General Overview to Establish Foreign Owned Company in Indonesia

Foreign Company shall be classified as Large Company (unless otherwise specified different in other regulation). The classification as Large Company while the company meets with one of the requirements below:

1. has equity more than IDR10,000,000,000 (ten billion Rupiah) which excluded land and building in accordance to the latest financial report; or
2. sales per year is more than IDR50,000,000,000 (fifty billion Rupiah) in accordance to the latest financial report.

Minimum Investment required by the government is IDR10,000,000,000 (ten billion Rupiah) or approximately equal to USD750,000 (seven hundred and fifty thousand US Dollar) for one business code which excluded the land and building. This investment amount comprises to the amount of (i) working capital, including but not limited to salaries, utilities, and any other regular expenses; and (ii) others, including but not limited to the rental of office, renovation, buying of transportation assets, etc (“Investment Composition”) This investment amount does not mean to require the investor to have the money injected into the new-established company. However, the investment amount can be achieved within year since the company obtained the business license.

Minimum Paid Up Capital is IDR2,500,000,000 (two billion and five hundred million Rupiah) or approximately equal to USD200,000 (two hundred US dollar). The investor is required to inject the capital proportionally in accordance to shareholding composition in new-established foreign company. The law does not specifically regulate on how long should the capital being injected by the investor.

Minimum capital for each foreign shareholder is IDR10,000,000 (ten million Rupiah).

Exemption on the minimum investment for business activity of development and management of property.

1. If the property is not in the form of 1 (one) building or 1 (one) integrated housing, the minimum investment is more than IDR10,000,000,000 (ten billion Rupiah) excluded to land and building and the minimum value of the paid up capital for each shareholder is IDR10,000,000 (ten million Rupiah) which has to follow the Debt to Equity Ratio (DER) 4 : 1 .
2. If the property is in the form of building or integrated housing, the minimum investment is more than IDR10,000,000,000 (ten billion Rupiah) including land and building; or

Negative Investment List. Pursuant to Presidential Regulation Number 44 Year of 2016 on lists of business fields that are closed to and business fields that are open with conditions to investment (“Perpres 44/2016”), there are business sectors that are open or closed or open with condition. Investor shall ensure that the shareholding composition complies with the negative investment list otherwise the licenses of the business can’t be granted or issued by OSS.

Although the government regulated minimum investment and minimum capital, some of business activities might have specific provisions which issued by relevant Ministry who supervises such sectors, some of the examples are below:

Classification on Business Activities and Negative Investment List

Every business activity is classified in accordance to Regulation of Head of Central Bureau of Statistic No. 95 of 2015 on the amendment on Regulation of Central Bureau of Statistic No. 19 of 2017 regarding Standard Indonesian Business Field Classifications which mentions the scope of business. The company shall choose the business code/KBLI in accordance to the business activity. After choosing the business code/KBLI, investor shall check to the negative investment list as regulated under Perpres 44/2016 whether such business is open or close or open with conditions. Read more: how if my business is close for foreign ownership?

• Establishment Procedure

To incorporate foreign owned company in Indonesia, client needs to establish legal entity. The incorporation process will go through some procedures including but not limited to obtain; (i) Deed of Establishment; (ii) approval from Ministry of Law and Human Right Approval, (iii) Business Identification Number/NIB; (iv) Business License

Disclaimer:

This article is intended for the informational purposes only and does not constitute any legal advice.