Company Registration in Indonesia - Business Starting & Setup

Indonesia's economy is one of the largest in the modern world and, given stable GDP growth and increasing purchasing power of the population, has every chance of becoming the region's financial center in the coming years.

Key business advantages include:

• Flexible legal forms, including foreign investment companies (PT PMA), allowing non-residents full control over their business.
• Simplified registration procedure - company incorporation takes from 10 working days, with the unified online system (OSS) minimizing bureaucratic barriers.
• Liberal requirements for directors and shareholders: no mandatory residency for management and the possibility of participation by foreign legal entities.
• Access to ASEAN markets through free trade zones and benefits for export-oriented enterprises.
• Competitive tax conditions and support programs for priority sectors such as manufacturing, digital technologies, and "green" energy.

Indonesia's legal system is based on the Romano-Germanic system of law, with a significant percentage of borrowing from the Dutch legal system. Corporate law is contained in the Company Law NUMBER 40 OF 2007, as amended from time to time.

Compared to other jurisdictions, the opportunity for foreign direct investment appeared in Indonesia relatively recently.

The main regulatory act is the Republic of Indonesia Federal Law No. 40 of 2007.

In general, it should be noted that the legislative system of Indonesia consists of more than 4,000 federal government decrees and more than 15,000 local self-government body acts, some of which directly or indirectly regulate company activities in specific sectors and regions.

In this regard, we strongly recommend expanding the preparatory stage when registering a company if the planned activity falls under the Medium and High Risk categories.

Indonesian law provides for the possibility of establishing the following organisational and legal forms:

Local company with liability limited by shares (PT PMDN),Company with foreign investment and liability limited by shares (PT PMA),Representation of foreign company (KPPA).

PT (Perseroan Terbatas) – a local company with liability limited by shares. This type of company implies 100% ownership by Indonesian citizens. This corporate form may be of interest to foreign investors only for the purpose of conducting business in a sector closed to PT PMA.

PT PMA (Perseroan Terbatas Penanaman Modal Asing) – a company with liability limited by shares and involving foreign capital. This type of company allows for direct participation of foreign individuals in the company's share capital.

Foreign Company Representative Office – this legal entity is intended for establishing a financially non-independent representative office of a foreign company, with the purpose of representing its interests, conducting market research, and supporting the investment process in the target region.

The most popular and common form is the foreign-invested limited liability company (PT PMA).

All business activities in Indonesia are categorized under specific licenses (KBLI). For comparison, in CIS countries, a similar classification exists in the form of OKVD.

Currently, only certain types of activities allow for company registration as a PT PMA (Foreign Investment Company).

Registration is permitted for companies engaged in:

• Trade, both within Indonesia and internationally.
• Service companies meeting large-scale business criteria. Example: Opening a café under a foreign-owned company is not allowed, but establishing a restaurant with a larger seating capacity is permitted.
• Industrial companies.

The Indonesian government primarily views foreign investment as a means to develop large-scale businesses in the country. For small and medium-sized enterprises (SMEs), the government follows a protectionist policy, prohibiting foreigners from being founders of such companies.

Additionally, all business activities in Indonesia are classified by risk level:

• Low Risk – No additional permits required. This category includes trading companies, real estate businesses, consulting firms, and holding companies.
• Medium Risk – Requires additional licensing from the relevant department. Service companies fall under this segment.
• High Risk – Requires additional licensing and compliance with job creation, production volume, and other requirements. This includes industrial companies, educational service providers, and IT-related businesses.

The most popular and common form is a company with foreign investment and liability limited by shares (PT PMA).

The time period for registering a new Indonesian company in the registry is 10 working days, but may be longer due to the need to obtain additional authorisation documentation for the planned activity.

The word "PT" is a mandatory element of the name indicating the legal form of the limited liability company. Every Indonesian company name must first be approved by the registration authority. The Latin alphabet may be used in the spelling of names. The name must contain a minimum of 3 words with at least 3 letters in each word. The registrar may reject any name that it considers unacceptable, that is the same or similar to the names of already registered Indonesian companies, or that implies illegal activities, militaristic orientation or government patronage.

The first step in registering a company in Indonesia is to obtain approval of its name from the Registrar of Companies. The Memorandum of Association is then signed by the shareholders in the presence of a notary public.

The Memorandum of Association defines the basic structure of the company, specifies its name, the purpose of incorporation, the amount of share capital and its division into shares of a certain value, as well as other provisions related to the structural organisation of the company, procedures for convening shareholders' meetings, passing resolutions and transfer of shares, including all possible restrictions. By special resolution, the company may amend or supplement the Memorandum of Association.

At the next stage of company registration, the Memorandum of Association and the necessary registration forms are sent to the Ministry of Foreign Investment for approval. Upon receipt of the registration confirmation from the Ministry, a request for a tax number is sent to the local tax office. At the same time, registration in the online company register (OSS) is carried out in order to obtain a Commercial Certificate Number (NIB), which will be used for most of the procedures.

Upon completion of registration, a commercial licence, proof of compliance with zoning regulations, and a certificate of compliance with environmental regulations are issued.

Companies must have a registered office (registered office) in Indonesia. Copies of the company's corporate documents must be kept at this registered office address.

Indonesian law does not contain requirements for the existence, form and content of a seal. Each company can prepare a seal according to its own preferences. The most common reason for preparing a seal is to open a corporate account with foreign banks, most of which require a seal.

Redomiciliation of companies from and to Indonesia is not possible at this time.

The minimum number of directors is one. It can only be a natural person. Data on the directors are entered in the online register. The law does not impose residency requirements, however, in order to avoid difficulties during on-site inspections by the state authorities, it is recommended that the director resides permanently in Indonesia.

