In general, there are three legal entity options for foreigners to do business in Indonesia: local company (PT), foreign-owned company (PT PMA), and representative office.
However, many foreign investors prefer to set up a PT PMA in Indonesia as it allows up to 100% foreign ownership depending on the type of business. But before getting started with the PMA company setup, it is best to know the 7 mistakes commonly made by foreigners.
7 Mistakes when Setting up a PMA Company in Indonesia
1. No Clear Business Plan
Not having a detailed business plan when setting up a PMA company in Indonesia is a big no-no. This is because a clear business plan helps what your business activities are.
These business activities are crucial to determine what your business classification is.
While some business classifications in Indonesia allow foreigners to have 100% ownership, others may be entirely or partially close to foreigners under the Negative Investment List.
2. Not Having Enough Capital
A minimum paid-up capital of IDR 2.5 billion is required if you want to establish a PMA company in Indonesia.
However, Cekindo always encourages investors to provide paid-up capital of more than IDR 2.5 billion so that you will be able to hire foreigners and participate in the large tender. It will be difficult for you to inject more capital in the future.
3. Not Knowing Tax Obligations
Not knowing your tax obligations can ruin all your effort in establishing a PMA. Instead, you must be familiar with them or hire someone who is able to take care of all your tax matters.
For instance, once you have received your tax identification card, you must report taxes timely even though you do not have any transactions or activities yet.
Also, you must comply with related tax laws such as investment reporting, social security programs, employee health insurance, and others.
4. Not Knowing the Requirements for Work Permit and Stay Permit (KITAS) Application
Don’t be surprised that not knowing the requirements for the work permit and stay permit application is the most common mistake that many foreigners make – especially those who set up their PMA company in Indonesia for the first time.
A work permit allows you as a foreigner to work legally in Indonesia and you must obtain this permit from the Indonesian Ministry of Manpower. And a work permit is not the same as a stay permit, you will need both to be able to stay and work at the same time in Indonesia.
5. Not Doing Employee Background Check During Recruitment
An employee background check during hiring and recruitment is one of the factors to determine if your company will have the right talent to help your business grow.
Not doing so means you may hire someone who is not qualified for a specific position, or someone with criminal records that will harm your workplace safety and company reputation.
Always get a background check specialist to ensure that your potential candidates are who they say they are, and their provided information is not deceitful.
6. Not Verifying the Building Permit (IMB)
If you do not verify the building permit or IMB of your business property, chances are it may not be suitable for the type of business you are running.
In other words, it is illegal if you run your business at a property with an incorrect IMB.
Make sure you check the IMB and other related property documents carefully and completely so that you are in total compliance with the regulations.
7. Not Choosing a Reliable Agent for Incorporation
While hiring an agent is important for your company incorporation in Indonesia, choosing an unreliable one means that you will lose not only your money, but also your time, effort, and reputation.
Thus, you need to do a thorough check on your agent to make sure that they are registered professional agents in Indonesia with expertise in Indonesian laws and foreign establishment incorporation.
Experience Hassle-free PT PMA Company Registration with Assistance from Cekindo
Navigating financial and legal compliance legislations in Indonesia can be exhausting due to its complexity.
Hence, it will be a wise decision to work with a local partner to set up your PMA company in Indonesia.
With Cekindo, you will get timely expertise and assistance as our professional consultants will ensure a smooth PMA company registration process.
For many years, Cekindo has provided consulting services to help businesses successfully set up their PMA company in Indonesia.
We are experts at analysing Indonesian markets and businesses, and engaging our clients with active dialogue and detailed reports during the entire business setup and registration process.
Find out more from Cekindo. Fill in the form below.
