How to Set up a Company in Indonesia

Foreigners are increasingly drawn to Indonesia because of its low living costs, expanding business opportunities, and diverse landscapes. Many see it as a practical base in Southeast Asia, offering access to a large, young market and a more relaxed lifestyle. Cities like Jakarta and Bali are evolving into hubs for remote work and entrepreneurship, making the country more attractive to expatriates and investors.

Business is thriving in Bali, attracting a growing number of expatriates, entrepreneurs, and investors eager to tap into its vibrant tourism sector. The island’s unique blend of stunning landscapes, rich culture, and welcoming atmosphere creates an ideal environment for new ventures. With a steady influx of tourists, there are ample opportunities in hospitality, wellness, and lifestyle businesses.

Many expats are successfully establishing enterprises in this dynamic environment making Bali an exciting place for anyone looking to start a business and thrive in Indonesia’s expanding market.

In this article, we will take a closer look at the requirements for foreigners who wish to establish a business in Indonesia and make this tropical paradise their home for the foreseeable future.

Can a foreigner set up a company in Indonesia?

For foreigners looking to incorporate a business in Indonesia, a PT PMA company could be the ideal solution. But what exactly is it?

PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a company structure specifically designed for foreign investment in Indonesia. This allows foreigners to own and operate a business in Bali, Lombok, or any other part of the country.

What are the benefits of a PT PMA company?

A PT PMA company enables foreign investors to establish a business in Indonesia with majority or even full ownership, depending on the specific sector in which they plan to operate. This structure is particularly attractive for foreign nationals looking to invest in the Indonesian market, as it offers them significant control over business decisions.

Moreover, operating under the PT PMA framework grants foreign investors limited liability. This means that their personal assets are generally protected from debts or liabilities incurred by the company, reducing the financial risks associated with starting and running a business.

Overall, setting up a PT PMA company in Indonesia can be a strategic way for foreign investors to tap into the growing opportunities in this vibrant economy while enjoying a secure legal framework that safeguards their interests.

Are there minimum capital requirements for PT PMA establishment?

In general, an Indonesian PT PMA company must register a minimum share capital of IDR 10 billion (USD 606,000). This capital is to be invested over a period of three years according to the company’s investment plan. At least 25% of the share capital, which amounts to IDR 2.5 billion, must be contributed during the first year.

What are the shareholder and directorship requirements?

A PT PMA company must have a minimum of two shareholders, who can be individuals or entities from Indonesia or abroad. In certain sectors listed in Indonesia’s Positive Investment List (DPI), it is possible to have 100% foreign ownership.

The company must also have at least one director and one commissioner. The commissioner’s role is to supervise management and provide strategic advisory support, akin to a board of directors role.

Are there any restrictions attached to a PT PMA company?

Foreign-owned PT PMA companies are subject to specific restrictions that can differ significantly depending on the sector in which they operate. These restrictions are often designed to protect local businesses, ensure compliance with national laws, and promote sustainable practices within the industry.

In addition to the general restrictions, companies may also need to obtain various licenses or permits to legally operate within their specific industry. These requirements can vary widely and may include environmental permits, operational licenses, or special approvals from government agencies. It’s crucial for foreign investors to conduct thorough research and seek advice to navigate the regulatory landscape effectively, as failing to comply with these requirements can lead to penalties or disruptions in business operations.

Are there any tax benefits to running a PT PMA company?

The headline corporate tax rate in Indonesia is 22%. However, businesses of smaller turnover are eligible for tax discounts as follows:

• Revenue below IDR 50 billion (USD 3 million) – 50% discount on taxable income portion of first IDR 4.8 billion of revenue
• Revenue below IDR 4.8 billion (USD 291k) – Some businesses are eligible to pay 0.5% tax on revenue

In addition to this Indonesia also applies a VAT tax at the rate of 12%.

Who is a PT PMA suitable for?

Indonesian PT PMA companies are ideal for foreign nationals looking to establish a business in Indonesia and obtain residency permits in the process. Due to the relatively high share capital requirements, a PT PMA is best suited for those who are serious about investing in Indonesia or who can pool funds with other investors.

Owning a foreign-owned Indonesian company can be an excellent way to realize the Indonesian dream, whether that means living in beautiful Bali or the bustling, emerging city of Jakarta.

Can I get a work permit to live in Indonesia?

As the owner of a business, you do not need a work permit for yourself, as long as you are only performing managerial tasks and not manual work. Instead, you should apply for an investor stay permit (KITAS), which is valid for two years.

If you wish to hire other foreign employees for your business and obtain the necessary work permits for them, your company must employ 10 local workers for every foreign employee hired.

Next steps

If you are interested in establishing a PT PMA company in Indonesia or have other inquiries about moving to this popular tropical paradise, feel free to get in touch.