Are you a foreigner looking to set up a business in Bali but is confused about where to begin with? Read on and we will help you understand the basics.

Let’s kick off this article by focusing on the “Private-Owned Company” business type in Indonesia. This entity has 3 forms and among them, the most common is what’s called a “PT (Perseroan Terbatas)”, like “LLC (limited liability company)”, as it is more widely known. This is an entity whose capital is divided into stocks or shares while the liabilities are the sole responsibility of the owner/s.

A “PT” company ideally requires that all shareholders of the company are citizens of Indonesia; this set up is called “PT Local”. So how will this setup enable you, as a foreigner, to build your business in Bali? By selecting a nominee aka Nominee company.

PT Local Nominee Company

Quick overview:

• Owner must be a local
• At least two local shareholders appointed as a director & a commissioner
• Additional foreign director and commissioner are allowed
• No minimum investment capital required

The setup of a PT Local company is relatively easy as compared to a PT PMA establishment.; however, for a foreigner to run a business under this setup, the trick is to register your company with a trustworthy local partner. Remember that you cannot appoint just anyone to be the shareholders of your company based on blind trust even when it is your good friend or someone you have already known for a long time. You do not want to imagine the worst-case scenario that could happen if someone that was once trustworthy turn their back against you. Given such risk, putting your company or business in the hands of someone else does not seem like a good idea after all.

Thus, when possible, it is always best to set up a “PT PMA” and be the owner of your own company.

PT PMA (Foreign Investment LLC)

Quick overview:

• Ideal for foreign investors who want full legal control of their business operating in Indonesia
• Full foreign ownership is possible
• Shareholders, directors and commissioners can all be foreigners
• Provide direct sponsorship, ie KITAS or Business Visa, to foreign workers and business partners
• Allows for properties and assets to be owned/leased to the company
• Highly demanding investment capacity requirement (at least IDR 10B)

A company is considered a PT PMA when there is a foreign shareholder – this is the main difference between a PT Local and a PT PMA company. A PT PMA can have foreign directors or commissioners, up to three people for each position, which later can be called as Board of Directors and Board of Commissioners. With this company setup, you have more freedom to execute your business the way you want things done; however, it is not that easy to set this up.

So how do you set up a company in Indonesia? The high-level requirements are:

1. To submit and get an approved Investment Plan to BKPM
2. To have at least 2 shareholders, 1 director and 1 commissioner
3. To commit with IDR 10,000,000,000 investment plan
4. To inject a paid-up capital/working capital of IDR 2,500,000,000 to the bank account of the company once the company is established

The cost to set up a PT PMA with the help of a business agency service is around USD 3,000 – USD 5,000 for a one-time fee. It will take around 2.5 to 3 months to set up the company until it has all the licenses. PT PMA is fully established and legal to operate once it has its deed of establishment from a notary, Ministry Approval (SK Kemenkumham), Business License Number (NIB) from the Online Single Submission (OSS) system, Tax Number (NPWP), Business Operational License (Ijin Usaha) and Domicile Letter.

For every company in Indonesia, it is mandatory to report the annual tax. The general income tax rate is around 12.5-25% of the net profit if the company’s gross revenue is above IDR 4.8 billion. A flat rate 25% is applied when the yearly revenue of the company is above IDR 50 billion. If the company’s gross income is below IDR 4.8 billion, he final income tax rate is 0.5% of the monthly gross income.

Additionally, to paying taxes, you will need to do a quarterly investment report. This report usually contains the profit and loss statement of your company, information on the number of employees, etc. This report is important as the government will see that your company is up and running instead of being a dormant company. Failing to provide such a report will attract the authorities to run an audit of your company.

Business classification for PT PMA

Every company in Indonesia needs to be registered under at least one business classification. The business classifications are determined by the activities you are planning to do. Based on the Presidential Decree No. 36 Year 2010, not all the business classifications are open 100% for foreign ownership. There are some other classifications that are closed for foreign ownership and require you to have a local partner to incorporate a company.

For example, the business classifications that are still open 100% for foreign ownership are real estate, villa accommodation, business consulting, restaurant or cafe, and trading for export/import among others. On the other hand, business classifications such as retail and beauty salons are closed for foreign ownership.

Many investors open a PT PMA company in order to start their real estate business in Indonesia. While a company establishment is not recommended nor necessary for a single property development or purchase, it may be suitable if your business purpose is to develop multiple villa projects in one of the upcoming development areas of Bali. You may purchase land titles such as HGB (Hak Guna Bangunan) directly in the name of your PT PMA company. If you’re interested to learn more about the benefits of purchasing a property via your company, please read on via this link.

Setting up a PT PMA in Indonesia can be quite a challenging experience therefore it is best to use a trustworthy agency who can help with reliable consultation and setting up the right company entity based on your needs. Do not save money on the wrong ends, you want your company to be safe and completely legal. Feel free to contact us and we are glad if we can help you further.

Sources:
http://www.dpr.go.id/dokjdih/document/uu/UU_1967_1.pdf
https://www.expat.com/en/guide/asia/indonesia/11641-setting-up-a-business-in-indonesia.html
https://www.hukumonline.com/klinik/detail/ulasan/cl3380/pendirian-perusahaan-terbatas–pt-/

Please note that Bali Treasure Properties is not a legal entity qualified to advise about setting up a company; this article intends to share a high-level guideline.