Company Registration in Indonesia
Indonesia is among the top nations for conducting any business. It shares its boundaries with various countries, making it a top choice for EXIM businesses. Indonesia fosters a conducive business environment and liberal tax structure, allowing entities to thrive solidly and seamlessly. If you are about to set up a venture in this part of the world, you must learn which regulations to fulfill. Read on to discover everything about company registration in Indonesia.
What Makes Indonesia a Potential Avenue for Businesses?
Indonesia has an immense potential business-wise. It offers a conducive environment for businesses and has a tax-friendly landscape for entrepreneurs. Let’s have a glance over some benefits:
- With a population of over 270 million, Indonesia fosters a massive and diverse consumer base- something that suits most entrepreneurs.
- Its location in Southeast Asia makes it a hotspot for trade and investment.
- Indonesia is naturally blessed with endless resources, making it appealing for entities needing raw materials.
- It adheres to business-friendly policies, encouraging overseas investment and entrepreneurship.
- Indonesia's diverse culture offers a unique market with varied consumer preferences.
Company Structures for Company Registration in Indonesia
- Foreign-Owned Company (PT PMA)
- Limited Liability Company (PT)
- Representative Office (KPPA)
- Representative office for trading (KP3A)
Unlike KPPA, the trading representative office has a more extensive scope of operation and extended rights. They can perform trading undertakings on behalf of their controlling entity.
- Branch Office
A foreign-owned company best fits overseas entrepreneurs as it ensures 100% foreign ownership. The essential capital and paid-up requirement for PT PMA is IDR 10 billion and IDR 2.5 billion, respectively.
A Limited Liability Company is arguably the most widely used legal structure. Known as Perseroan Terbatas in Indonesia, the PT company can be constituted as a large-scale or small-scale entity. The consent of the Capital Investment Coordinating Board is mandatory to form an LLC.
Representative Office is an easy-to-form legal structure- thanks to minimal compliances. It offers the ease of opening a legal office in a non-native country. However, ROs do not necessarily have the power to carry out main business chores. Instead, they can only engage in promotional activities, helping its parent entity to grow.
A branch office serves as an extended arm of the parent company without any legal identity. This means that its parent corporation shall cater to its losses and debts
Compliances for Company Registration In Indonesia
- Companies in Indonesia must have at least one director, one commissioner, and one director. Or you can team up with a certified service provider to fulfill such requirements.
- For localized entities, the presence of a local stakeholder is a must. This condition does not apply to foreign-owned companies. As such, the presence of a company secretary is not a legal compulsion in the status quo
- A PT company's minimum share capital requirement has been capped at IDR 500 million. The IDR 10 billion is the minimum threshold for large-scale businesses
- The proper documentation for the board meetings and financial audits is mandatory.
- Any changes in the management require the concerned authority’s approval.
- The foreign parent company can have a branch office for scaling its operation. The brand office must have a legal status.
Documents concerning Company registration in Indonesia
- Director’s identification card copy
- Passport copy
- Rental agreement copy or lease of the business office
- Consent letter from neighbor to operate in a residential area
- A reference letter from the landlord
- Property tax copy from the landlord
- Director’s image with a red background
- A photo reflecting the company name affixed on the premises’ entry
- A ratification letter issued by the Ministry of Law and Human Rights
Corporate taxes levied on the registered entities
A flat CIT @ 22% imposes on the overall taxable income. However, this rate can vary industry-wise.
- Public company discount
- Small company discount
Public companies that fulfill the underlying listing requirement of 40% and other norms have access to a 3% exemption.
Small enterprises reaping yearly revenue less than or equal to 50 billion rupiahs [IDR] can have a 50% tax discount, levied proportionally on taxable income on the part of overall revenue up to IDR 4.8 billion. Certain enterprises earn yearly revenue less than or equal to DR 4.8 billion tax at 0.5%.
Guide to Secure Company Registration in Indonesia
The following is the detailed guide that will help you secure company registration in Indonesia:
Stage 1: Pre-registration
The entity’s name must entail at least three different words since it is a mandatory requirement. You must contact the Directorate General of Legal Administration Affairs for name reservation. The Legal Entity Information System shall verify the proposed name against its database for authenticity.
The selection of similar or trademarked names is allowed. There is no language barrier in the context for the overseas applicant. However, this exception is not applied to the local applicant, meaning they must select the words fostering the local dialect. The selected name should not be offensive on religious or moral grounds.
Stage 2: Registration
- Amount of authorized capital issued capital, and paid-up capital
- Entity’s name and location
- Company’s objectives and operational undertakings
- Details concerning the capital
- Title, member details, appointment, and BOD’s discharge procedures
- Methods for organizing shareholder meetings
- Profit and dividends distribution method
- Period of incorporation of the company
- Number of shares and their classification
- Nominal value of share
Upon name approval, draft the articles of association under the notary’s supervision. The charter document must entail the following details?
Upon AOA drafting, get the consent of all the shareholders via signature. The Ministry of Law and Human Rights shall verify AoA for accuracy and then grant the deed of establishment, which means the incorporation has come into effect.
For an entity outside Jakarta, the company must secure the letter of domicile from the authority concerned. It basically reflects the following information:
- Name and DOB
- Gender and Religion
- Job
- Passport number
- Nationality
- Address
Stage 3: Secure taxpayer identification number
The taxpayer identification number will help secure other registrations, meet tax norms, and open a bank account. Here’s how you can apply for TIN.
- Visit the online portal of the Directorate General of Taxes and create an account via a verified email ID.
- Complete the account profile and proceed with account activation.
- Upload the required documents, such as a deed of establishment, member’s proof, owner’s photos, etc. There is an offline mode as well for document submission
- The tax office will verify the paperwork for accuracy.
- The grant of TIN shall come into effect after the successful inspection.
Note: There is an offline mode for submitting the tax registration application. Typical steps include visiting the tax service office, submitting the application form and the paperwork, securing a receipt, etc.
Stage 4: Secure business identification number
You can use the Online Single Submission (OSS) system to apply Business identification numbers (NIB), which entails 13 digits, ensuring identity for the business.
The NIB helps secure industry-specific approvals, operational registration, commercial licenses, etc. The NIB shall become inactive if the business fails to comply with regulations.
The NIB can act as a single-window document that legalizes the resident status, import activities, custom access, and participation in the Social Security for health.
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FAQs for Company Registration in Indonesia
Foreign-owned company (PT PMA), Limited Liability Company (PT), Representative Office (KPPA), Representative Office for trading (KP3A), or a Branch Office.
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