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Compare Different Legal Entity Formats In Indonesia

Comparison of different legal entities in Indonesia

Jan 20, 2014

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When you conduct business in Indonesia there are various options for setting up a legal entity. Most common is to register a limited liability company (PT PMA) but there are also alternatives in case your capital is limited or you can handle transactions via a foreign entity.

Most common legal entity formats in Indonesia

Type	Limited Liability Company with Foreign Direct Investment	Local limited liability company	Representative office	Representative office for trading
Indonesian abbreviation	PT PMA	PT	KPPA	K3PA
Allowed activities	Can conduct all business activities within the business field it got approval for	Can conduct all business activities within the business field it got approval for	Market researchLocal representation	Local representation
Best option for	Foreign companies and investors looking for full or partial ownership in a company operating in Indonesia	Local investors who are not involving any foreign shareholders	Foreign companies studying the market Foreign companies who don’t need to earn revenue from Indonesia	Foreign trading companies that don’t need to earn revenue to their Indonesian entity
Foreign ownership restriction	Foreign ownership can be anything from 0% to 100% depending on the business classification. Classifications that are not in Negative Investment List can be owned 100%.	Cannot have foreign shareholders. Limited amount of work permits for foreigners depending on size of capital	No restrictions	No restrictions
Minimum capital	Investment plan: Minimum $1.2 million USD.Paid-up capital: at least 25% of investment plan.For some industries required capital is higher.	Micro: Less than Rp.50 million Small:Rp. 50 – 500 millionMedium: Rp. 500 – 10 billionLarge: above 10 billion	No capital requirement	No capital requirement
Key benefits	Can operate fully as an independent limited liability company within the business classification	Smaller capital requirement and faster process as long as no foreign shareholders are involved.	No capital requirement Easiest way to have a legal presence in Indonesia	License can always be extended every 3 years
Key disadvantages	Large capital requirement Ownership restricted or forbidden in some industries	No foreign shareholders	Cannot seek or earn revenue in Indonesia Valid for maximum 5 years, and cannot be extended	Not allowed to earn any revenue
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	Only Medium Size PT can apply work permit for its foreign worker Unlimited amount of business visa sponsorships	Work permit for the chief representative Unlimited business visa sponsorships 3 Indonesians for every foreigner hired	Work permit for the chief representative Unlimited business visa sponsorships 3 Indonesians for every foreigner hired
Additional licenses required	Permanent Business License from BKPM Import license for importers Additional operating licenses needed for some industries	Import license for importers Additional operating licenses for some industries		Representative office needs to be extended every 3 years
Compliance	Monthly withholding tax report Quarterly/semi-annual investment reporting	Annual tax reporting Monthly withholding tax report Annual tax reporting	Monthly withholding tax report Annual Activity report to BKPM	Monthly withholding tax report Annual Activity report to BKPM
Time to register	~10 weeks	~8 weeks	~6 weeks	~6 weeks
Set up with Emerhub	PT PMA company registration	Buat PT	Representative office	Representative office