Indonesia Company Registration

• Before registering your company, Tetra Consultants will understand your business activities and recommend a suitable form of legal entity for you.

• Once you have chosen a suitable business entity, you must check to see if you meet all the requirements of the government. The specific requirements differ depending on the type of entity structure, which will be elaborated on below.

• You may wonder how to check Indonesia company registration to check the availability of the name. You can access the official company directory on the government website to do so.
• You will then need to get clearance for the name with a notary. Tetra Consultants will assist you to secure a notary who will first pay IDR 200,000 at a local bank, to get clearance for your intended name via an electronic processing system.
• The notary will then obtain a code together with the receipt of payment confirming the transaction, and this code will then be used to submit an online reservation of the name with the Indonesia Ministry of Law & Human Rights.

• Tetra Consultants will assist you in preparing all the documents required for Indonesia company registration. The specific documents mandated will depend on your type of business structure.
• For a foreign Limited Liability Company (PT), documents needed include:
• • Passport copy of the shareholder if the shareholder is a natural person, or legal business document and passport copy of the director if the shareholder is a corporate entity.
• • Registered office address of the company
• • If a physical office space is to be purchased, you would need to submit the Leased Agreement or Deed of  purchase
• Your documents will then have to be notarised with the help of the notary.

• Tetra Consultants will then proceed to apply for the deed of establishment to the Ministry of Law and Human Rights. This must be done before 60 days pass after the creation of the deed. Approval will take place within 2 weeks after the application.
• You will then receive the Certificate of Company Domicile from the local government, along with other documents needed to operate your business in Indonesia.
• For businesses that have a physical presence in an office building in Indonesia, you would first have to apply for a Domicile Certificate for Building Management from the Building Management Office.

• Next, Tetra Consultants will assist your company to secure the SIUP, which refers to the permanent business trading license, from the Ministry of Trade. This is necessary for non-facility businesses that partake in trade. The license will include information about the individual in charge of the business as well as the nature of the business’ activities.

• Tetra Consultants will then assist your business to register with the local tax office you are incorporating in, to obtain a Tax Identification Number (NPWP). Our dedicated team of accountants will then assist you to meet all tax filing and financial reporting requirements to remain compliant.

• The company must then apply for the permanent business trading license (SIUP) at the Ministry of Trade. This constitutes the business license for a non-facility company engaging in trading business and contains details about company activities, and the person in charge of the company.

• Once the above steps are completed, Tetra Consultants will proceed to registering your company in the One Single Submission System (OSS).
• Once the incorporation process is completed, you will receive the company registration certificate which would also contain the Company’s Business Identification Number (NIB).

• Depending on your business activity and capital, you will also be required to apply for suitable business license in order to operate your business in Indonesia.
• You may also apply or register with other necessary systems at the local level, including applying for health care insurance for your company staff, registering with social security and VAT collection.

• After the incorporation of your business, you need to open a corporate bank account with a reputable bank.
• Tetra Consultants will leverage our extensive banking network to open one for your business with either a local or international bank, depending on your preference. You will then be able to begin business transactions.

Accounting and tax obligations

Accounting obligations 

Language and currency

• All accounting records and financial documentation should be maintained in Bahasa Indonesia and denominated in Rupiah. The standard underlines uniformity and readability in financial reporting. Except for a few categories of entities specifically noted, this is a universal requirement.

Bookkeeping requirements

• This includes proper, detailed, and accurate bookkeeping on the part of the businesses. This means that every financial transaction and operational activity must be accounted for, hence clear financial reporting with good accountability.

Preparation of financial statements

Every company needs to prepare and present to stakeholders the following key financial statements:

• Statement of financial position: This may also be referred to as the balance sheet, since it provides a snapshot in time of the firm considering its assets, liabilities, and equity.
• Profit and loss statement: This statement shows the revenues of the company, its expenses, and the profit or loss incurred over a specific period.
• Cash flow statement: It denotes the inflow and outflow of cash from operating, investing, and financing activities.
• Statement of changes in equity: This statement shows changes in the equity of the company during a reporting period, including retained earnings and all other equity components.

