing regulations.
The procdure for winding up of a RO is a much simpler process compared to a limited liability company. To learn about the process for deregistering a company in Indonesia, read this section.
How Can I Do Business Without Setting Up an Entity Indonesia?
Foreign investors in Indonesia need to set up an entity in order to conduct business. They can do this by establishing a foreign investment company (PT PMA) or a representative office (RO), although an RO cannot generate income.
Foreign investors who want to operate a PT PMA should understand that this can carry legal uncertainties as a PT PMA can only be owned by Indonesian citizens. Further, joint ventures or partnerships with domestic firms may also be a viable option for foreing investors.