Due to its large area, tropical climate, and abundant natural resources such as oil, minerals, timber, and raw or semi-processed agricultural products, Indonesia has consistently attracted foreign investment.
Recognizing this, the Administration of Indonesia is seeking to shift the country’s industry towards a more modern, industrial and service-oriented economy, weaning the economy away from its dependence on commodity exports. These plans include policies to develop new infrastructure and long-term and sustainable growth through business-friendly taxes.
The government is also turning large cities into specialized industrial and service centers for machines, electronics, cars and auto parts. Indonesia is committed to developing its tourism and hospitality sector, which notably includes several UNESCO World Heritage Sites.
Internet penetration is high in Indonesia. With a population of over 260 million people, a growing middle class and a nominal GDP of around US$1 trillion, Indonesia is an extremely attractive place to start any business with its already large, affordable and fast-growing market.
However, Indonesia does not offer an easy way to navigate the business environment, ranking 73rd out of 190 economies for ease of doing business. Indonesia’s ranking remained unchanged at 73rd in 2019, up from 73rd in 2018. Therefore, investors should be aware and well informed about local regulations and industry demands before starting their business in Indonesia.
Why is doing business in Indonesia really profitable?
The question is far from being as idle as it might seem at first glance. Therefore, when choosing a jurisdiction for starting a biz or long-term enclosure, this island state of Southeast Asia should be considered as one of the most attractive options.
Advantages of Indonesia:
- Proximity to Asian economical and financial centers.
- Full involvement in the WTO (World Trade Organization).
- Leading positions in terms of economic development, in particular, GDP growth (7th place in the world).
- Huge potential market capacity (population – 266 million people).
- Favorable climatic conditions conducive to tourism.
- Legal regulations based on Euro-standards.
- Explored and proven mineral deposits (gas, coal, iron, aluminum, manganese, etc.).
- Ease of opening companies is enshrined at the level of legislation.
- Various preferences for startups and investors.
- The rapid development of the agricultural sector.
The country is a member of the CRS information exchange program and compliance with KYC (Know Your Customer, Know Your Customer) rules makes the potential risk of sanctions from global financial regulators and the United States extremely insignificant.
How to open a business in Indonesia?
There is not a wide variety of organizational and legal forms in the jurisdiction, so you will not have much choice. The only option provided for in the legislation is Perseroan Terbatas , which is essentially an analogue of a traditional LLC. Companies with foreign participation cannot place shares on the local stock exchange, they are allowed to work only in the investment format (PT PMA).
Types of PT (the minimum amount of the declared authorized capital is indicated):
- (SIUP Besar), 10 billion IDR (~640.000 EUR).
- (SIUP Menegnah), 5 billion IDR (~320.000 EUR).
- (SIUP Kecil), 1 billion IDR (~65,000 EUR).
What else to pay attention to:
- The minimum amount of paid-in capital is from 25% to 75%.
- In order to obtain an import license, you will need a category A or B company.
- The minimum number of PT founders is 2 (both individuals and legal entities are allowed). Any distribution of shares.
- The top managerial level consists of two boards. If there are several, the positions of president-director and president-commissioner are introduced (Direktur Utama and Komisaris Utama, respectively)
- Businesses in Indonesia and tax structure
Fees to the budget in this jurisdiction are quite high. Income tax rate – 25% or 20%. The first option is standard, all legal entities go through it. The second is applicable to those companies, 40% of whose shares are listed on the local stock exchange.
If the company’s turnover does not exceed 50 billion IDR (~3.21 million EUR), a reduced 50% rate is applied depending on the gross annual turnover. With a turnover of less than 4.8 billion (~310,000 EUR) IDR, the calculation is carried out according to a simplified preferential system, income tax is reduced to 1%.
The status of a tax resident are companies: a) registered or established in Indonesia and b) with domiciliation or address in the jurisdiction.
Foreign representative offices are subject to the same tax rates as local companies, although their ability to do business in Indonesia for sale is severely limited.
You can not pay income tax if the company incurs losses. The benefit is valid for 5 years (sometimes an extension of 10 years is allowed).
Tax consolidation and any group benefits are prohibited.
Types of business in Indonesia
Foreign citizens planning to visit Indonesia for a long period of time to resolve business issues can apply for a business visa. There are two types of this migration document:
- single – for a period of 30 days, with the right to two extensions;
- multiple, allowing an unlimited number of entries and exits with a one-time stay of no more than 60 days.
A visa business for sale in Indonesia holders is not eligible for paid employment.
