When talking about starting a business in Indonesia, three major company establishment options exist in Indonesia. The options are local limited liability company (PT), foreign limited liability company (PT PMA), and representative office (RO).
Each of these options has its pros and cons and there is no doubt that establishing a local PT company makes it easier for business owners to penetrate the market faster and interact with prospective customers.
If you are a foreigner looking to register a local company in Indonesia, it is not entirely impossible – only if you know the particulars and get the facts right.
In this article, Cekindo will only discuss facts about the local company in Indonesia.
Facts of Local Company Establishment in Indonesia
1. A Local PT Company Requires 100% Local Ownership
The laws in Indonesia do not permit foreign ownership for a local PT company.
To put it another way, all shares in a PT must be 100% owned by Indonesian individuals or corporate entities.
Due to this restriction, some foreigners are not able to be involved in certain sectors as they are only open to local PT companies.
2. The Ideal Solution for Foreigners to Set up a PT Company: Special Purpose Vehicle Arrangement
In some cases when foreign investors want to go ahead with the local company establishment in Indonesia, there is one way they can do it: a Special Purpose Vehicle arrangement.
The reason for foreigners to open a PT company is to get involved in particular business sectors that are close to foreign investments.
A Special Purpose Vehicle arrangement means that an Indonesian partner will serve as the shareholder of the PT company on behalf of the foreigner.
3. Foreigners can Enjoy Lower Paid-up Capital Requirement of Local PT
Local company establishment in Indonesia requires significantly lower paid-up capital than a foreign entity:
- Micro company: less than IDR 50 million
- Small company: IDR 50 million to IDR 500 million
- Medium company: IDR 500 million to IDR 10 billion
- Large company: more than IDR 10 billion
4. The Setup Process of a PT Company is Simpler and Shorter
Starting a local PT company involves the following process and it generally takes approximately 30 – 45 business days:
- The Ministry of Law and Human Rights will approve the company name
- The Notary will prepare the Association Article
- Acquire Deed of Establishment from the Ministry of Law and Human Rights
- Obtain a domicile certificate from the local government office
- Obtain taxpayer identification number and value-added tax number at the local tax office
- Acquire trading business license (SIUP)
- Obtain company registration certificate (TDP)
5. A Local Company can Hire Foreign Employees
If you set up a local company and you have a medium-sized or large-sized company with a paid-up capital of more than IDR 10 billion, you can hire foreign employees.
However, you need to secure a relevant business visa and work permit in Indonesia to do so.
How Cekindo can Assist with PT Registration in Indonesia
Being the largest economy in Southeast Asia and one of the fastest emerging market economies in the world, Indonesia offers foreigners better access to more business sectors and venture capital when setting up a local company.
Cekindo is one of the most professional and innovative firms for company establishment in Indonesia. We have redesigned the company setup experience for this modern era and benefited many of our clients.
By leveraging deep expertise and cutting-edge technology as well as an expansive local network, we make company setup services more accessible and cost-effective.
And of course, we want to work with some of the most aspiring entrepreneurs in the world just like you. Start your local PT establishment in Indonesia today by connecting with one of our expert consultants.