When a foreign investor or business wants to register a company in Indonesia, there are 2 types of legal entities we can help with: Foreign Direct Investment Company and Representative/Branch Office.
Foreign Direct Investment Company (PT PMA)
Foreign Direct Investment Company (or Foreign Owned Company, as we like to call) is a legal entity that can be fully owned by foreign companies or investors. However, the maximum foreign ownership is determined by the business sector and business activities. The restrictions are listed in Indonesia’s Positive Investment List. This type of entity allows foreigners to earn revenue in Indonesia.
Representative/Branch Office (KPPA)
A Representative Office is also commonly referred to as a branch office, foreign companies or investors can fully own a Representative Office. This setup works best for non-sales-related business activities (e.g.: setting up call centers, design houses, market research). It is also an interim solution for preparing the establishment of PT PMA. KPPA cannot earn revenue in Indonesia but is able to hire employees and issue work permits.
Difference Between The Two
|Foreign Direct Investment Company (PT PMA)||Representative/Branch Office (KPPA)|
|Activities||Any business activities which are not banned by Negative Investment List. Required to invest with minimum IDR 10 billion after obtaining the Capital Investment Registration or Business License, in the first 5 years. This amount is applied to one business line and will be multiplied in accordance with how many business lines needed.||Limited to the preparation of PT PMA establishment, market research, promotion, etc. Not allowed to sign any contract, issue invoice, receive payment, or even apply for any other license, such as an import license. Need to have the exact same name as the parent company.|
|Investment||More than IDR 10 billion (USD 800.000)|
|Stakeholder||Min. 2 shareholders, 1 director, and 1 commissioner All of the stakeholders can be a foreigner Local representative as the director and/or the commissioner||1 Chief of Representative Office Can be local or foreigner, except for Construction RO which shall have local chief|
|Authorized Capital||More than IDR 10 billion (USD 800 000) as the paid-up capital injected into the company’s bank account once the company is well established|
|Additional Requirement||For a business line that shall apply for Investment Capital Registration, it is mandatory to fulfill investment plan before getting Business License and running a business. For the business line that directly apply for one-year Business License, it is allowed to start running the business or apply any further license required while realizing the investment plan.|
|Tax Obligations||PPh 21 (Employee income tax) Progressive RatePPh 25/29 (Corporate income tax) Progressive RatePPh 23 (Withholding tax for service provider) 2%PPh 26 (Withholding tax for abroad services) 20%PPn (Value added tax) 10%, if tax subject is a registered VAT PayerPPh article 4, clause 2 (Witholding tax for construction) 10%||PPh 21 (Employee income tax) Progressive RatePPh 23 (Withholding tax for service provider) 2%PPh 26 (Withholding tax for abroad services) 20%PPh article 4, clause 2 (Witholding tax for Tax Obligations construction) 10%|
|Mandatory Tax Report||PPh 21, PPh 23, PPh 26, PPh 4 ayat 2 (Monthly Report)PPh 25/29 (Corporate income tax) [Annualy]||PPh 21, PPh 23, PPh 26, PPh 4 ayat 2 (Monthly Report)|
|Documentation Needed||Copy Valid Passport minimum 18 month from expiry dateCompany Legal document if the shareholder is a legal entity. (Plus Director Passport min 18 month from expiry date)Leased Agreement or Deed of sales and purchase. (only if there are plan to buy the office space)Company Address||LOA (Letter of Appointment from Director of Mother Company) legalized by corresponding embassyLetter of Intent (Legalized by corresponding embassy)Letter of statement (Legalized by corresponding Embassy)Letter of Reference (Issued by Embassy)Copy Valid Passport minimum 18 month from expiry dateCompany Legal document if the shareholder is a legal entity. (Plus Director Passport min 18 month from expiry date)Leased Agreement or Deed of sales and purchase. (only if there are plan to buy the office space)RO Company Address|
|Legal Documents Created||Notarial DeedApproval from ministry of Law and Human RightsNPWP (Company Tax Payer ID)NIB Number||NPWP (Company Tax Payer ID)NIB Number (Special for trading rep office)KPPA Permit|
|Estimated Time (after supporting documents are received)||1-1,5 month||1-1,5 month|
Foreign Company Registration
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