Foreign companies can establish a legal presence in Indonesia primarily through a PT PMA (Foreign-Owned Limited Liability Company) for commercial operations or a Representative Office for non-sales activities.
A PT PMA requires a minimum investment of IDR 10 billion (approx. $650,000 USD), allows 100% foreign ownership in many sectors, and requires registration via the Online Single Submission (OSS) system.
Key Registration Options
- Representative Office (RO): Suitable for foreign companies, such as a Representative Office (KPPA) or Trade Representative Office (KP3A), to conduct market research, marketing, or act as a purchasing agent without generating direct revenue.
- PT PMA (Perseroan Terbatas Penanaman Modal Asing): This is the mandatory legal structure for foreign investors intending to generate revenue, invoice, and trade in Indonesia.
Representative Office (RO)
A representative office in Indonesia is ideal for foreign businesses wishing to explore the Indonesian market. This type of office is restricted to activities such as market research, promotional efforts, and acting as an intermediary for the foreign parent company.
The office cannot engage in profit-generating activities in Indonesia, and all commercial transactions are managed by the parent company abroad.
No minimum capital is required, unlike other foreign-owned companies in Indonesia. Both local and foreign staff can be employed at the office.
There are three categories of representative offices in Indonesia:
Foreign Representative Office
A foreign representative office manages the company’s interests in Indonesia or oversees activities abroad.
- It is prohibited from conducting profit-generating activities, entering into contracts, or purchasing goods or services from local businesses.
- It cannot engage in any other forms of business in Indonesia.
Required Documents:
- A letter of appointment from the foreign parent company.
- The foreign parent company’s Articles of Association.
- A copy of the passport for the Head of the Representative Office (foreigners) or an Indonesian ID and tax number for Indonesian citizens in the role.
- A letter of intent and a statement affirming the role as the Executive of the Representative Office, solely conducting its activities and not other business.
Required Permits:
- Approval letter from the Investment Coordinating Board (Badan Koordinasi Penanaman Modal – BKPM).
- Business Registration Number from OSS.
- Business License from OSS.
- Domicile letter from local authorities.
- Taxpayer Registration Number from the tax office.
- Company registration certificate from the Company Registration Office.
Foreign Construction Representative Office
This office oversees construction-related services, especially for high-risk, high-cost, or high-tech projects through joint operations.
Required Documents:
- Foreign parent company’s Articles of Association.
- A construction business license from the parent company’s country.
- A recommendation letter from the Indonesian Embassy.
- Valid construction service permit from the parent company.
- Letter of appointment for the Chief Representative.
- The foreign parent company’s audited financial records.
- A CV of the Head of the Representative Office.
- A copy of the Head’s passport (for foreigners) or ID and tax number for Indonesians.
- A domicile letter from the building management or a local official.
Required Permits:
- A Foreign Construction Representative Office license, valid for three years and renewable.
Foreign Trade Representative Office
This office focuses on promoting foreign products in Indonesia, conducting market research, and assisting with product information and import processes.
- It may also conclude contracts with Indonesian businesses on behalf of the foreign parent company.
Required Documents:
- Temporary SIUP3A (Foreign Representative Office Business License):
- Application form.
- Letter of intent, appointment, statement, and reference, legalized by the Indonesian Embassy.
- Representative office work plan.
- CV of the Head of Representative Office.
- Diplomas and passport/ID copies.
- Permanent SIUP3A:
- Domicile letter from the local sub-district office or statement from building management.
- Appointment approval from the foreign parent company.
- Copy of ITMA (company’s registration).
- Domicile permit from the local village chief.
- Extension SIUP3A:
- Copy of ITMA.
- Statement of foreign vs. Indonesian worker ratio (1:3).
- Company registration certificate.
- Report on office activities.
- Modification SIUP3A:
- Application form.
- Legalized letters of intent, appointment, statement, and reference from the Indonesian Embassy.
- Representative office work plan.
- CV of the Head of Representative Office.
- Diplomas and passport/ID copies.
- Management-signed application.
Subsidiary Company (PT PMA)
A subsidiary company in Indonesia is established as a limited liability company (PT). If the parent company is foreign, the appropriate type is a PT PMA, a foreign-owned company.
Key Points:
- The subsidiary is a separate legal entity, taxed at 25%.
- Minimum Capital Requirement: At least IDR 10 billion (approximately USD 600,000).
- The company must have:
- Two shareholders (can be foreign or a combination of foreign and local).
- One local director.
- One foreign or local commissioner.
Requirements for PT PMA Registration
- Minimum Capital: A minimum of IDR 10 billion total investment, with at least 25% ($IDR 2.5 billion) paid-up capital.
- Structure: Requires at least two shareholders (individuals or entities) and at least one director and one commissioner.
- Investment List: Must comply with the Positive Investment List, which defines allowed foreign ownership percentages in specific sectors.
Documents Needed:
- Principle and business licenses from BKPM.
- Legalization of PT PMA by the Ministry of Law.
- Domicile letter from local authorities.
- Tax Identification Number (NPWP).
- Company Registration Certificate.
- Labor reports and company welfare reports.
Steps to Register a Foreign Company
- Name Reservation: Reserve a unique company name with the Ministry of Law and Human Rights.
- Draft Articles of Association: Prepare the deed of establishment via a notary.
- Obtain Legal Entity Status: Approval from the Ministry of Law and Human Rights.
- Secure NIB (Nomor Induk Berusaha): Obtain the Business Identification Number through the OSS system, which acts as the company’s registration number, importer identification, and customs registration.
- Tax Registration (NPWP): Register for a tax ID number.
- Business Licenses: Obtain necessary permits based on risk level.
Before registering a foreign company, you want to know The Impacts of Indonesia’s Omnibus Law on Foreign Investors
Common Pitfalls and Considerations
- Foreigners often use virtual offices for initial registration, but some sectors require a physical office.
- The process takes 1-5 days for NIB issuance after submission, but total setup time varies.
- Foreign directors/commissioners will need to secure a Work Permit (KITAS).
Read more: Challenges When Starting a Business in Indonesia for Foreigners and How to Overcome Them
How BaliEasy Can Help
Visa BaliEasy simplifies the process of establishing a foreign company in Indonesia, offering personalized support to foreign investors. Whether you are registering a PT PMA or setting up a Representative Office, we assist in navigating the regulatory and licensing complexities to ensure a smooth experience.
How BaliEasy Can Help:
- PT PMA Registration: We guide you through the registration process, from name reservation to securing business licenses.
- Legal Compliance: BaliEasy ensures that all required documents, including NPWP and legal entity status, are handled efficiently.
- Work Permit Assistance: We assist in securing Work Permits ITAS and Investor ITAS for foreign directors and commissioners.
- Streamlined Processes: Our experts handle all legalities, reducing your workload and ensuring compliance.
- Language Support: BaliEasy offers bilingual support, making communication with local authorities easier.
- Fast Track Services: We expedite the process with our experienced team, allowing for quicker business setup.
- Transparent Pricing: Our service fees are clear, with no hidden costs, making your investment more predictable.
