There are many forms of companies and incorporation in Indonesia. If certain conditions are met, expatriates can be involved in the creation of three types:
◦ Usaha Dagang (UD)
◦ Commanditaire vennootschap (CV)
◦ Usaha Dagang (UD)
◦ Commanditaire vennootschap (CV)
An expatriate who is married to an Indonesian citizen and who holds a KITAS/P visa sponsored by his/her spouse may be involved in a UD or CV that is created by their spouse.
◦ Perseroan Terbatas - Penanaman Modal Asing (PT PMA)
This is the only option for forming a company that is available to an expatriate who is not sponsored by an Indonesian spouse.
A quick overview and the pros and cons of the above:
Usaha Dagang (UD) - Equivalent to sole proprietorship, this is the simplest form of company. It is easy to establish. Any notary should be able to draw up documents for this, as well as arrange for a business permit (Surat Ijin Usaha Perdagangan, or SIUP) for a relatively low cost. The owner should also apply for a tax identity numer (Nomor Pokok Wajib Pajak, or NPWP) if s/he doesn’t have one already (the UD does not require a separate tax number). For all of those services, a notary in Denpasar, Bali charged about Rp 1.5 million (~ USD 120) in 2014. Only an Indonesian citizen can form the UD, but his/her foreign spouse can work for the UD. The UD cannot obtain the needed permits (KITAS and IMTA) to employ unrelated foreigners.
Pros: Easy to form, may employ a foreign spouse on a KITAS/KITAP without any additional paperwork, good choice for small family business, minimal asset requirements
Cons: As with all sole proprietorships, the owner shoulders all the risk, and there is no separation of assets between the business and the owner. The UD is not a legal entity. Only an Indonesian citizen can form the UD.
Commanditaire vennootschap (CV) – This is equivalent to limited liability partnership. It is probably the most common form of company after UD, although I doubt any non-Dutch speakers can even spell it correctly. Usually it is just referred to as “CV”. The CV requires at least two participants: the managing partner and a limited partner. The managing partner deals with the day-to-day operations, the limited partner provides capital and general oversight. Incorporation is fairly easy and only slightly more expensive than UD. All partners have to be Indonesian citizens.
Pros: Still easy to form, may employ the foreign spouse of the managing partner who is on a spouse-sponsored KITAS/KITAP without any additional paperwork. It’s a good choice if you need a partner to provide capital. It provides separation of assets for the limited partner.
Cons: No separation of assets for the managing partner. Not a legal entity. All partners have to be Indonesian citizens. Slightly more complicated set up than UD.
Perseroan Terbatas - Penanaman Modal Asing (PT PMA) - A full fledged Limited Liability partnership. This is the only way you can own a private business as a foreigner if you are not a spousal KITAS or KITAP holder. A foreigner can own a PT PMA outright up to the percentage allowed by Perpres [Presidential Instruction] no.44/2016 (link).
A PT PMA is much more complicated to form than the two previous options. It involves far more paperwork, the details of which are beyond the scope of this article. The biggest hurdle will probably be the capital requirement: Rp 10 billion capital (roughly USD 764,000 at August 2016 exchange rates) with Rp 2.5 billion (~USD 191,000) paid-up capital. Assistance by a law firm specializing in PT PMA is recommended, even though it further increases start up costs.
Pros: It can sponsor the foreign owner’s stay visa and work permit. There is separation of assets between the owner and the company. It may hire foreigners, provided they qualify for proper permits such as an IMTA. It is the only way for a foreigner not on a spousal KITAS/KITAP to own a company. The PMA may own assets such as property with a Hak Guna Bangunan (HGB) title, not freehold. HGB is the type of title that Indonesian businesses use to control their properties.)
Cons: Expensive and complicated start up costs, some fields are restricted, much longer start up times.
Usual legal disclaimer: While every effort has been made to make the above information as accurate as possible, the writer is not a lawyer, nor is this article supposed to be legal advice. Readers are advised to recall that Indonesian laws, regulations, and procedures can change at any time. This post was last revised in August, 2016 and was accurate to the best of the writer's knowledge at that time.
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