Table of Contents
Legal Entity Formats in Indonesia
Do you want to conduct business in Indonesia? There are various options for setting up a legal entity. The most common format used by investors who want to enter the Indonesian market is a limited liability company (PMA). However, there are alternative ways that you can consider.
Here are the most common legal entity formats in Indonesia:
Type | Limited Liability Company with Foreign Direct Investment | Local Limited Liability Company | Representative Office | Representative Office for Trading |
Indonesian Abbreviation | PT PMA | PT | KPPA | K3PA |
Allowed Activities | Can conduct all business activities within the business field it got approval for | Can conduct all business activities within the business field it got approval for | Market research local representation | Local representation |
Best option for | Foreign companies and investors looking for full or partial ownership in a company operating in Indonesia | Local investors who are not involving any foreign shareholders | Foreign companies studying the market Foreign companies who don’t need to earn revenue from Indonesia |
Foreign trading companies that don’t need to earn revenue to their Indonesian entity |
Foreign Ownership Restriction | Foreign ownership can be anything from 0% to 100% depending on the business classification. Classifications that are not in the Negative Investment List can be owned by 100%. | It cannot have foreign shareholders. Limited amount of work permits for foreigners depending on the size of capital. |
No restrictions. | No restrictions. |
Minimum Capital | Investment plan: Minimum $1.2 million USD.Paid-up capital: at least 25% of the investment plan. For some industries, the required capital is higher. | Micro: Less than Rp.50 million Small:Rp. 50 – 500 millionMedium: Rp. 500 – 10 billionLarge: above 10 billion |
No capital requirement. | No capital requirement. |
Key Benefits | It can operate fully as an independent limited liability company within the business classification. | Smaller capital requirements and faster process as long as no foreign shareholders are involved. | No capital requirement. The easiest way to have a legal presence in Indonesia. |
The license can always be extended every 3 years. |
Key Disadvantages | Large capital requirement. Ownership restricted or forbidden in some industries. |
No foreign shareholders | It cannot seek or earn revenue in Indonesia. Valid for maximum of 5 years, and cannot be extended. |
Not allowed to earn any revenue. |
Issuing Work Permits and Visas for Foreigner | All shareholders, directors, and commissioners are eligible for the work permits. Unlimited amount of business visa sponsorships. Work permits can be issued to foreign experts. |
Only Medium Size PT can apply work permit for its foreign worker. Unlimited amount of business visa sponsorships. |
Work permit for the chief representative. Unlimited business visa sponsorships. 3 Indonesians for every foreigner hired. |
Work permit for the chief representative. Unlimited business visa sponsorships. 3 Indonesians for every foreigner hired. |
Additional Licenses Required | Permanent Business License from BKPM. Import license for importers. Additional operating licenses needed for some industries |
Import license for importers. Additional operating licenses for some industries |
A representative office needs to be extended every 3 years. | |
Compliance | Monthly withholding tax report. Quarterly/semi-annual investment reporting. |
Annual tax reporting. Monthly withholding tax report. Annual tax reporting |
Monthly withholding tax report. Annual Activity report to BKPM. |
Monthly withholding tax report. Annual Activity report to BKPM. |
Duration | ±10 weeks | ±8 weeks | ±6 weeks | ±6 weeks |
Are you still thinking about the best format for your company? Contact us!