Indonesia offers excellent opportunities to those who want to start their business in Indonesia, whether for the locals and also for the foreigners. To start a foreign company in Indonesia needs to be assigned in the form of Foreign Limited Liability Company or PT PMA in the Indonesian language. This kind of foreign company in Indonesia is regulated by the Company Law No. 40 Years 2007 about the Company Law. If the foreigners want to start their business in Indonesia, they will need an expert to help them navigate the regulations on registering their company in Indonesia.
A company is in the form of PMA if the shares of the company are held partially or entirely by a foreign company or foreign national. The amount of the shares whether it is 1%, 51%, or 100%, as long as there are foreign shareholders, the company is a foreign company in Indonesia. Besides establishing a Company, foreign investors can also set up a representative office in which the international company represents an overseas company in Indonesia, but it doesn’t generate any income from its activities in Indonesia.
Advantages and Disadvantage of Foreign company in Indonesia
- Advantages of PT PMA
The foreign company in Indonesia will receive many benefits if it is in the form of PT PMA. PT PMA is allowed to become a 100% foreign-owned limited liability company or else it can also be established as a limited liability company in the form of joint venture with Indonesia partners. This type of foreign company in Indonesia can give the international investors a full control of their business, and it will also reduce the risk of finding a right local partner. This form of foreign company in Indonesia has the same rights and responsibilities as a local company. On-site tax and import duties are lower for PT PMA, and the company can sponsor many foreigner employees.
- Disadvantage of PT PMA
There is also some disadvantage of the foreign company in the form of PT PMA. PT PMA is not allowed to establish some types of business activities that are closed for foreign ownership. Another disadvantage of this kind of foreign company in Indonesia is this company obliged to make monthly tax reports. The company is also required to report their business activities to the BKBM every three months. It is purposed so that BKPM can monitor the development of the company. The minimum investment plan for the foreign company in Indonesia is about US$ 1.000.000,- in which is a considerable amount.
- Advantage of Representative Office
Representative office or KPPA is the foreign company in Indonesia in which is established by the international company abroad to take care of their business activities in Indonesia but not collecting any income from their operations in Indonesia. The benefits of establishing a representative office in Indonesia is it is not required any capital to develop this form of foreign company in Indonesia. It means that foreign investors can build a market presence legally in Indonesia in a cheap way. KPPA or representative company is also having the possibility of handling their sales and deliveries of their products or service.
- Disadvantage of Representative office
There are some limitations for the representative office activities in Indonesia. The operation of representative in Indonesia is limited in the role of supervising, connecting, coordinating and caretaking of the Company interests or its affiliate company inside or outside of Indonesia. This type of foreign company in Indonesia is not allowed to fund any income from pursuing sales transaction and from the purchase of its products and services. The foreign company in Indonesia in which in the form of the representative office is also obliged to be located in the capital city of the province and must have an office building.
Hopefully, the information above which is about some forms of the foreign company in Indonesia might help you to learn about the foreign-owned business entity that established in Indonesia.