How to Start A Business in Indonesia as Foreigner?

If you looking to set up a business in Indonesia and wonder what are the steps for that then you find the right article to answer your question. It is a fact that setting up a business in Indonesia is not as easy as it is in top investment country destination such as Singapore, Hong Kong, West Europe and United States. This is reflected by relatively low position of Indonesia in Ease of Doing Business Index at 73rd place compared with Singapore (2nd), Thailand (21st), and Malaysia (12nd).

However, Indonesia have strong selling point with its’ position as 4th largest population in the world, and good demographic profile which reflect huge potential for good investment. In addition, the government continues to improve Indonesia competitiveness and making procedure for investment easier for foreigner and citizen alike with digitalization and reform. Now if you want to enter Indonesia market you can follow these steps on how to start a business in Indonesia as foreigner.

1. Check Your Business Investment Requirement in Government Positive List

To conduct a business as foreigner in Indonesia you need to set up Perseroan Terbatas Penanaman Modal Asing (PT PMA). Before establishing a PT PMA, founder need to specify what business PT PMA will do in Indonesia. However, for certain business sector government may require specific requirement for PT PMA to be able to conduct business in that sector such as limited foreign ownership, rural investment location, or partnership with local SMEs. This specific requirement is contained in Presidential Regulation No. 49 of 2021.

If your prospective business sector does not have any requirement in or does not listed in the regulation then that business is open for 100% foreign investment. However if the regulation list maximum foreign ownership for that sector then you will need a local partner to set up a joint venture PT PMA.

2. Work With Legal Consultant

After you identify whether there is a specific requirement or not in the presidential regulation, the next step will be finding legal consultant that you can trust. While legal consultant is not mandatory, it is advisable for you to use legal consultant in the process. Legal consultant can save you a lot of time and hassle of the process. Legal consultant also allow you to make sure that your business are comply with all regulation and mitigate any legal risk.

3. Establishing PT PMA

The next step on how to start a business in Indonesia as foreigner is establishing PT PMA as your business vehicle. In order to establish a PT PMA you need to contact a Notary that have territorial license in the location where you intended to conduct its business. For example, if you want to open a restaurant in Denpasar Bali then you need to find Notary in Denpasar. For your reference PT PMA have minimum capital requirement namely:

• Minimum 2 shareholders
• Minimum authorized capital of IDR 10 billion/+- USD 660.000 (note: authorized capital represent maximum shares that the company can issue based on the deed of establishment)
• Minimum paid up capital of IDR 2.5 billion/ +- USD 165.000

In addition to the above you need a local address for your company. Please be informed that the address cannot be a residential address. This process does not as complex as your Notary will do most things that required. This step often need 1-2 weeks.

4. Obtaining Licenses

After you established your PT PMA you need to obtain required licenses such as NIB (Nomor Induk Berusaha), Tax ID (NPWP), and others. In order to obtain the licenses you can use OSS system. From there, you will obtain your NIB and any other licenses you may need. You can also request your Notary to handle this step for you. This step can take between 1-2 weeks.