Documents retention

• All books of accounts and records shall be kept by every company for at least 10 years. This will ensure that the records are available for reference and verification over a long period, which may at times be demanded by the regulator.

Financial reporting

• The financial statements should be prepared and presented in accordance with the Indonesian Financial Accounting Standards, including:
• The companies must, therefore, disclose all their significant accounting policies and those related-party transactions that provide transparency into financial practice.
• Any entity that has subsidiaries is under obligation to prepare consolidated financial statements, through which the financial results of the parent and subsidiaries are combined.

Audit requirements

• Companies that meet certain requirements, especially those with a considerable public accountability component, are mandated to have audits. The audit should be performed in accordance with SAK, which is a translation of International Financial Reporting Standards for consistency and global standards in financial reporting.

Tax obligations

Corporate Income Tax

Standard corporate income tax rate is 25%. However, the following are excluded:

• Listed public companies on IDX with at least 40% of their shares publicly traded shall be granted a 5% reduction in tax, hence making the effective rate at 20%.
• SMEs whose annual turnover lies below IDR 50 billion, or about USD 3.8 million, may be allowed a 50% reduction in the tax levied proportionately against taxable income up to IDR 4.8 billion.
• On gross turnover below IDR 4.8 billion, the tariff is 1% income tax.

Value-Added Tax (VAT)

• The standard VAT rate is 10%, and this is increased to 11% with effect from April 2022, then 12% by 2025. Some goods and services enjoy a zero rating for VAT. These include the export of taxable goods and services. VAT returns should be filed on a monthly basis not later than the end of the following month, while payments are due prior to the filing deadline.

Withholding Tax

• The withholding tax rates differ based on the kind of income. For example, 20% withholding tax is charged on after-tax profit remitted to the home country.

Regulatory requirements to register company in Indonesia

There are various requirements depending on the business structure. The most common structure is LLC which may require following requirements:

• 2 local shareholders
• 1 local director
• 1 commissioner of any nationality

Types of business structures available for company registration in Indonesia

• It is not straightforward to register a company in Indonesia as a foreigner. Many industries are protected by the Indonesian government and some of them will require local shareholders.
• There are three main types of business entities available for Indonesia company registration mainly include the Limited Liability Company (PT), Foreign-owned Limited Liability Company (PT-PMA), and Representative Office.
• Tetra Consultants will fully understand your business activity and determine the best strategy for your company’s expansion into Indonesia as per the Negative Investment List.

Limited Liability Company (PT)

• If you are looking to register a company in Indonesia that is 100% local-owned, the most suitable business entity will be the Perseroan Terbatas (PT) company.
• This business entity allows only 100% Indonesian citizen ownership.
• If you are a foreign investor whose business nature requires your company to be 100% locally owned, you will require a nominee company to act on your behalf. In such a case, Tetra Consultants will act as your local Indonesian shareholder and director. Our legal team will prepare a nominee shareholder agreement to be signed by all parties, stating Tetra Consultants has no authority nor decision-making power in your company.
• A PT can be set up with the following requirements:
• • 2 local resident shareholders
• • 1 local resident director
• • 1 commissioner of any nationality
• • The paid-up capital must be IDR 10billion (approximately US$650,000).
• Tetra Consultants recommends you to set up a PT in Indonesia only if you are planning to conduct businesses that are protected by the Negative Investment List.

