Registration for foreign investment in Indonesia – Foreign Investment or “PMA” in Indonesian is a form of investment by building, buying or acquiring a total company. Investment in Indonesia is regulated in Law Number 25 Year 2007 regarding Investment.
In this Law, Foreign Investment is an activity to invest in conducting business in the territory of the Republic of Indonesia by foreign investors, whether using fully foreign capital or in connection with domestic investors as regulated in Article 1 of the Constitution. Of Law Number 25 Year 2007 regarding Capital Investment. For registration for foreign investment in Indonesia there must be a procedure to be followed.
Foreign Investment “PMA” has many advantages such as long term, many give fair in technology transfer, transfer management skills, create new job opportunity. For developing countries, it is very important to have job opportunities given the limited ability of the government to provide employment. Foreign investment in Indonesia is usually divided into several sectors. Broadly speaking, foreign investment in Indonesia focuses heavily on development, tourism, mining, transportation and products sectors.
The sector is determined in accordance with the potential of each region in Indonesia. For example, islands such as Bali and Lombok could attract foreign investors in the tourism sector due to their already adequate infrastructure. Foreign investors can invest by building hotels and tourist attractions.
There is also invesstment in the processed palm oil products sector. On islands such as Sumatera and Kalimantan, oil palm can thrive. Foreign investors can build palm oil processing plants to boost the local economy. In addition, many areas of concern by foreign investors are mining and natural resources such as minerals, liquefied natural gas, coal, and petroleum.
The large number of potentials makes foreign investors racing to invest by establishing companies and factories in Indonesia. however, foreign investment in Indonesia must be conducted in an orderly manner and in accordance with the investment law. Do not let, foreign investment would harm Indonesia in the future. Establishing a Foreign Investment Limited Company is sometimes the investors make some mistakes. The following lists some of the possible mistakes made during registration for foreign investment in Indonesia:
1. Undermining Tax Issues
The tax laws in every country are so strict, especially the taxes paid by foreign companies that run their business in their territory. In Indonesia, you are required to pay your taxes from the first place after receiving your Tax Card (NPWP), regardless of whether your company has activities or not. Hire a professional accountant to handle reporting and make sure that you report and pay taxes on a regular basis. Otherwise, it will arouse suspicion from the tax office. You should avoid playing with the bureaucracy while doing business in a foreign country.
2. Take Trivial Local Business Cultures
If you want to run a business in Indonesias, you must learn Indonesian business culture. This will help you understand many things that may happen during your business activities in Indonesia. Which includes many national holidays, a long and confusing bureaucracy, difficult and complex registration process, countless document preparations, and more.
This is not something you can master in one night, but when you think it is worth to build a PMA PT in Indonesia, you would think that understanding local business and work culture is a great asset you need to master. In the end, you will feel important, especially when you want to expand your business locally and hire more local people to work in your company in the future.
3. Consultant Who Holds Your Legal Document
After the entire PMA registration process is done, the trusted agent will return all legal documents to you (the client). local agents often do the general trick by storing all documents in the hope that you will use the same agent to deal with any future issues, for example when you want to make changes to capital or do some restructuring company.
Realize that this is illegal practice, because as a client, you are not required to keep working with the same agent once the contract is met and fulfilled. After saving your documents with them, this ‘stubborn’ agent will eventually ask you to pay some money in the future if you want to have your documents back. While this is not a common practice, it is unhealthy and is happening everywhere in the world. Again, you learn how important it is to use the services of reputable and trusted agents.
4. Capital for Lower Foreign Investment from Company Law Documents
The Government of Indonesia has very strict regulations concerning the minimum amount of capital the PMA must have. It aims to protect local businesses, in the hope that foreign investors cannot easily manage PT PMA in Indonesia. Under Indonesian law, it is stated that PT PMA must have a minimum capital of 10 billion. Regardless of the value of the currency, the government has set the dollar amount, which is not less than US $1 million.
You must remember that when you want to set up a large company in Indonesia, a minimum capital of US $1 million must be met. Otherwise, PT PMA cannot be established, because PT PMA is considered as a big company. You may start a lower-scale company (medium business) and upgrade after you have a higher capital, but upgrading your company and making changes to the company’s capital is complicated and expensive. Start with high capital for registration for foreign investment in Indonesia.
5. Take Trivial Bureaucratic and Legal System in Indonesia
Each country has laws and systems that every businessperson must respect. That does not mean that it is not important Just because you think that something is not applied in your country. Every detail and information relating to the registration process must be met, without exception. Breaking the law can be considered an illegal act that will impact your business in the future.
Hopefully by knowing the various list of errors in the registration for foreign investment in Indonesia it makes you more obey and understand the procedures in establishing a Foreign Investment Limited Company.