First Step to set up foreign company
Before planning to set up a foreign company in Indonesia, there are three important things, we should know which are :
Indonesian regulations clearly differentiate between local companies and foreign companies. There is a set of regulations that specifically made for foreign investors, which is meant to protect the local business. However, the government also provides an interesting incentive for foreign investors to encourage them in setting up a foreign company in Indonesia. Understanding the regulations will help you to get more benefit in the process of registering your company. The process itself consists of three stages: getting approval on the establishment of your company, having an identification number to operate, and getting the operational or commercial license.
Being a vast country with a wide area, Indonesia has so many different races and cultures. Each race has its own language and local custom that shape a unique market character. Regarding to this fact, understanding as many as Indonesian cultures is a good way to know understand the Indonesian market. Having a local partner is advisable to help you get deeper knowledge about the culture so that your company can operate as expected.
Having enough capital that met the requirements from the Indonesian government is a must. The Indonesia Investment Coordinating Board (BKPM) as the government agency in-charge, requires a foreign company to provide investment value at least IDR 10 Billion, 25% of it (or IDR 2.5 Billion at least) must be the paid-up capital. The paid-up capital can be presented in the form of cash or fixed assets apart from land and buildings.
Apart from understanding those three important things, you also need to avoid basic mistakes in setting up your company and make sure that your company will be running well. First, you need to make sure that you use the trusted consultant to register your company, suite to those 3 things above.
The legal foundation governing the investment business sector is as follows:
PERPRES No. 49 Tahun 2021 concerning Amendments to Presidential Regulation Number 10 of 2021 concerning Investment Business Fields
- PERPRES No. 44 Tahun 2016 concerning List of Business Fields That Are Closed and Business Fields That Are Open With Requirements in the Investment Sector
- PERPRES No. 76 Tahun 2007 concerning Criteria and Requirements for Compilation of Closed Business Fields and Open Business Fields with Conditions in the Investment Sector
10 steps to Setting Up A Foreign Company in Indonesia
The requirements for establishing a foreign company are as follows:
1. Incorporation Process: Submitting the necessary documents and application forms to the relevant government agency responsible for company registration.
2. Legal Entity: Determining the type of legal entity for the foreign company, such as a limited liability company (PT PMA) or a representative office.
3. Investment Plan: Presenting a detailed investment plan that outlines the company’s objectives, scope of activities, and financial projections.
4. Shareholder Composition: Specifying the shareholding structure of the company, including the percentage of ownership held by foreign and local shareholders.
5. Capital Requirement: Meeting the minimum capital requirement as set by the Indonesian Investment Coordinating Board (BKPM) or other relevant authorities.
6. Business Activities: Describing the intended business activities of the foreign company, ensuring they comply with the Indonesian classification of business fields (KBLI).
7. Licenses and Permits: Acquiring the necessary licenses and permits for the specific industry or sector in which the company will operate.
8. Tax Registration: Registering for taxation purposes and obtaining a Tax Identification Number (NPWP) from the Indonesian tax authorities.
9. Employment of Local Manpower: Complying with regulations regarding the employment of local workers and ensuring the fulfillment of labor requirements.
10. Compliance with Regulations: Adhering to all applicable laws, regulations, and requirements set by the Indonesian government for foreign companies.
It’s important to note that these requirements may vary depending on the specific circumstances and the type of industry in which the foreign company intends to operate.
10 Requirements To Setting Up A Foreign Company In Indonesia
The documents required for establishing a foreign limited liability company (Perseroan Terbatas Asing) in accordance with the Online Single Submission (OSS) Regulation on Business Licensing and Investment (RBA) are as follows:
1. Application Form: A completed application form for company establishment, provided by the OSS system.
2. Article of Association (AoA): A notarized copy of the company’s Articles of Association, which outlines the company’s structure, objectives, and governance.
3. Deed of Establishment: A notarized Deed of Establishment, which officially establishes the foreign limited liability company and includes details such as shareholders, capital, and management.
4. Proof of Capital: Documentation showing proof of the minimum required capital as determined by the relevant authorities.
5. Legalized Passport Copies: Copies of valid passports of all foreign shareholders and directors of the company, duly legalized or notarized.
6. Shareholders’ and Directors’ Resolution: Resolutions from the shareholders and directors approving the establishment of the foreign limited liability company.
7. Power of Attorney: If applicable, a Power of Attorney document authorizing a representative to act on behalf of the company during the establishment process.
8. Letter of Domicile: A letter of domicile from the landlord or property owner where the company’s registered office will be located.
9. Company Name Approval: Proof of company name approval from the Ministry of Law and Human Rights.
10. Other Required Licenses: Depending on the specific industry or sector, additional licenses, permits, or certifications may be required.
Please note that the specific requirements and procedures may be subject to change, so it is advisable to consult with relevant government agencies or legal professionals to ensure compliance with the current regulations.
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