First of all, setting up companies in Indonesia as a foreigner is hard! At the same time, the road is paved with pitfalls in terms of rules that can be misunderstood, people who want to cheat you for money, and bureaucracy that will drive you crazy.
My advice to anybody, who wants to setup a company, is to examine your actual needs for a company very carefully. If you can fulfill your needs with a local partner that creates the company or the simplest form - a representative company (described below), please do this.
The more rights you need the harder and more risky it gets.
Creating a company in Indonesia as a foreigner can be done in a number of ways, I am familiar with 2 company setup types, which I will describe.
Representative companies
The easiest way to get started is by setting up a representative company, this requires a legal company entity wherever you come from. I am from Denmark and the first company type I sat up was a representative company, I could do that since I already was co-owner of a Danish limited company.
Representative companies give you some limitations - actually a lot:
- You cannot invoice, your mother in your respective countries company has to do that.
- You cannot employ more than x people, in my case it was 8. And you can typically only hire (and sponsor) one extra expat (you count for one yourself).
- Representative companies do not need to make income statements etc. but you have to pay income tax as an employee.
- The legal costs for a representative company – if you do all the right steps and the agent/lawyer does not try to take financial advantage of you is typically around USD 4000 including agent fees.
PT companies
If you need larger staff and more rights you need a PT, which is similar to a limited company in other countries. You can setup PT companies in 2 ways:
- With a local partner - this requires the local partner acquire around 50% of the shares, which can be compensated for if you keep income in Indonesia low
- Individually, this company type is also called a PMA (foreign owned PT)
Creating a legal entity
