By Business Team Last updated on September 28, 2019

Legal Entity Formats in Indonesia

Do you want to conduct business in Indonesia? There are various options for setting up a legal entity. The most common format used by investors who want to enter Indonesian market is limited liability company (PMA). However, there are alternative ways that you can consider.

Here are the most common legal entity formats in Indonesia:

Type Limited Liability Company with Foreign Direct Investment Local Limited Liability Company Representative Office Representative Office for Trading
Indonesian Abbreviation PT PMA PT KPPA K3PA
Allowed Activities Can conduct all business activities within the business field it got approval for Can conduct all business activities within the business field it got approval for Market research local representation Local representation
Best option for Foreign companies and investors looking for full or partial ownership in a company operating in Indonesia Local investors who are not involving any foreign shareholders Foreign companies studying the market

Foreign companies who don’t need to earn revenue from Indonesia

Foreign trading companies that don’t need to earn revenue to their Indonesian entity
Foreign Ownership Restriction Foreign ownership can be anything from 0% to 100% depending on the business classification. Classifications that are not in Negative Investment List can be owned 100%. Cannot have foreign shareholders.

Limited amount of work permits for foreigners depending on size of capital.

No restrictions. No restrictions.
Minimum Capital Investment plan: Minimum $1.2 million USD.Paid-up capital: at least 25% of investment plan.For some industries required capital is higher. Micro: Less than Rp.50 million

Small:Rp. 50 – 500 millionMedium: Rp. 500 – 10 billionLarge: above 10 billion

No capital requirement. No capital requirement.
Key Benefits Can operate fully as an independent limited liability company within the business classification. Smaller capital requirement and faster process as long as no foreign shareholders are involved. No capital requirement.

Easiest way to have a legal presence in Indonesia.

License can always be extended every 3 years.
Key Disadvantages Large capital requirement.

Ownership restricted or forbidden in some industries.

No foreign shareholders Cannot seek or earn revenue in Indonesia.

Valid for maximum 5 years, and cannot be extended.

Not allowed to earn any revenue.
Issuing Work Permits and Visas for Foreigner All shareholders, directors and commissioners eligible for work permit.

Unlimited amount of business visa sponsorships.

Work permits can be issued to foreign experts.

Only Medium Size PT can apply work permit for its foreign worker.

Unlimited amount of business visa sponsorships.

Work permit for the chief representative.

Unlimited business visa sponsorships.

3 Indonesians for every foreigner hired.

Work permit for the chief representative.

Unlimited business visa sponsorships.

3 Indonesians for every foreigner hired.

Additional Licenses Required Permanent Business License from BKPM.

Import license for importers.

Additional operating licenses  needed for some industries

Import license for importers.

Additional operating licenses for some industries

Representative office needs to be extended every 3 years.
Compliance Monthly withholding tax report.

Quarterly/semi-annual investment reporting.

Annual tax reporting.

Monthly withholding tax report.

Annual tax reporting

Monthly withholding tax report.

Annual Activity report to BKPM.

Monthly withholding tax report.

Annual Activity report to BKPM.

Duration ±10 weeks ±8 weeks ±6 weeks ±6 weeks

Have any questions regarding Legal Entity Formats in Indonesia? You can contact us anytime at indonesia@viettonkin.vn our consultants are always ready to help you to find the best options that fit your business.