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Understanding Different Business Entities in Indonesia

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Jakarta business district

Indonesia’s economy has been growing steadily since the turn of the millenia. As recently as 2018, Indonesia’s GDP reached an all-time high of 1,042.17 USD billion. To further increase its economic growth, the Indonesian government has taken measures to encourage business activities by continuing deregulation and reducing bureaucracy.

With such measures in place, it is easier for you to start your business and register your business entity in the country. There are several types of legal entities that foreign or domestic business owners can set up a company in Indonesia. If you’re looking to set up a business entity, it’s best to understand the differences between these entities and its requirements, benefits and drawbacks.

There are three forms of privately owned entities:

  • Firma
  • Commanditaire Vennootschap (CV)
  • Perseroan Terbatas (PT)

    • Penanaman Modal Dalam Negeri (PT PMDN)
    • Penanaman Modal Asing (PT PMA)

Aside from the business entities above, Indonesian law also regulates non-profit organizations. Yayasan, also known as a foundation in Indonesia, is a form of entity that one needs to set up to legally operate in social, religious and humanitarian fields in Indonesia.

Firma

Firma is a type of cooperative business entity formed by two or more Indonesian citizens in one agreement to make a collective name to deal with third parties in making a profit.

Advantages

  • Responsibilities are not limited for different partners. Each partner has the right to lead and have the authority to represent the company and make decisions

Disadvantages

  • As Firma is established between partners that have equal authority, internal conflict among partners can threaten the management and survival of the company.
  • Firma is not a legal entity, thus there is no separation between personal wealth and company assets.
  • Each Firma partner is responsible for paying off the unpaid debt with their personal property.

Documents Required for incorporation

Indonesian Individual

  • Colored scanned copy of KTP, KK and NPWP.
  • Color Photo (passport size).

Commanditaire Vennootschap (CV)

The CV is an enterprise that is established by two or more persons as partners. There are two types of partners: active partners, that provide capital as well as run the business, and silent partners, that only provides capital.

Advantages

  • CV is the easiest entity to establish. While the minimum deposit for PT is 50 million, In setting up a CV, you do not have to have the minimum capital and can remain operating.

Advantages

  • A CV is not a legal entity, it does not have its own wealth, which can be a drawback for partners.

  • It is difficult to withdraw deposited capital

Documents Required for incorporation

Indonesian Individual

  • Colored scanned copy of KTP, KK and NPWP.
  • Color Photo (passport size).

Perseroan Terbatas (PT)

PT is a most common business entity. Its capital is divided into stocks (shares). The responsibility for liabilities/debt for the company is limited to the owners of holdings. There are two types of PT; a locally owned PT called PT Penanaman Modal Dalam Negeri (PT PMDN) and foreign owned PT called PT Penanaman Modal Asing (PT PMA).

PT PMDN

It is further divided into three categories based on the projected investment value:

  • Small companies (Rp 50 million)
  • Medium sized companies (Rp 500 million)
  • Large companies (Rp 10 billion)

Advantages

  • While PT PMA requires an investment plan for at least Rp 10 billion, PT PMDN allows more flexibility on investment value.
  • PT PMDN companies are allowed to operate a wider variety of business activities than foreign owned companies. 

Disadvantages

  • PT PMDN has to be 100% locally owned, which means foreign shareholders are not allowed.
  • Small and medium sized companies registered under PT PMDN are not allowed to apply for work permits for foreign workers.

Documents Required for incorporation

Indonesian individual
  • Colored scanned copy of Indonesian ID card (e-KTP).

  • Colored scanned copy of Indonesian Tax ID (NPWP).

  • Colored scanned copy of Indonesian family card (KK).
  • Colored scanned copy of the Articles of Association (“AOA”) of the Indonesian company and its amendments and its MOLHR approvals (in Indonesian language).

  • Colored scanned copy of the latest Directors and Commissioners structure of the Indonesian company, in the form of: notarial deed and the related MOLHR notification of deed appointment of latest Directors and Commissioners of the Indonesian company.

  • Colored scanned copy of passport/ eKTP of the directors and the authorized signatory of the Indonesian company.

  • Colored scanned copy of passport/ eKTP of the authorized signatory of the Indonesian company in relation participation of the Indonesian company in other company, in this case, for example, the Board of Commissioners of the Indonesian company.

  • Colored scanned copy of Indonesian Tax ID (NPWP) of the directors of the Indonesian company.

  • Colored scanned copy of Indonesian Tax ID (NPWP) of the commissioners of the Indonesian company.

