Types of Companies in Indonesia of Interest to Expats

dafluff

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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)
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.

Questions/Comments/Corrections? Please add them below!
 
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Macedonian

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Thank you for the information dafluff.
Its good to know the types of companies that foreginers can work in i mean expats. I might set one in the future and i do also hope that indonesia will be more liberate with the expats in the future and will open the doors for us to help them develop and move forward.
 

pinky321

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Based on Peraturan Menteri Ketenagakerjaan No 16 Tahun 2015 Pasal 4 Ayat 2
"Pemberi kerja TKA yang berbentuk persekutuan perdata, firma (Fa), persekutuan komanditer (CV), dan Usaha Bersama / Associate (UB), Usaha Dagang (UD), dan koperasi dilarang mempekerjakan TKA kecuali diatur dalam undang-undang"

In English:
TKA (foreign workers) employer in the form of a civil partnership, firm (Fa), a limited partnership (CV), and the Joint Business / Associate (UB), Trade Enterprises (UD), and cooperatives are prohibited from hiring foreign workers unless regulated by law

Here is the regulation link:
http://tka-online.naker.go.id/pdf/PERMEN_16_TAHUN_2015.pdf

So, only Local PT with SIUP Besar (capital requirement Rp 10 billion excluding land and building) and PMA (capital requirement Rp 10 Billion with Rp 2.5 Billion paid up capital) which allow hire Expats.
 

SydWesMel

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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. It is much more complicated to form than the two previous options. It involves far more paperwork, the details which is beyond the scope of this article. The biggest hurdle will probably be the capital requirement: Rp 10 billion capital, with Rp 2.5 billion paid-up capital. Assistance by a law firm specializing in PT PMA is recommended, eventough it further increases start up costs.
I have received mixed messages on the requirement to prove the paid up capital. Some have said that all you need is a stat-dec stating the capital is paid up. Others have said you need to show a bank statement.

Thoughts?
 

dafluff

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I have received mixed messages on the requirement to prove the paid up capital. Some have said that all you need is a stat-dec stating the capital is paid up. Others have said you need to show a bank statement.

Thoughts?
It used to be you could simply say that you will pay up the capital. More recently they are insisting on actually seeing the money (ie. bank statement).
 

R Cameron

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It used to be you could simply say that you will pay up the capital. More recently they are insisting on actually seeing the money (ie. bank statement).
I promise I'm not trying to be difficult, but could you tell us more about your source(s) for that? Do they want to see it in a foreign account, since before getting the business setup you can't get a local business banking account?
 

Brian

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What about KPPA and K3PA?
Are they the same thing?

I read that they are not allowed to have income in Indonesia, so where does the money come from?

If it is injected by the shareholder, in what capacity do they inject the fund? shareholder loan? capital injection?

Can shareholders be a foreign individual or company?

Does it require any local ownership?
 

pinky321

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Generally, all you need is make a statement letter your capital with your notary, since you just begin to set up company documents.
Once you already have a domicile letter, then you can open local bank account.


I have received mixed messages on the requirement to prove the paid up capital. Some have said that all you need is a stat-dec stating the capital is paid up. Others have said you need to show a bank statement.

Thoughts?
 

SydWesMel

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I received the advice from a couple of companies that act as agents to setup foreign owned companies. The advice seemed to change depending on who you spoke to in the consultancy.

KPPA & K3PA - as far as I am aware is a representative office. This allows you to hire staff and run limited operations within Indonesia. However you cannot perform work for local companies (cannot invoice or receive payment). The purpose of this company is mainly to perform research on setting up a PMA. We used this initially.

The representative office is not in a sense a local entity - just an extension of your foreign company (i.e. Australian Pty Ltd). You do not have local ownership of a representative office and must introduce all operating funds into the country.

There is a lot of info available on this in other parts of the forum.
 

dafluff

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I promise I'm not trying to be difficult, but could you tell us more about your source(s) for that? Do they want to see it in a foreign account, since before getting the business setup you can't get a local business banking account?
This was from my notary last time I talked to him, I will go give him a shout and ask more specifically what the steps are. I wasn't setting up a PT PMA at the time, so it was just a conversation in passing.
 

dafluff

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What about KPPA and K3PA?
Are they the same thing?

I read that they are not allowed to have income in Indonesia, so where does the money come from?

If it is injected by the shareholder, in what capacity do they inject the fund? shareholder loan? capital injection?

