This article is the result of numerous questions from expats regarding the setup of a company and the function of The Negative List. It describes the establishment of the PT PMA, as many expats actually don’t have a clue and their surf journeys on the Internet have made them even more puzzled.
Below we will clarify that the process is certainly comprehensive, but easy to understand; actually only demanding a lot of paperwork and accurate homework.
What kind of expat wants to set up a company in Indonesia? There are several groups; we name the most common ones. See if you belong to one, and if not, you can still use this article to get an idea of the process:
- Expats at the end of their employment agreement and who don’t want to leave Indonesia yet, for their own reasons.
- Expats already legally living in Indonesia who want to set up their own company, as a side job.
- Foreigners (investors) still abroad, who want to invest in Indonesia.
- Expats who want to own a house or apartment without nominees.
There are two different types of companies suitable for expats. Both are legal limited liability companies, know with the abbreviation PT (Perseroan Terbatas).
- The PT PMA or foreign direct investment company, for expats who want to invest with their own money, own the shares themselves, work in the company themselves and don’t want to have to deal with nominees or other legal constructions. In short, expats who want a transparent and direct ownership.
- The PT PMDN or local company, for expats who aren’t using local Indonesians as nominees. In this article we only handle the PMA.
On the Internet one can find numerous articles about how to establish a company, some with detailed information, and if one wants to know more, just surf your new company together. We recognize four phases in the setup of a company.
General overview of company setup phases and the respective documents (licenses, permits, registrations) needed.
*This article is for expats with a desire to establish small- or medium-sized companies, so we cease discussing the large company requirements and the special documents those companies need. We use abbreviations, as most Indonesian stakeholders only know these Indonesian abbreviations.
Realize how many documents are actually needed; 11 for the establishment of the company and 24 if expats are hired. All applications go with attachments and this is only for a normal company:
- Application and registration of company name (BP Nama)
- Submission of investment application with BKPM
- Presentation of Investment
- Initial Approval from BKPM (Izin Prinsip)
2. Establishment phase
- Draft of the Articles of Association (AoA)
- Deed of establishment from notary (Akta Perusahaan)
- Approval and legalization of Deed and AoA from Minister of Justice (SK)
3. Registration phase
- Letter of Domicile of company (LOD)
- Tax Identification Number (NPWP)
- Tax Registration Letter
- Company registration (TDP)
4. Hiring expat staff case
- Compulsory employment report (WLK)
- Companies Foreign Employees Plan (RPTKA)
- Statement of obligation to pay and proof of payment of DPKK
- Health insurance statement (BPJS certificate)
- Actual work permit (IMTA)
- Approval of the Director General of Immigration to work (Telex approval)
- Limited stay visa to work (VITAS)
- Stay permit (KITAS)
- Multiple exit and re-entry permit for Indonesia (MERP)
- Registration of your address with the local police (STM)
- Temporary ID card (SKTT)
- Certificate of Registration of Temporary Residents (SKPPS)
- Registration of the existence of the employee (LK)
THE NEGATIVE LIST for foreign direct investment
Where, in all this, does the New Negative list no. 44 of 2016, published on 24 May 2016, for Foreign Direct Investment fit in?
This negative list is a regulation that determines which business fields are open for investment and under which restrictions. Nothing more and nothing less.
*An English translation of this list is available online by SSEK, an Indonesian Legal consultants firm: www.ssek.com/download/document/Presidential_Regulation_44_of_2016_(2016_Negative_List)_English_151.pdf)
The forbidden (closed) fields are areas where a common expat cannot be involved in, such as casinos and gambling, historical and archaeological remains, telecommunications stuff, and the manufacture of chemicals and liquor (alcohol). Though alcohol we are still allowed to drink!
The following business fields are allowed with restrictions in the sense that you have a local partner owning some shares. The decisive factor is the KBLI number of the business field.
- Maritime and Fisheries
- Energy and Mineral Resources
- Defence and Security
- Public Works
- Tourism and Creative Economy
- Communications and Informatics
If the specific business field (look for KBLI number) in which you want to be active is not listed, the business activity is free.
Using the negative list is simple and one doesn’t need to see this list as a major hurdle to invest in Indonesia. Just choose the business field in which you operate in the Indonesian Standard Classification of Business Fields (KBLI).
Your agent can only help you satisfactorily if you have done your homework and determined which business field is applicable.
Some activities such as direct selling are ousted, so companies can legally operate as 100 percent foreign owned companies. Other sectors, such as warehouse distribution, travel agencies, and telecom services have had their maximum allowance level of foreign investment increased to 67 percent; important, because now the foreigner gains full control.
Our motto for this article: If you decide to establish your own company and need the assistance of an agent, it is wise and helpful if you have any idea what the agent is doing and where in the process you actually are. Show it to your agent or representative and let him point out where you are in the respective phase.
Finally… this is Indonesia. There is no such thing as:
Average costs about Rp.45,000,000 including one expat staff, depending on the agency.