The Canadian Trade Commissioner Service
An Investment Guide to Indonesia
The Canadian Trade Commissioner Service (TCS) can play a pivotal role by facilitating Canadian clients' investments in foreign markets
http://www.tradecommissioner.gc.ca/eng/document.jsp?did=133467#toc24
Table of Contents
2. Procedures to Establish Foreign Enterprises
Foreign investors have several options when entering the Indonesian market.
Representative Offices
A company may establish a representative office. The representative may be Indonesian or an expatriate. A license from BKPM is required. The office can undertake sales promotions, market research and assist local agents or distributors, but may not generate revenue.
Limited Liability Companies
For direct capital investment, the investor must establish a corporate entity known as a "Penanaman Modal Asing" (PMA) in accordance with the 2007 investment law. The entity takes the form of a limited liability company(PT),and can be either wholly-owned by the investor or with a local partner.
Permits
Investors usually first obtain a principle licence from BKPM, which is valid for three years, while they prepare to start commercial operations, at which time they apply for a permanent license. Companies are advised to engage lawyers or consultants to assist in navigating this process.
To establish a PT company and obtain a principle license, which BKPM says will take 10-14 days, the investor must:
Submit its investment application containing information about the investment plan. The components of the application include the legality of the prospective investor and the investment plan (planned capacity, diagram or flowchart of production, marketing plan, number of employees, capital), with required documents
Once the company is ready to start operations, it must apply for its permanent license, a process that can take up to 70 days. The process involves:
- Securing approval for the company's official name from the Ministry of Justice.
- Establishing articles of association through an Indonesian notary public.
- Registering the company address with the Kelurahan (the lowest level of government administration).
- Obtaining a tax payer registration number (NPWP) and Value-added Tax number from the Taxation Directorate General.
- Placing initial capital at the bank.
- Paying non tax state revenue (PNBP) for legal services at a bank.
- Registering at the Ministry of Justice and Human Rights to secure approval for the establishment of the company.
- Securing a company registration number from the Trade Ministry.
- Securing the permanent business trading license (SIUP) from the Trade Ministry.
- Registering at the Ministry of Manpower
- Registering with the worker's insurance program (Jamsostek).
The next step is to submit the permanent license application to BKPM, or the Office of the State Minister for projects in bonded areas, with the required documentation. The permanent license is valid for 30 years.
Investors are required to submit regular investment reports to BKPM (semi-annually for companies with their principle licenses and annually for those with permanent licenses) using BKPM templates.
Land Use
Foreign individuals are prohibited from having direct freehold ownership of land. Freehold title may only be held by Indonesian citizens or by Indonesian entities that are 100% owned and controlled by Indonesian citizens. The 2007 investment law outlines different types of land rights available to investors:
- HGU is the right to exploit land that is owned by the state for farming, fishery and livestock purposes.
- HGB is the right to construct and own buildings on land owned by the state or individuals and which are not farm lands.
- Right to Use is the right to use and/or earn income from land owned by the state or individuals. The stipulation on the right to use is set by a relevant official or under an agreement with the land owner. The right to use is given for a certain period or as long as the land is used for certain purpose.
HGU and HGB rights can be held by Indonesian citizens and corporate bodies that are established under Indonesian law and are based in Indonesia (including PMA) but not by foreign individuals or foreign representative offices. This right could change hands during the contract period.
Right to Use can be held by Indonesian citizens and corporate bodies that are established under Indonesian law and are based in Indonesia (including PMA) as well as by foreign individuals or representative offices. If the land belongs to the state, the Right to Use can be transferred to another party with approval of the relevant government official. The Right to Use land belonging to individuals can also change hands.
Table- 5.1
Land rights
| Right over land | Description |
|---|
| a. Right to cultivate (HGU) | 60 years with possible 35-year extension. |
|---|
| b. Right to build (HGB) | 50 years with possible 30-year extension. |
|---|
| c. Right to use | 45 years with possible 25-year extension. |
|---|
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FAQ
http://www.healyconsultants.com/company-incorporation/indonesia-faqs.html
What is the minimum number of shareholders required for an Indonesian company?A minimum of two shareholders is required.
What is the minimum number of directors required for an Indonesian company?Under statutory regulations, an Indonesian company requires a minimum of two directors.
Are shareholder/director details available for public viewing?Yes.
What are the minimum capital requirements for an Indonesian PT.PMA company?
An Indonesian wholly-owned foreign company has a minimum share capital requirement of 877 million rupiah (US$100,000).
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Company Registration Formalities in Indonesia PT.PMA
Most investors choose to use a professional services Firm to handle all formalities related to Indonesia business start up, which include:
- Arranging for company shareholders to sign a Deed of Establishment before an Indonesian notary.
- Applying for company name approval to the Ministry of Justice and Human Rights.
- Obtaining a Certificate of Company Domicile from the management of the building in which office space is leased or where the registered office is located.
- Arranging for the notary to prepare the Deed of Establishment by electronically filing the bank account certificate, tax registration certificate and Certificate of Company Domicile at the Ministry of Justice and Human Rights.
- Registering the company at the Department of Trade.
- Arranging for the notary to publish the company’s Articles of Association in the State Gazette. The application is submitted to the State Printing Company, which usually takes 2 to 3 months to publish the notice. Until this is done, the company is unable to begin trading.
- Registering the company with the Ministry of Manpower (if it employs more than 10 staff).