All companies must appoint a commissioner, who may be an individual, whether resident or non-resident. There are no specific qualification requirements for the position of Commissioner. According to the law, a person may not fulfil the functions of a sole director and a commissioner at the same time.

Every company in Indonesia must appoint a Commissioner, who can be either a resident or non-resident individual. This role is unique in international business practice.

The Commissioner serves a supervisory function over the Director and shares joint liability. There are no KITAS (work permit) requirements for this position, and no specific qualifications are mandated by law.

However, under Indonesian law, the same individual cannot serve simultaneously as both the sole Director and Commissioner of a company.

An Indonesian company is required to have two or more shareholders, which can be individuals and legal entities, Indonesian residents or non-residents. General meetings of shareholders must be held at the business address annually, with the first meeting to be held within 18 months of the company's incorporation.

The company’s authorized capital must be denominated in Indonesian Rupiah (IDR). The minimum declared capital is 10 billion IDR (approx. 700,000 USD). While Indonesian law does not specify a deadline for capital contribution, we recommend discussing this matter during a consultation on your planned business activities to avoid issues with regulatory authorities.

Capital contribution can be made in the following ways:

• Transfer from the shareholder’s personal account;
• Reinvestment of retained profits.

The authorized capital may be used to cover operational expenses.

The issuance of bearer shares or shares without a nominal value is not permitted.

The founding documents of an Indonesian company must include the company's registered address.At this address, scanned copies of the founding documents must be kept.

For the initial period, it is possible to rent a virtual office. Please note that this option does not provide space for employees. In case of business expansion and staff growth, we recommend renting a physical office to simplify communication with regulatory authorities, as government officials always visit the address stated in the company’s Articles of Association.

From a legislative perspective, each holder of an Investor Kitas (Kartu Izin Tinggal Terbatas – Limited Stay Permit Card) is required to hire a "personal assistant."Therefore, the minimum number of employees is 1, as obtaining a Kitas for the company director is mandatory.Further, when employing foreign nationals, the staffing ratio must be maintained at 1 foreigner per 10 local employees.

The corporate income tax rate is 0.5% of gross turnover , until either:

• The annual turnover exceeds IDR 4,800,000,000 (USD 320,000) , or
• A period of three years has elapsed.

After that, the standard corporate income tax rate of 25% applies.Resident corporate taxpayers with a gross revenue of up to IDR 50,000,000,000 (USD 3,280,000) are eligible for a 50% reduction in the corporate income tax rate , applicable to taxable income derived from gross revenue up to IDR 4,800,000,000 (USD 320,000).

In Indonesia, the obligation to register for VAT arises only once the domestic sales turnover exceeds the registration threshold of IDR 4,800,000,000 (USD 320,000).

The standard VAT rate is 11%.

Certain types of business activities are subject to special tax regimes.An example is one of the most common sectors — Real Estate.

A special tax of 10% of the transaction value is imposed on rental income from real estate.In the case of the sale of land owned by the company, a tax of 2.5% applies.

The Indonesian tax system operates under the withholding tax principle , which means that the company is obligated to withhold tax upon payment of dividends.

The issue of double taxation avoidance remains one of the most pressing matters, resulting in a significant expansion of the list of international agreements aimed at preventing double taxation.

The taxation of employee income depends on the amount of annual salary (amounts are presented in IDR):

• Up to IDR 50,000,000 – 5%
• From IDR 50,000,000 to IDR 250,000,000 – 15%
• From IDR 250,000,000 to IDR 500,000,000 – 25%
• Over IDR 500,000,000 – 35%

According to Article 66 of the Company Law , Indonesian companies are obligated to prepare and submit financial statements.This requirement is mandatory regardless of whether the company conducted any business activity during the reporting period.If no business activity was carried out, the company’s accountant must prepare and file nil reporting.

The company must submit its financial reports to the tax authorities within one year after the end of the reporting period.

The requirement to obtain an audit opinion arises if the company meets any of the following conditions:

• The company manages public funds;
• The company issues debt securities;
• The company is state-controlled;
• The company holds assets or generates turnover exceeding IDR 50,000,000,000 (USD 3,280,000).

The company is required to submit quarterly reports to BKPM (Indonesian Investment Coordinating Board), reflecting the volume of investments made.

In addition to annual reporting, all Indonesian companies are required to submit monthly tax returns, reflecting the company's profit for the previous month and calculating employee withholding income tax.

Once the company is registered for VAT and has obtained a taxpayer identification number, the Indonesian company must prepare and submit quarterly VAT returns , and pay any applicable taxes within 40 days from the end of the reporting period.

Indonesia offers foreign entrepreneurs and specialists a clearly structured visa and work permit system, allowing legal employment in the country.

For short-term business visits, a Business Visa Category B211 is available, allowing a stay of up to 180 days without the right to work . This visa is ideal for conducting negotiations, searching for partners, and studying the market before starting a business.

For long-term employment in an Indonesian company, foreigners are required to obtain a work permit-based Temporary Residence Permit (KITAS) , preceded by obtaining a Work Permit (IMTA – Izin Mempekerjakan Tenaga Kerja Asing) .The process begins with the employer submitting an application to the Ministry of Manpower , where justification for hiring a foreign specialist must be provided.Upon approval, the applicant receives the visa at the embassy, which can then be converted into a 1-year KITAS upon arrival, with the possibility of extension.Special conditions apply to investors who have contributed at least 1 billion rupiah — they may qualify for a visa without the need to obtain an IMTA.

A key requirement for all work visa categories is proof of qualifications, including submission of diplomas and professional certificates.It is also important to consider sector-specific quotas on foreign labor and mandatory payments related to the use of expatriate workers.