Indonesia is one of the fastest-growing economies in Southeast Asia. Foreigners looking to open a business in Indonesia should be aware that there are numerous risks involved, such as labor and legal issues. The good news is, however, that these can be mitigated with sufficient research before beginning your venture.

This FAQ aims to provide you with information about opening a business in Indonesia so you can make an informed decision on whether it’s right for you. The next step will be to read this FAQ from start to finish!


Frequently Asked Questions by Foreigners on Starting A Business in Indonesia

  1. How does the register a company in Indonesia process work?
    • Make sure your business sector is available for investment. Here’s how.
    • Choose your company type.
    • Obtain the Deed of Incorporation through a public notary.
    • Get approval from the Ministry of Justice and Human Rights (SK HAM)
    • Get provincial level permits and licenses
    • Obtain Tax Identification Number (Nomor Pokok Wajib Pajak or NPWP) for your company
    • Obtain a Single Business Identity Number (Nomor Induk Berusaha or NIB) for your company
    • Apply for other licenses.
      • Additional licenses may be required for certain business sectors
  2. What business entities are available in Indonesia?
    • There are 3 legal entities for your business available in Indonesia. They are:
      • PT PMA (Foreign Direct Investment)
      • PT PMDN (owned entirely by locals)
      • Represenattive Office (much less requirements but unable to perform profit generating activities)
      • Check out the pros and cons of each entity here.
  3. What are some of the things foreigners looking to start a business in Indonesia should be aware of before they open their company?
    • Consider getting a professional to register your company. Becoming your own agent can be a daunting task. The change in regulations is always happening, and unless you’re up-to-date with all the latest changes to these rules for starting your company it will lead to disaster! It’s best if someone who knows what they are doing helps us out instead of risking getting rejected or delayed because you don’t know enough about this process.
    • Obtain living and working permits for your foreign employees. Too often start-ups or entrepreneurs make a common mistake: not understanding how difficult it can be for them to run legally within Indonesian borders without permission from the Ministry of Manpower’s Office. There are many rules surrounding these permissions–and sometimes confusion as well–but if you’re willing take an extra step toward doing things by the book then your business will thank you later. In fact, recent changes in legislation mean that working here has never been easier!
    • Always check the building permit (IMB) before leasing. Make sure the building you lease is deemed eligible for business purposes.
    • Fail to report tax and investments accordingly. Your tax card is the key to being able to declare your taxes and avoid penalties. You must report as soon as you get it so that authorities can be notified about any activity or lack thereof when they are monitoring closely, which could result in some pretty hefty fines if ignored over a long period of time!
  4. How long is the business registration process?
    • The process can vary anywhere from 1 month up to 3 months depending on how quickly owners send across their company documentation. But once everything has been submitted successfully, companies will be operational within 30 working days! You can also obtain your business licenses through Online Single Submission licensing application which integrates all business permit applications under one website.
  5. Can foreigners purchase a property in Indonesia?
    • Buying a condominium or apartment and office space is possible for foreigners as long as the building isn’t subsidized government housing and the building’s land status is strata title under the Right to Use (Hak Pakai) with certain conditions that is regulated in Article 69-73 of Government Regulation Number 18/2021.
  6. What are the types of property ownership available for PT PMA in Indonesia?
    • There are 3 types of land statuses available for rent by PT PMA (FDI):
      1. The Right to Cultivate (Hak Guna Usaha or HGU), granted for 35 years and extendable for another 25 years as stipulated in Article 22 Point (1) Government Regulation Number 18/2021. Another renewal will be no more than 35 years.
      2. The Right to Build (Hak Guna Bangunan or HGB), grants the right to build and own a building on land which does not belong to the builder for 30 years and is extendable for a maximum of 20 years.
        • Renewals on State Land (Tanah Negara) and Land with Right to Manage (Tanah Hak Pengelolaan) is available for a maximum of 30 years.
        • Renewal of Right to Build (Hak Guna Bangunan) on a Freehold Title Land (Tanah Hak Milik) is a maximum of 30 years using the deed granting the Right to Build on a Freehold Title Land (Article 37 Point (1) and (2) GR Number 18/2021).
      3. The Right to Use (Hak Pakai) is the right to use and/or collect resources from the land directly controlled by a state, or owned by other persons that grant rights stipulated in an agreement with said person.
        • The Right to Use on a State Land (Tanah Negara) and Land with a Right to Manage (Tanah Hak Pengelolaan) can be obtained for 30 years, extendable for a maximum of 20 years, and can be renewed for a maximum of 30 years.
        • The Right to Use (Hak Pakai) on a Freehold Title (Hak Milik) can be obtained for 30 years max and can be renewed with the deed of granting the Right to Use (Hak Pakai) on the Freehold Title (Hak Milik) – Article 52 Point (1) and (3) GR Number 18/2021.
      4. Right to Cultivate (HGU), Right to Build (HGB) and Right to Use (Hak Pakai) are properties that can be owned by Indonesian citizens or foreigners who have a residence in Indonesia. These entities include companies established under Indonesian law with an office based in the country as well as those foreign companies which have set up a representative office here.
      5. The HGU and HGB ownership transfer is allowed during the contract period. However, certain conditions may apply depending on the land usage rights that come with these properties. The individual land use rights can also be transferred around between different people as needed so long as they comply with all relevant laws in place for such a transfer of property rights.

Indonesia Global Law Firm Can Help

Indonesia Global Law Firm is the perfect company for any business that needs legal assistance in Indonesia. With years of experience and corporate knowledge, we are able to help you come up with a strategy based on what your specific goals may be, while also keeping an eye out for ways we can save money or time throughout this process.

We know how expensive and frustrating it can be when businesses have to deal with complicated laws where their operations happen–we don’t want your business to go through all of those struggles!

Indonesia Global Law Firm will help you navigate the complexities of Indonesian law and regulations. With years of experience, corporate knowledge that’s second to none, and an attentive customer-focused approach—you’ll be in good hands with our legal team!

 

Image Credit: Photo by Icons8 Team on Unsplash 

 


Didn't find what you were looking for?

The most important thing about our company is that we are always happy to help you. It doesn't matter if it's a question or an issue, contact us and let one of our experts take care of the rest!



For more information:

Agustin, S.H., M.H., Managing Partner

The contents of this publication are intended for informational purposes only and should not be construed as legal advice, nor create a lawyer-client relationship between the reader and the author. The material contained here does not represent the opinion of any attorney at law or other professional legal advisers.

Indonesia Global Law Firm is passionate about sharing knowledge and providing education to its readers. All publications are copyrighted so that they may be reproduced only with the express written consent of Indonesia Global Law Firm.


Protected by Copyscape