To start doing business in Indonesia, foreign investors and entrepreneurs can choose to set up a Representative Office (RO), a Local Limited Liability Company (PT), or a foreign-owned limited liability company, Penanaman Modal Sensing (PT PMA), which is one of the three common legal entities allowed to be used in the country.
Types of company registration in Indonesia
Representative Office (RO)]:
RO is often considered to be a branch of an overseas parent company, its first step in the Indonesian market and a pioneer in the establishment of PT PMA. It is mainly set up for marketing, market research or as a buyer and seller. It can be established after obtaining the necessary permits from the relevant ** department. The entity has a very loose corporate structure and does not require shareholders or directors; The CEO alone is enough. RO's restrictions include the inability to sell or issue bills of lading directly.
Local Company (PT)]:
This is the most common body corporate in Indonesia. Even if a local company is only available to Indonesian citizens, a foreign company or entrepreneur can set up a local company according to the local ** arrangement, as this type of company only allows 100% local ownership. The paid-up capital of a local company is much lower as compared to a foreign-owned company. In general, it ranges from IDR 50,000,000 to over IDR 10,000,000,000.
Wholly Foreign Owned Company (PT PMA)]:
It is a corporate body that can be fully owned by foreigners. However, the maximum amount of foreign ownership depends on the business sector and business activities. These restrictions are set out in regulations called the Indonesian Negative Investment List (DNI), which regulates foreign ownership of businesses based on the industries in which they operate. Certain business activities are completely off-limits to non-resident investors, while others are partially restricted. For businesses that are partially open to foreign investment under the DNI, foreign ownership is allowed to be 49%-95%. On the other hand, businesses or industries that are not listed in the DNI can be 100% open to foreign ownership. It usually takes 2 to 6 months to set up a PT PMA, and an office is required during the registration process. It can sponsor and issue work permits and working itas for its international employees. Usually, the minimum capital requirement for PT PMA is IDR 10 billion, of which 25% (paid-up capital of about IDR 2.5 billion) must be deposited in advance.