The process of limited company registration in Indonesia is not hard and complicated but easier. Indonesia is located in South East Asia and consists of around 17,000 islands. Its capital city of Jakarta is situated on the largest island of Java. It is home to about 260 million (2017).
Although it is currently one of the fastest growing economies in South East Asia, it was previously not very popular for business investments. This was due to the fact that it was infamous for high levels of corruption. With the changes in the government, the current administration has done a lot to bring in more foreign investments into the country.
The current government has become more lenient towards foreign investments and has come up with some initiatives to spur growth. Some of these are improving the process of registering a company and opened up more sectors to foreigners in the Negative Investment List. Let discuss company registration in Indonesia and types of companies as law of Indonesia:
Types of foreign companies in Indonesia
- Limited liability company with foreign ownership or locally known as Perseroan Terbatas Penanaman Modal Asing (PT PMA) –
This is the most common type of foreign company that is incorporated in Indonesia. Under Indonesian law, even if a foreigner holds a 1% share in a company, it is still considered a foreign company. The approval from the Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal – BKPM) must be obtained before starting business.
Some of the features of a PT PMA are –
- a) as required by BKPM the minimum authorized share capital must be IDR 10 billion of which 25% must be paid up as share capital
- b) must be set up with at least 1 director and 2 shareholders and 1 commissioner who is the person in charge of running the company.
- c) there is no restrictions as to the area where the joint venture company can operate except that it’s not allowed to do business in certain industries which is the Negative Investment List
- Representative Office (Kantor Perwakilan Perusahaan Asing – KPPA) –
There a 2 types of representative office namely the Trade Representative Office and the Construction Representative Office.
- a) Trade Representative Office – If a foreign company wishes to have a market presence in Indonesia, they can also incorporate a representative office. However this type of business entity is only allowed to
- i) conduct market research and promotional activities only
- ii) gather information for the parent company
This type of company is under the Ministry of Trade.
- b) Construction Representative Office – As its name implies, this type of company is established to enter into a joint venture arrangement with an Indonesian party for construction project or consultancy works. This type of entity is under the purview of the Ministry of Public Works.
- Branch office – The Indonesian law doesn’t allow the operation of a branch office.
Company registration process in Indonesia
The following steps of company registration process in Indonesia are uphold-ed for attention:
- Obtain approval for a company name – This process is done at the Notary Public. The person can perform this function online through a computerized system with the Ministry of Law and Human Rights (MLHR). The MLHR will approve or reject the name. Cost for this is IDR 200,000 and takes 1 day.
- Notarize company documents – The Notary Public will notarize all the relevant company documents and this process takes less than 1 day.
- Legalization of the company documents – The MLHR will legalize the company documents and thereafter will publish the details of established company in the Supplement State Gazette within 14 days.
- Apply for the certificate of company domicile – This can be obtained from the municipality where the company is located or the building management where the office of the company is located. This will be used for tax registration. This process takes about 2 days.
- Apply for a permanent business trading licence (Surat Izin Usaha Perniagaan – SIUP) and the certificate of company registration from the Ministry of Trade. This process will take 7 days.
- Register with the Ministry of Manpower – A manpower report must be submitted to this ministry within 30 days together with the required documents.
- Apply for Worker Social Security Program –This is a program mainly for the employees of the company to take careof their occupational accident security, old age security, pension security and death security. This is done at the Badan Penyelenggara Jaminan Sosial (BPJS) Ketenagakerjaan office.
- Apply for healthcare insurance – This is also for the welfare of the employees and is done at the BPJS Kesehatan office.
- Obtain a tax registration number and VAT Collector number from the tax office.
How to register a Representative Office
- Prepare the following documents –
- a) Letter of Appointment from the foreign parent company
- b) Articles of Association of the parent company in English
- c) Copy of registration at a Chamber of Commerce of the parent company
- d) Power of Attorney to sign the application
- e) Copy of a valid passport (of the foreign national) or national identity card of a local Indonesian who will be the Representative Office Head
- f) Letter of Intent or Letter of Statement to confirm that the person who takes the position of Representative Office Executive will only work in that position and nothing else
All the above documents must be notarized by a Notary Public and the Indonesian embassy in the country of the parent company as lawful process of company registration in Indonesia.
- Obtain the approval from BKPM which will take approximately 10 days.
- Obtain a Letter of Domicile of the Representative Office
- Get a Power of Attorney to sign the application if they are represented by a third party.
- Obtain a tax identification number from the tax office.
The licence for a Representative Office is normally only for 3 years but can be extended for another year up to a maximum of 5 years. After this, the licence can’t be extended any further. The Representative Office then must either incorporate a PT PMA or proof to the government authority that there is a change in the business activity.