Because of the complications of Indonesia business set up as described above, it is normal for most entrepreneurs to hire the services of a Firm to project manage all formalities. This Firm will i) incorporate the company ii) open a corporate bank account iii) obtain employment permits for expatriate staff, and iv) assist with tax and accounting obligations.
CHALLENGES OF INDONESIA COMPANY REGISTRATION
Indonesia company incorporation is challenging for foreign investors. Inconsistent legal frameworks and procedures, a lack of transparency over incorporation procedures and costs, and the ever-present prospect of corruption combine to make Indonesia one of the most difficult investment locations in Southeast Asia.
The following is an overview of the Indonesian corporate entities available to foreign investors, as well as Indonesia company registration requirements.
- Indonesia company formation is hampered by foreign investment restrictions, erratic law enforcement, uncertain government costs and a lack of regulatory transparency. In terms of the ease of doing business, Indonesia is poorly ranked at 121st according to the 2011 Doing Business Survey by the World Bank. The survey measures factors including business start up procedures, time, cost and minimum capital required to start a business.
- Indonesia poorly ranks as the 110th least corrupt country in the world, according to the 2010 Corruption Perceptions Index by Transparency International, a global measure of corruption amongst public officials and politicians.
- An Indonesian company is liable to pay a corporation tax of 25% on income sourced in Indonesia and internationally. Capital gains are taxed at 20%. Additionally, Indonesia is poorly ranked as the world’s 116th freest economy in the Heritage Organization’s 2011Index of Economic Freedom, a measure of freedom enjoyed in business, trade, monetary, financial, investment and labour markets.
- Indonesia remains blacklisted by the Financial Action Task Force (FATF) on Money Laundering, making it difficult to open corporate bank accounts following Indonesia company registration process.
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BKPM - NEGATIVE INVESTMENT LIST - YATIRIM YAPILAMIYACAK YADA KISITLANMIS ALANLAR
On May 25, 2010, the Government of Indonesia issued decrees establishing a new list of sectors that were either wholly or partially closed to private foreign and/or domestic investment called the Negative Investment List, known as the acronym DNI.
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| Incorporation of Foreign Company Investment (PMA Company) in Indonesia |
http://www.wijayaco.com/index.php/library/29-incorporation-of-foreign-company-investment-pma-company-in-indonesia-
Thursday, 03 September 2009 00:00 | Written by Wijaya |
 Business activities in Indonesian may be carried-out in the form of a sole proprietorship, a general or limited partnership or one of a various number of corporations. However foriegn capital investment (so called "PMA Company") in Indonesia may only conducted in form of a limited liability company, being established and existed under the Indonesian laws and havin its legal domicile within the Indonesian territory.
The limited liability company (Perseroan Terbatas, so called "PT") is the most ideal vehicle for direct foreign investment because of its nature as an association of capital with objection to make profits and the laws on establishment of other type of legal entity does not accomodate foreign investors.
An application to the Investment Coordination Board ("BKPM") is necessary in order to have a foreign capital investment. A letter of approval (Investment license) will be issued by the Head of the Investment Coordinatong Board to the applicant after all of the requirements have been completed and fulfilled.
 Form of Foreign Capital Investments
Foreign Capital Investment may be conducted in the form (1) Joint ventures between foreign capital and capital owned by Indonesian citizens and/or Indonesian statutory bodies. Under the current applicable regulation, the foreign party may have 95 % of the share in the Company, and at least 5 % of the share shall be owned by Indonesian citizen or legal entity; (2) Direct Investments, which the entities capital being owned by foreign legal entities, whether it is a foreign citizens or foreign statutory bodies.
A foreign entity may invest their capital through several ways, e.g. purchasing an existing company, wholly or partly as well as setting-up a whole new company.
Incorporation of a Limited Liability Company
In order to incorporatea limited liability company, the company shall at least require two legal entities (persons or business entities) or more ("Founder") using a notarial document written in Indonesian language. The founder may be represented by its attorney or proxies. Each founder of the company shall get their part of the company shares at the time the company is incorporated.
 Deed of Incorporation
The notarial document which in this matter is the Deed of Incorporation shall contain the company articles of associations and other relevant information, at least information regarding personal or company profile of the founder, member of the board of directors ("BoD") and Board of Commissioners ("BoC") of the company for the first time appointed and name of shareholders and the shares that they hold, objectives and purposes of the company.
Approval from the Minister of Justice
In order to be able to commence its business legitimately, a company must apply for an approval of its incorporation from the Ministery of Justice ("MOJ"). It is then considered as a corporate body/legal entity. Normally, the MoJ shall grant the approval no later than 60 days after the receipt of the complete application. Once it is approved, the BoD of the company must register the company to the Company Registry Office in oder to be registered within the List of Company. After it has been registered, it will be announced within the Supplement to the Gazette of the Republic of Indonesia. As long as the registration has not yet been made, the BoD shall collectively be held responsible for all legal acts conducted by the company.
 Limitations
Certain industries are entirely closed to foreign capital investment, the most notable being industries vital to the national defense, e.g. industries producing arms, ammunition, and military equipment. Large sectors of trading and distribution business, particularly domestice retail trades, exports and import are largely closed to foreign capital investment. The government gradually issue and publish a list of business sectors absolutely restricted as well as business sectors that are open but with certain conditions for foreign and domestic capital investment.
In regards to sales activities (merchandise selling), trading and its supporting services are restricted to foreign investment except for large retailers (superstore, shopping mall, etc), large scale trading (distributorship/wholesaler), restaurants, quality certification services, market research services and after sales services are opened for foreign investment. However these sectors are opened with certain conditions set-up by other relevant regulations.
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