Can shareholders be a foreign individual or company?

Does it require any local ownership?
Both of those are local representative offices for a foreign company. They have very limited functions. KPPA is a foreign company representative office, and its main function is to prepare for a PT PMA set up. K3PA is a foreign company trade representative, and their function is to promote/market the parent company's product. As these are owned outright by their parent company, I don't think there are any local shareholders.
 

R Cameron

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Both of those are local representative offices for a foreign company. They have very limited functions. KPPA is a foreign company representative office, and its main function is to prepare for a PT PMA set up. K3PA is a foreign company trade representative, and their function is to promote/market the parent company's product. As these are owned outright by their parent company, I don't think there are any local shareholders.
Additionally, my understanding is that KPPA is only for a few (3?) years maximum, but K3PA can be extended indefinitely. K3PA also looks appropriate for foreign companies wishing to purchase goods from Indonesia and wanting a representative office to oversea the manufacture and/or purchase.

Scope of Activities

Based on the Regulation of Minister of Trade No. 10/M-DAG/PER/3/2006 concerning Terms and Procedures of Issuance of Trade Representative Business License, the opening of Trade representative office may be in the form of Selling Agent and/or Manufactures Agent and /or Buying Agent.

The Trade Representative Office is permitted to:
1.introduce, promote and improve the marketing of products that manufactured overseas by Foreign Company or Groups of Foreign Companies;
2.provide information or instruction regarding the usage and import of such products to the company or user; (In this regards, the Trade Representative Office shall appoint national company as an agent for the products that promoted, and the appointment shall be based on the approval from the Foreign Company or Groups of Companies);
3.conduct market search and supervise the sales of product in relation to the promotion of the products in Indonesia;
4.conduct market research in relation to supplying of products from Indonesia as required by the principal company;
5.liaise and provide information and guidelines to any prospective Indonesian counterpart on the requirements for the exportation of products;
6.conclude contracts with an Indonesian entity or business counterparts on behalf of the principal company in relations to exportation.

Trade Representative Office is prohibited to conduct trade and sales transactions, in the initial phase up until the completion phase, such as conducting tender application, signing contract, conducting claims and others.

Source:
https://www.hg.org/article.asp?id=6084
 

kroshka

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Does anybody in here have experience with opening a representative without using an agent/consultant? As this is something a foreign company is doing, I would presume, and hope that it can be done without local help.. like the procedure is clean, and documents in English.. I believe lots of initiatives have been made the last couple of years to make these kind of things more "smooth"

Appreciating you input
 

PhilippeD

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CV - Pt PMA... doesn't it have the PT in between them?

Can't be use by a foreign but can be use by an Indonesian spouse
 

Geodaddy

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How about the Indonesian spouse starts a normal PT. Is the foreign spouse allowed to be employed in the family business without issues similar to UD and CV?
 

marsel

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Based on Peraturan Menteri Ketenagakerjaan No 16 Tahun 2015 Pasal 4 Ayat 2
"Pemberi kerja TKA yang berbentuk persekutuan perdata, firma (Fa), persekutuan komanditer (CV), dan Usaha Bersama / Associate (UB), Usaha Dagang (UD), dan koperasi dilarang mempekerjakan TKA kecuali diatur dalam undang-undang"

In English:
TKA (foreign workers) employer in the form of a civil partnership, firm (Fa), a limited partnership (CV), and the Joint Business / Associate (UB), Trade Enterprises (UD), and cooperatives are prohibited from hiring foreign workers unless regulated by law

Here is the regulation link:
http://tka-online.naker.go.id/pdf/PERMEN_16_TAHUN_2015.pdf

So, only Local PT with SIUP Besar (capital requirement Rp 10 billion excluding land and building) and PMA (capital requirement Rp 10 Billion with Rp 2.5 Billion paid up capital) which allow hire Expats.

Thats correct, but Dafluff said something different
" 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", witch is is different by hire a foreigner, just means that the foreigner can partecipate with the UD/CV of the spouse without to be hired nor have a salary.

 

Matthew_28

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I have discussed with my Indonesian lawyer, he said there are some new regulations issued by the govt. Like OSS, and no need principal license for PT PMA
 

jstar

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Commanditaire Vennootschap.
although I doubt any non-Dutch speakers can even spell it correctly.
True, they always write vennotschap (one o). I do think it’s a legal entity since a CV can even have PT’s as subsidiaries?

Good thread btw. ??
 

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