Foreign-owned Limited Liability Company (PT PMA)

• If you are a foreign investor who wishes to open company in Indonesia, Tetra Consultants will recommend you to set up a Penanaman Modal Asing (PMA). You can 100% own a PT PMA and will have full control as long as your business activity is not forbidden by the Indonesian government.
• In order to operate in Indonesia, you are required to secure foreign investment approval from BKPM. BKPM will require you to submit an investment plan of US$1,000,000 and deposit a minimum share capital of US$200,000.
• If required, Tetra Consultants will provide you with a nominee resident director. As always, our legal team will prepare a comprehensive nominee director agreement to be signed by all parties. This is to ensure that our nominee director does not intervene with your business. In order to complete the foreign company registration in Indonesia, the following requirements should be met:
• • 2 shareholders of any nationalities
• • 1 local resident director
• • 1 commissioner of any nationality
• • Equity capital of US$200,000
• Tetra Consultants recommends you to set up a PT PMA in Indonesia if you are planning to conduct businesses that are outside of the Negative Investment List. Although there is a huge paid-up capital before company registration, you can control the Indonesian company fully.

Representative Office

• A representative office is only allowed to conduct market research and marketing for the parent company. It is not allowed to sign contracts, sales agreements, and earn income in Indonesia. It will be a good option for foreign companies seeking to explore the market before settling in Indonesia.
• The operating license of a representative office is valid for two years. As such, some foreign investors prefer to set up a representative office to gain a local presence before establishing a PT or PMA in Indonesia. Do note that foreign companies are currently not allowed to set up branch offices.

Why choose to register your company in Indonesia?

Before you proceed with company registration in Indonesia, it is important to understand the business landscape of the jurisdiction. This is to ensure that your newly established entity will be able to conduct business safely and legally while striving towards your long-term business goals.

Political

• According to the Corruption Perceptions Index reported by Transparency International, Indonesia is ranked 85th least corrupt country worldwide. As such, it may result in delays during the company establishment process.
• Indonesia maintains good diplomatic relationships with its neighbouring countries.
• Indonesia is also one of the founding members of the ASEAN and East Asia Summit, as well as a member of the United Nations, the Organisation of Islamic Cooperation (OIC), and the World Trade Organisation (WTO).

Economical

• According to the Global Competitiveness Report published by the World Economic Forum, Indonesia scored 64.63%. As a result, Indonesia is the 50th most competitive economy in the world.
• Indonesia is the 16th largest economy in the world with a GDP per capita of $3,871.

Social

• The official language in Indonesia is Bahasa Indonesian. As such, your company documents will not be in English. If required, Tetra Consultants will send you corporate documents that are translated by a certified translator.
• According to the EF English Proficiency Index, Indonesia has low proficiency in English and is ranked 13th in Asia. You may face some difficulties when speaking to local government authorities or Indonesian bankers.
• Indonesia has a population of around 268 million with a labour force participation rate of 69%. However, do note that most of these workers are in the manufacturing and agriculture sectors.

Technological

• Indonesia’s government has introduced multiple policies in an attempt to shift the country’s specialization from manufacturing and agriculture to technology. Some of these policies include “Making Indonesia 4.0”, which aims to leverage technology to enhance industrial capacity in five key areas (F&B, automotive, chemical, textile, and electronics).
• There are also plans to convert Indonesia into a tech hub focusing on artificial intelligence, 3D printing, and robotics. However, there is a limited number of highly skilled workers within the labour force.

Legal

• According to the latest World Bank annual ratings, Indonesia is ranked 73rd among 190 economies in the ease of doing business. This is due to the time-consuming company registration process as well as the requirement for local directors, commissioners, and shareholders for some entities.
• The government is not very open to foreign investors setting up companies in Indonesia. To do so, you are required to apply for BKPM approval. In addition, you will be subject to share capital of approximately US$250,000.

Environmental

• According to the Environment Performance Index, Indonesia is ranked 113th in the world.
• Indonesia consists of thousands of islands located between Asia and Australia, providing a prime destination for both local and international tourists.

Thinking of Indonesia company registration?

• Tetra Consultants will be your one-stop solution for Indonesia company registration. Our services include company formation, registered agent, registered address and business bank account opening.
• Contact us to find out more about Indonesia company registration. Our team of experts will revert within the next 24 hours.

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