Foreign Investment in Indonesia

Starting a business or legal entity in Indonesia can be a hazardous undertaking for foreigners, in particular to newcomers in Indonesia who lack profound experience with the country and do not have useful contacts or a network to rely on. Indonesia is not the world's most business-friendly country (reflected by the weak ranking in the World Bank's Doing Business Index) and contains specific cultural dynamics which - to an outsider - can make matters complicated.

There are two legal entities that are permitted for foreigners in Indonesia: (1) a foreign investment limited liability company (in Indonesian: Perseroan Terbatas Penanaman Modal Asing, or, PT PMA), and (2) a representative office (in Indonesian Kantor Perwakilan Perusahaan Asing, or, KPPA). This section aims to provide you all required information about the establishment of a:

• Foreign Investment Company (PT PMA)

• Representative Office (KPPA)

Foreign Investment Company Representative Office
Allowed Activities All business activities related to the sector it is engaged in and received approval for from BKPM Only for market research & local representation
Best Option for Companies that want to engage in commercial activities in Indonesia Companies that want to engage in market research, networking, etc. It is strictly forbidden to generate profit and revenue or engage in sales directly
Foreign Ownership Restriction Foreign ownership varies between 0% - 100% depending on the Negative Investment List No restriction
Minimum Capital IDR 10 billion (paid up capital at least 25% of investment plan) No requirement
Benefits Operates as an independent limited liability company within the business classification No capital requirement,
Takes less time to establish
Disadvantages Large capital requirement Cannot engage in commercial activities,
Valid for a maximum period of 5 years
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 Work permit for the chief representative, unlimited business visa sponsorships, 3 Indonesians for every expat hired
Compliance Monthly withholding tax report, quarterly/semi-annual investment report Monthly withholding tax report, annual activity report to the BKPM
Time to Establish 4 weeks 2 weeks
Estimated Costs Starts from USD $8,500 Starts from USD $2,000