Why Register a Company in Indonesia

Indonesia is a large archipelago consisting of nearly 20,000 volcanic islands. They are rich in mineral resources: oil, natural gas, and coal are mined in Indonesia. In addition, the country is one of the largest exporters of cacao beans, coffee, and tea.

Indonesia is classified as a developing country but it has the third largest economy in Southeast Asia trailing only to China and India. One of the special characteristics that the country possesses is a large spectrum of opportunities that it offers to foreign investors. They can engage in almost any kind of business activity but many foreigners choose to offer products and services to local consumers. They do so because the authorities of Indonesia offer them serious incentives in exchange.

As the labor force is inexpensive in Indonesia, it makes good sense to build manufacturing facilities there.

The official language is Indonesian and the official currency is the Indonesian rupiah. Only 30% of the population have some knowledge of the English language and they are highly qualified workers.

The most promising business areas are the tourist and the hospitality industries. You should bear in mind that you might face some cultural specifics if you decide to launch a company in Indonesia. There you will find corruption and strange interpretation of some laws.

If you would like to open a company in the region but you don’t want to deal with corrupted government officials. Singapore should be your choice even though a considerably large amount of investment would be required. Please read a review from an expert team about the differences between starting a company in Indonesia and in Singapore. Here we will continue with Indonesia.

Advantages that Indonesia offers

Notwithstanding some cultural aspects, establishing a company in Indonesia can be highly beneficial for a foreigner. The main advantages of doing business in the country include the following ones:

A growing economy: year after year, the Indonesian economy has been growing at a faster rate than expected;
A fast rate of the GDP growth is an indicator of a stable economy;
The list of bilateral treaties on double taxation avoidance signed by Indonesia has been growing: the number of countries now exceeds 60;
Foreigners can work in almost any business segment and in some segments, they can be full owners of companies;
Large population: Indonesia is the fourth most populated country in the world;
Acceptable company maintenance costs: they are significantly lower than average;
Competitiveness of the country in many spheres: it ranks the 34^th most competitive country on the planet;
Indonesia is the only ASEAN country that is a member of G20.

We must also note that the country is a WTO member, which would certainly simplify building a business there.

Another advantage that Indonesia offers is the opportunity to set up a company in one of the Special Economic Zones. Resident companies can use significant tax incentives available in the Zones.

Pluses for the foreign investor

You will find the following properties in Indonesia if you decide to start a business company there:

High capacity of the local market: the lion’s share of the economy is aimed at local consumers. The consumption level is constantly growing and the tendency is going to continue, according to the experts.
Good prospects for businesses in such areas as agriculture, manufacturing, construction, and the service industry: these segments are highly profitable and they are filled only to 1/3.
Advanced modern infrastructure: Indonesia cannot be referred to as a rich country but the business environment is highly comfortable there.

Last year, the country launched a foreign direct investment support program. Government support is available in any sector of the economy. Non-resident entrepreneurs making long-term investments now enjoy a large array of benefits and preferences.

Requirements to company founders

The requirements are rather lax. To start a company in Indonesia, a foreign national has to do the following:

Choose a name for the company; and
Decide on the form of company ownership.

The company name should contain several words, three being the optimal number. The name can be in English or Indonesian but local government officials appreciate it when a foreign company founder suggests the company name in the two languages at a time. They feel the foreigner is paying respect to their national traditions.

Regardless of the form of company ownership that you choose, you have to have a functional office in Indonesia. The local authorities will want to ascertain that your company office is functional indeed: an inspector is going to pay a visit to your company office to see if you have people working on business tasks there.

Minimum requirements that you have to meet to start a company in Indonesia:

There has to be at least one company director (a natural person);
At least one company officer;
The authorized capital has to be at least US$ 200,000.

A quarter of the authorized capital has to be in a bank account at all times.

Officially, the company registration timeframe is 6 weeks in Indonesia. In practice, however, the process can span over 2 to 3 months. The company registration fee will depend on the form of company ownership but an administrative fee of 200,000 rupiahs is payable in any case.

Specifics of opening a bank account in Indonesia

Not all banks in Indonesia will open corporate accounts for foreign companies. Therefore, you have to find a bank that would agree to take you onboard in advance. Now there is a specific difficulty related to setting up a corporate bank account in Indonesia.

The company has to be already registered to be able to open a business account. But when applying for company registration, you have to supply a document from a bank, a sort of letter of consent to provide banking services to you. Thus, when your suggested company name has been approved, you have to bring the following documents to the bank managers:

A document certifying the company name approval;
Copies of all application documents.

When the bank manager has these documents, he or she can sign a letter that gives provisional consent to provide banking services to you. This will suffice for the company registration authorities. When the company registration process is over, you will have to pay another visit to the bank and set up an account for your company there.

Taxes in Indonesia

Indonesia could not be referred to as a low-tax country. Foreign companies have to pay the following taxes there:

Corporate tax of 20% on net profit;
10% VAT (it is mandatory);
Tax on dividends – 20%;
Tax on interests – 20%;
Tax on royalties – 20%.

The taxes are 5% to 7% lower for fiscal residents of Indonesia.

Money repatriation

No currency control is applied in Indonesia and there are no official obstacles for transferring Indonesian-earned money to other countries. However, every bank will have its internal regulations and you have to find out about them in advance.

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