Foreigners' Guide to Starting a Business in Indonesia

TEMPO.CO, Jakarta - Under certain prerequisites, foreign nationals could set up a business in Indonesia. Foreigners must abide by several administrative requirements to establish a foreign-owned company or PT PMA in Indonesia. To better understand the criteria for foreigners to set up a business in Indonesia, the explanation is as follows.

How to set up business for foreigners in Indonesia

Foreigners must comply with Law Number 25 of 2007 concerning Investment and Government Regulation Number 23 of 2010 concerning Investment Implementation. There are five things that foreign nationals must heed when planning to set up a business in Indonesia. 

1. Legality

The first criterion that foreigners must fulfill to ensure their business runs following procedures is to have clear business legality. To set up a business in Indonesia, one must obtain the deed of establishment, domicile letter, registration of tax, trading business license, and most importantly, approval of legal entity. 

The approval of a legal entity is given by the Ministry of Law and Human Rights and is proof that said business is legal and has met the requirements. Important to note that some sectors are included in Indonesia’s Negative Investment List (now called the Positive Investment List), which will guarantee no permit for the business. 

2. Business Identification Number (NIB)

Foreigners can arrange with the Investment Coordinating Board (BKPM) to apply for an NIB. NIB includes critical information about the business, including licensing data, tax identification, and other information required by relevant agencies. With NIB, businesses can be recognized and monitored by the government. Additionally, the identification number can also be the basis for various official needs, such as opening a bank account, applying for a loan, and even tax purposes.

3. Capital

Foreigners who want to set up a business in Indonesia must invest capital with a minimum realization of US$1 million. Additionally, business owners must invest a paid-up capital of Rp10 billion (or the USD equivalent) excluding building and land assets. 

4. Organizational Structure

Before establishing a PT PMA, foreigners must ensure their business has a clear organizational structure, including at least 1 president director and 1 president commissioner. At least one of the shareholders must be a foreign national or foreign entity. 

5. Tax Compliant

It is important to understand that every business, including those owned by foreigners, is required to comply with all applicable tax regulations and provisions in Indonesia. This includes regular tax reporting and fulfilling tax obligations according to the type of business and income earned.

AULIA ULVA

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