Compare Different Legal Entity Formats In Indonesia

Comparison of different legal entities in Indonesia

Legal entity in IndonesiaWhen you conduct business in Indonesia there are various options for setting up a legal entity. Most common is to register a limited liability company (PT PMA) but there are also alternatives in case your capital is limited or you can handle transactions via a foreign entity.

Most common legal entity formats in Indonesia

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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 researchLocal 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 foreigners
  • 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
Time to register

~10 weeks

~8 weeks

~6 weeks

~6 weeks

Set up with Indosight

PT PMA company registration 

Buat PT

Representative office

Representative office 

Indosight

Market entry services in Indonesia

Indosight provides legal and payroll services to companies entering and expanding in Indonesia. Get in touch with our consultants regarding our company registration, payroll, compliance or visa services.


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2 thoughts on “Compare Different Legal Entity Formats In Indonesia

  1. Christina

    Dear sir/mam,

    I would like to open trading company in Bali,Indonesia.Can you tell me the steps on how to do it and what kind of documents will be need it

    Thank you,
    Christina

    • Indosight

      Hi Christina,

      Thank you for contacting us. Our consultant will be in touch with you shortly to ask you some specifying questions.

      Lauri

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