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V. Doing business in Indonesia 2022

An Introduction to Doing Business in Indonesia 2022 covers the following: A. Corporate establishment; B. Human resources and payroll; C. Tax and accounting; D. Audit and compliance.

Topic Feature

A. CORPORATE ESTABLISHMENT Requirement and Process of company registration based on Type of Legal Entities: • Local Company, Foreign Direct Investment Company known as a Limited Liability Company, and Representative Office.

1. LOCAL COMPANY (PT) A foreigner can start doing business in Indonesia as a local citizen or a foreign investor under a local nominee arrangement as this kind of company allows only 100% local ownership. On the contrary to other legal entities, a local company is not a subject to such strict requirements and limits. Local Company (PT) is the most common legal entity in Indonesia Even though a local company is intended for Indonesian citizens only, there are some circumstances under which a foreign investor can incorporate a local company in Indonesia as well.

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Registration Process of a Local PT Step 1 Company Name Application Submit your company name to the Ministery of Law & Human Rights Step 2 Article of Association Preparation This requires presence of notary Step 3 Deed of Establishment Approval Approved by The Ministery of Law & Human Rights Step 4 Certificate of Domicile Acquisition Obtained form local government to show business location Step 5 Tax Payer Registration Number (NPWP) Application to secure other licenses, banking activities, and fulfilling tax obligations Step 6 Application of NIB Alongside NIB, Business Licenses and Location Permit will also be granted one day following the registration via OSS

Benefits of a Local Company in Indonesia for Foreigners Even though there are other legal entities particularly designed for foreigners — a limited liability foreign-owned company and representative office — starting a local company might bring more benefits to some foreign entrepreneurs.

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A. CORPORATE ESTABLISHMENT

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Continue on page 9... a. Not Restricted from Some Business Fields

The Negative Investment List is a document that regulates foreign ownership of businesses based on business sectors they operate in. Thus, some business activities are fully closed to non-domestic investors, and some are partially limited. On the other hand, a local company is not a subject to this regulation, and it might be the only choice how to start a business in Indonesia in your field. b. Lower Incorporation Costs

In comparison with a foreign-owned company, the paid-in capital of a local company is much lower. In general, it ranges from IDR 50,000,000 up to more than IDR 10,000,000,000. The amount of the capital defines the size of the company, which further determines whether a company is eligible to sponsor a work permit for a foreign worker (and how many). • Small : IDR 50,000,000 – 500,000,000 • Medium : IDR 500,000,001 – 10,000,000,000 • Large : above IDR 10,000,000,001

2. FOREIGN OWNED COMPANY (PT PMA) A foreign-owned company in Indonesia, known as PT PMA, has been designed to meet the needs of foreign entrepreneurs. On the contrary to the incorporation process of a local company or a representative office, establishment of a foreign-owned limited liability company (LLC) in Indonesia might be more challenging and time-consuming. The Negative Investment List stipulates the maximum allowed foreign ownership in particular business sectors, causing some industries to be fully closed or only partially open to foreigners. Therefore, having an expert partner in Indonesia or engaging professional assistance becomes a critical point to succeed when forming an international company in Indonesia. Foreign-owned limited liability company is a legal entity that can be fully owned by foreigners. However, the maximum foreign ownership is determined by the business sector and business activities. The restrictions are listed in a regulation called the Indonesian Negative Investment List. Establish a PT PMA Company: The Procedures. Step 1 Approval of Company It should consist of three words that are not vulgar or obscene Step 2 Deed of Incorporation It should include an Asticle of Association, and a notary must be present Step 3 After submission of Deen of Incorporation by the notary, the Ministery of Law and Human Rights will give approval Step 4 Registration of Tax ID (NPWP) A valid NPWP is required for securing other company’s licenses, banking activities, and fulfilling tax obligations Step 5 Domicile Letter Required to show the location of your business Step 6 Application of NIB Alongside NIB, Business Licenses and Location Permit will also be granted one day following the registration via OSS Step 7 Application of Others Licenses Depending on the business sector, additional licenses such as commercial license and tourism license may be required before operation

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