Indonesia Company Registration for Foreign Investment

Indonesia Company Registration for Foreign Investment

Indonesia Company Registration – Indonesia has long been an attractive market for foreign investors. The country is a member of G20 which represents global economies. Also, it is a home for nearly 250 million population. These facts make Indonesia a promising country for investors from around the globe to invest their fund.

However, investors should take note on some important points to make their business strong and legal. An overview of Indonesia company registration for foreign investment may help you with description of how to establish your company legally.

Foreign Investment in Indonesia

Before we learn the regulation and start with Indonesia company registration, we need to learn about an overview of companies which capitals come from foreign investment in the country or known as PT PMA. PT PMA is a limited liability company with directly foreign investment.

A company is considered as a PMA if there are any of the shares which held by a foreign country or foreign company. It does not matter how much the share is, it can be a full 100%, a half 50%, or even 1%. In Indonesia, you are determined as a foreign-owned company if there are amount of foreign shareholders.

However, foreign investors have other option of legal entity. It is representative office. Representative office is useful for foreign investors who firstly want to explore their business opportunities in Indonesia. To begin with, there should be a parent company overseas to manage its Indonesia representative.

Representative offices mainly focus on carrying market research, marketing, and promotion through selling or buying agents. Running a representative office is an effective way for some foreign investors to grow their business in the first place before establishing a PT PMA. Here are some advantages of opting a representative office:

1. It can be fully owned by foreign investors.
2. There is no minimum capital required.
3. There is requirement of shareholder, director, and commissioner.
4. The setting up process is relatively easier and less time consuming.

You may also learn the disadvantages of representative office for further consideration. In this legal entity, the role of supervisor, coordinator, and parent company representative in Indonesia is limited.  It is also not allowed to carry direct sales and make revenue within the country.

The Limitation of Foreign Ownership

Business classification determines the limitation of foreign-owned company ownership. It ranges from a full 100% ownership to totally restricted for foreign investment. Restricted industries are regulated by the Negative Investment List and it is changed every few years.

In Indonesia, grandfathering principles are applied so the revision of the negative investment list will not affect businesses which have previously registered. It means the shares are not necessarily sold to local partners if your business are among the restricted classification in the future regulation.

The Importance of Local Partner

Among major challenges in establishing business in Indonesia are changes in regulations and bureaucracy. The process may be time consuming and complicated. Therefore, a professional assistance will significantly help investors. It is important to relate with local partners who has access to related officers or qualified knowledge about business regulation in Indonesia.

You can contact a reliable consulting firm that provides services such as giving a local market view and utilizing extensive network in order to support your business operation in Indonesia. Besides that, consulting firms also give assistance for daily operation, administration, and company representation in Indonesia.

Indonesia Company Registration for Foreign-Owned Company

The process of company registration in Indonesia generally needs more than a month. If you need specific license for your business, additional time is necessary. There are three main stages in Indonesia company registration. They are business incorporation, permanent business license, and operational license.

1. Business Incorporation

This process is started from investment application and finished with issuance of principal license or IzinPrinsip which function is to give you permission to start operation in Indonesia.

Business incorporation involves seven government institutions. If you decide to be partner with local consulting firm, they will help you along the process. You need to be involved in the beginning to get important information about your business structure and classification. For particular industries, investors—accompanied by a senior consultant—also need to present in front of Investment Coordinating Board.

2. Permanent Business License

After business incorporation is completed, you will get a one to three years (it depends on your business classification) of time to apply for a permanent business license. Permanent business license shows the investment plan and should be acquired immediately after you are eligible for that. Certain business however, needs to obtain additional licenses. Those business commonly import, construction, also coal and mining.

3. Operational License

In relation with business activities which need additional licenses, it is necessary for investors to get advise from the consulting firm on whether your business needs to acquire it.