To be able to register and run a company in Indonesia, foreign investors can choose between three common options of legal entities, namely a foreign-owned company (PT PMA), a locally owned company (PT), and a Representative Office (RO).
Foreign-Owned Company (PT PMA)
This option is the most popular among foreign entrepreneurs as it allows up to 100% foreign ownership. To know whether a business sector or a business activity allows full foreign ownership, there is a list called the Negative Investment List.
Ever since the company registration process has been streamlined, it takes only 1 to 1.5 months to register a PT PMA. The PT PMA registration can be done online via an integrated system called the Online Single Submission (OSS) system.
Foreign investors also prefer to establish a PT PMA because it can sponsor work permits and stay visas for its foreign employees.
The minimum capital requirement for PT PMA establishment is IDR 10 billion, with the paid-up capital of approximately IDR 2.5 billion that is required to be deposited in advance.
Locally Owned Company (PT)
Unlike a PT PMA that allows foreign ownership ranging from as little as 1% up to as much as 100%, a PT allows only local ownership. In other words, the owner of a PT must be an Indonesian citizen. There are no restrictions regarding business sectors and business activities when establishing a PT.
Foreign investors who are interested in establishing a PT can do so under a local nominee arrangement that provides professional shareholder, director, and commissioner services.
In addition to no restrictions, the capital requirement for setting up a PT is much lower. The range is between IDR 50,000,000 and IDR 10,000,000,000.
Foreign business owners who wish to penetrate the Indonesian market fast can opt to purchase a shelf company, also known as a ready-made company in Indonesia. Ownership transfer is carried out within one week. After the transfer is completed, the company can be fully operational.
Representative Office (RO)
An RO is the easiest and simplest legal entity to be established for market entry in Indonesia. There is no minimum capital requirement. Furthermore, an RO does not require local shareholders and directors.
An RO also comes with its own limitations. As a representative office of a parent company overseas, it can only conduct business activities that do not generate any income or profits. For example, an RO can conduct market research, marketing activities, and sign contracts.
There are three types of representative offices in Indonesia, namely the Foreign Representative Office (KPPA), Foreign Trade Representative Office (KP3A), and Foreign Construction Representative Office (BUJKA).