As a businessman, of course, we want to get more profit. One way that can be taken is to expand the market share.
Therefore, it’s a common thing to open businesses in other countries. One of the sexiest investment destinations in Southeast Asia is Indonesia.
With more than 270 million people, of whom 20 percent are middle class, this is certainly a lucrative market. If you want to set up a new company in Indonesia, this is the guide you are looking for.
3 Different Investment Schemes
In general, every foreign entrepreneur who wants to do business in Indonesia has 3 ways to open a business.
1 Create PT PMA (Perseroan Terbatas-Penanaman Modal Asing). It’s a Foreign Owned-Limited Liability Company.
This is the only type of company where non-Indonesia citizens are allowed to become shareholders. By becoming a shareholder, you have direct access and control over the company and the directors you will appoint.
However, not all entrepreneurs can make PT PMA in Indonesia. Several requirements make some potential investors retreat, namely the requirement to have a paid capital of 10 billion rupiahs (equivalent to 700,000 USD).
The second requirement is the need for a principle clearance from BKPM (Investment Coordinating Board). Without this permit, even though legally you already own a PT PMA, your company is not allowed to operate.
This requirement was made by the government to protect small and medium enterprises in Indonesia. So that foreign investment entering Indonesia does not compete directly with existing small and medium enterprises.
When later your company is established and holds the status of PT PMA, you are required to report the progress of your business to BKPM once every 3 months.
2 Set up a Special Purpose Vehicle / Entity (SPV) company.
This company is a local PT. Then, how is it different from PT PMA? In SPV, only Indonesians are allowed to become shareholders.
Therefore, you as a non-Indonesian person can only control the company indirectly. You can use special agreements to control the company.
The advantage is, that you don’t need to provide an authorized capital of 10 billion rupiahs. In addition, there is no need to ask for permission from the BKPM. Even after the company is operating, there is no need to report once every 3 months to BKPM.
But keep in mind, that owning an SPV can be illegal. For that, you have to look for the right local partner, so you don’t violate the law.
3 Create a Representative Office.
This is a great choice if you just want to do some research in Indonesia. Because making a representative office does not need any special permission. Your home country’s company documents are sufficient for the permit.
However, representative offices are not allowed to make sales. In other words, you cannot get income in any form by opening a representative office in Indonesia.
So, in conclusion, if you have 10 billion rupiahs in your bank account, you will usually choose to create a PT PMA. Creating a PT PMA means that many administrative processes must be carried out. It’s just that, if you have that much money, of course, you can pay someone to complete the necessary administrative processes.
If you don’t have 10 billion rupiahs, but want to sell your products/services in Indonesia, you will generally make an SPV. The only challenge in creating an SPV Company in Indonesia is finding the right partner.
So, after knowing the big picture, which option will you choose?
