Starting a Business in Indonesia – Tips & Tricks

Start business in indonesia

Indonesia’s economy has seen remarkable growth in recent years, drawing in global’s business owners and investors. Given the availability of numerous opportunities for startups and business enterprises, anyone can start business in Indonesia. To establish a reputable company, one must be aware of the following simple tips. 

1. Review the Positive Investment List

To start a PT Penanaman Modal Asing (PMA) or a foreign direct investment company, you must choose the business fields you are interested in investing in. For this, you should first review the Standard Business Classification or Klasifikasi Buku Lapangan Usaha Indonesia. 

In addition, you may also need to review the Positive Investment List that came into effect on March 2021. The list includes all the business sectors available to domestic and foreign investors. Unless there are particular restrictions, all business areas are open to global investment.

2. Build the appropriate legal corporate body

The next step is to establish the correct type of company. First, foreign investors must establish a PT PMA with at least two shareholders. It can be foreign entities, individuals, or both. In order to establish a PT PMA, there must have at least IDR 10 billion in authorized capital and IDR 2.5 billion in paid-up capital.

To carry out market research, foreign investors may also need to open a representative office. International companies may set up a representative office in Indonesia, also known as Kantor Perwakilan Perusahaan Asing (KPPA). 

However, representative offices of foreign companies are generally restricted from having direct involvement in several operational activities. This may include the signing of contracts, the issuance of official invoices, and other revenue-generating conducts.

3. Take On the Paperwork

Anyone planning to start business in Indonesia must complete paperwork to legalize the company. The followings are the requirements all foreign investors or companies must fulfill before establishing a company in Indonesia:

  • Complete the Deed of Incorporation
  • Obtain approval from Indonesia’s Ministry of Justice and Human Rights (Surat Keputusan Kementerian Hukum dan HAM)
  • Apply for business tax identification number (Nomor Pokok Wajib Pajak untuk perusahaan)
  • Acquire a business license
  • Apply for a business identification number via the BKPM’s OSS 
  • Apply for an operational or commercial license (Izin Operasional/Komersial)

Apart from businesses in the mining, real estate, and financial sectors, the majority of business licenses can be directly applied through the OSS system (Online Single Submission). It’s a one-stop service center managed by Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal/BKPM).

4. Decide on the Location and Resources

Determining a location is essential in establishing a foreign company in Indonesia. Much like anything else, there are also specific regulations foreign business owners must abide by. The rules mostly pertain to what kind of business sectors are allowed to be established in certain regions. Also, the regulations differ from one area to another.

As per the Government Regulation Number 142 of 2015 and Industrial Law Number 3 of 2014, industrial operations must all be situated in the designated industrial zones. Representative offices of foreign companies must be located in an office building and can only be established in capital cities. These include Medan, Jakarta, Denpasar, and Surabaya. As for the required paperwork, you can submit it in line with the region you select for the representative office.

Aside from determining the company location, you will need to also consider the human resources. While employers can hire local labor workers, some specific positions may only be able to be filled in by foreign employees.

5. Hire a Reliable Business Consultant

Starting a corporation in a new country requires you to be mindful of many things. Be it about your business partners, how to do the legal paperwork, and so on. For that reason, it’s necessary for any newly established company to hire a reliable business consultant.

Professional and highly competent consultants can be seen through their track records. Once you have selected a consultant, always keep tabs on their work to prevent unwanted occurrences.

That’s all you need to prepare to start business in Indonesia. Establishing a company in this country is manageable so long you adhere to all the existing regulations. IZIN.co.id have years of experience aiding over 8,000 entrepreneurs starting up businesses in Indonesia. Kindly email us at cs@izin.co.id or reach out to us via WhatsApp.