Procedures To Establish A Foreign Company In Indonesia
A foreign company (or PT Penanaman Modal Asing, hereinafter “PT PMA”) is a distinct business entity to generate revenues, profit, or engage in sales directly in Indonesia which can be established by either foreign citizens or legal entities. This entity is regulated generally under the Legislation No. 40 of 2007 regarding Limited Liability Company (hereinafter, “Limited Liability Company Act”), and Legislation No. 25 of 2007 regarding Capital Investment.
In order to establish PT PMA, there are several basic matters that must be considered:
- There is limitation for foreign share ownership under the Negative Investment List (Daftar Negatif Investasi, hereinafter “DNI”) that is specifically governed in the President Regulation No. 44 of 2016. The DNI is served as a guideline for the investors to have clear options about the business sectors or line of business which they can invest in Indonesia. DNI also provides distinction between PT PMA and companies established under the frame of Domestic Capital Investment (PT PMDN), and other ordinary local limited liability companies.
- Limited Liability Company Act requires the establishment of PT PMA to have certain organizational structure, namely:
- Minimum of 2 (two) shareholders;
- Established company organ which shall at least consist of:
- the General Meeting of Shareholders;
- the Board of Directors with at least 1 (one) Director;
- the Board of Commissioners with at least 1 (one) Commissioner.
- PT PMA cannot use the office address by Virtual Office service. BKPM stated that PT PMA with large capital ownership shall have a representative office, instead of a virtual office.
More specifically, the establishment of PT PMA requires its founders to acquire:
- Company Name approval.
This application is conducted with an online system that can be accessed by a notary. The Ministry of Law and Human Rights is able to reject the name for a variety of reasons. Usually the name will be rejected if it already existed or is similar to the name of another company. Based on Government Regulation No. 43 of 2011, the name of PT PMA must consist of 3 words that are appropriate and representing its sector. Such names shall not consist of numerical characters. This approval takes 3 days.
- The Deed of Establishmet of PTA Deed of Establishment of the company that has been approved by the Minister of Law and Human Rights;
- A Tax Payer Identity (NPWP) for company that has been registered and confirmed as taxpayer
It is required to obtain Tax Payer Registration Number (NPWP) and a Letter of Registered Tax (Surat Keterangan Terdaftar Pajak/SKT) at the Tax Office located at the same urban- village (kelurahan). This instrument is valid as a company’s tax ID and can be used for: proposing bank loans, obtaining other necessary company’s documents, and also company’s tax payment. To make NPWP, it takes 3 days.
- NIB and Business License trough OSS (Online Single Subsimission)
NIB is the identity of the business entity issued by the OSS Agency upon registration of the business entity by the applicant. NIB also applies as:
- The Company Registration Certificate (TDP) Number
- Importer Identification Number (API), if the company will carry out import activities
- Customs access or Custom ID (NIK), if the company will carry out cross border trading activities (export and/or import)
Futhermore, NIB serves as registration under Health and Social Security System, known as BPJS Kesehatan and BPJS Ketenagakerjaan.
- Commercial and Operational Licences
Businesses operating in sectors such as healthcare, medical devices production and distribution, and cosmetics are obliged to apply for addictional licences before starting their operations in indonesia. To begin the application process, businesses are required to comply with mandatory standards, licences, certifications and other registration of their specific business fields.
Author: Yosua Putra Iskandar