Indonesia has become an increasingly popular destination for foreign investment. As Indonesia continues to grow and develop, there have been more opportunities for businesses of all industries. To take advantage of newfound opportunities, companies have been exploring the option of Indonesia company formation.
A minimum of 2 shareholders are required – certain industries only allow shareholders to be Indonesia, although shareholders are not subject to any residency requirements. Only 1 company director and one commissioner, who is responsible for supervising the actions of the company and its board of directors. These two positions are not subject to any nationality or residency requirements, except when these positions are responsible for employment related matters. Company secretaries are also not required, unless the company is publicly listed.
Indonesian companies are required to have a registered office in Indonesia, with a lease agreement being required when applying for a business license.
Indonesia does impose capital requirements on their companies. The minimum authorized capital for a company is IDR50 million, with at least 25% being required to be issued and paid up as required under Indonesian Company Law. Companies with any number of foreign shareholders must invest more than IDR10 billion for each line of business.
Indonesian companies must submit annual tax returns to the Indonesian tax authorities. In addition, the board of directors must produce an annual report, approved by the annual general meeting of shareholders. A company’s board of commissioners must also produce an annual supervisory report that will be presented in the annual general meeting of the company’s shareholders.
The Indonesia company formation process will take one to two months to complete, on average. However, this process may be extended if a company has complex business activities and requires various business licenses as much of the company formation process is dependent on approval being granted by Indonesian government authorities.
Yes, however certain restrictions apply. The Indonesian government only permits certain business classifications to be 100% foreign owned. Foreigners can only partially invest in other business classifications or, in certain circumstances, are completely prohibited from participating in certain industries.
The industries which are restricted to foreigners are listed in the Indonesian government’s Negative Investment List. .
In Indonesia, the most common form of business entity is called Perseroan Terbatas – this company type is similar to a limited liability company in regards to its structure and functions. However, only Indonesian citizens and Indonesian legal entities are allowed to be shareholders of this type of company.
Foreign-owned companies are classified as Perseroan Terbatas Penanaman Model Asing (“PT PMA”). These companies do not require a local shareholder and their structure and functions are also similar to limited liability companies.