  • Colored scanned copy of SKDP/ Statement Letter of Domicile from building management of the Indonesian company.

  • Colored scanned copy of NPWP of the Indonesian company.

  • Colored scanned copy of SIUP of the Indonesian company.

  • Colored scanned copy of the NIB of the Indonesian company.

PT PMA

PT PMA is the standard way for foreign investors to operate a company in Indonesia. This entity can be owned 100% or partially by foreign investors.

Advantages

  • PT PMA allows businesses to receive foreign investment opportunities which are restricted in PT PMDN registration.

Disadvantages

  • PT PMA is restricted to operate on business sectors listed under Negative Investment List, a document that regulates foreign ownership of businesses based on the business sectors they operate in.
  • PT PMA is required to have an investment plan valued at minimum IDR 10 billion.

Documents Required for incorporation

PT with foreign shareholder(s) and Indonesian shareholder(s):

Foreign individual
  • Colored scanned copy of passport of foreign shareholders.

  • Colored scanned copy of ID Card with proof of address of foreign shareholders.
  • Colored scanned copy of the Articles of Association (“AOA”) of the foreign company and its amendments (in English language or translated into Indonesian language).

  • Colored scanned copy of the latest Directors and Commissioners structure of the foreign company, in the form of: records of the Commercial Register/ ACRA, as applicable.

  • Colored scanned copy of passport of Directors and Commissioners, and the authorized signatory of the shareholders, as applicable.

  • Colored scanned copy of ID Card with proof of address of Directors and Commissioners, and the authorized signatory of the shareholders, as applicable.
  • Colored scanned copy of Indonesian ID card (e-KTP).

  • Colored scanned copy of Indonesian Tax ID (NPWP).

  • Colored scanned copy of Indonesian family card (KK).
  • Colored scanned copy of the Articles of Association (“AOA”) of the Indonesian company and its amendments and its MOLHR approvals (in Indonesian language).

  • Colored scanned copy of the latest Directors and Commissioners structure of the Indonesian company, in the form of: notarial deed and the related MOLHR notification of deed appointment of latest Directors and Commissioners of the Indonesian company.

  • Colored scanned copy of passport/ eKTP of the directors and the authorized signatory of the Indonesian company.

  • Colored scanned copy of passport/ eKTP of the authorized signatory of the Indonesian company in relation participation of the Indonesian company in other company, in this case, for example, the Board of Commissioners of the Indonesian company.

  • Colored scanned copy of Indonesian Tax ID (NPWP) of the directors of the Indonesian company.

  • Colored scanned copy of Indonesian Tax ID (NPWP) of the commissioners of the Indonesian company.

  • Colored scanned copy of SKDP/ Statement Letter of Domicile from building management of the Indonesian company.

  • Colored scanned copy of NPWP of the Indonesian company.

  • Colored scanned copy of SIUP of the Indonesian company.

  • Colored scanned copy of the NIB of the Indonesian company.

Documents Required for incorporation

PT with 100% foreign shareholders:

Foreign individual
  • Colored scanned copy of passport of foreign shareholders.

  • Colored scanned copy of ID Card with proof of address of foreign shareholders.
  • Colored scanned copy of the Articles of Association (“AOA”) of the foreign company and its amendments (in English language or translated into Indonesian language).

  • Colored scanned copy of the latest Directors and Commissioners structure of the foreign company, in the form of: records of the Commercial Register/ ACRA, as applicable.

  • Colored scanned copy of passport of Directors and Commissioners, and the authorized signatory of the shareholders, as applicable.

  • Colored scanned copy of ID Card with proof of address of Directors and Commissioners, and the authorized signatory of the shareholders, as applicable.

Yayasan (Foundation)

Yayasan, also known as a foundation in Indonesia, is a form of non-profit organizations. It is required to legally operate in social, religious and humanitarian fields in Indonesia. Foundation is the only type of not-for-profit organisation which can be founded by foreigners.

Organizational structure of a foundation must consist of three bodies:

  • the Governing Board (Badan Pembina)
  • Supervisory Board (Badan Pengawas)
  • Executive Board (Badan Pengurus).

Yayasan is a legal entity that owns its own assets. In the event a yayasan is liquidated, any remaining assets of the yayasan must be transferred to another yayasan that have the same purpose and objective of the liquidated yayasan.

Benefits

Yayasan are generally subject to income tax on the same basis as other legal entities. However, there are exceptions. Income is tax-exempt in case:

  • Foundation uses income to provide scholarship funds
  • Income of a foundation working in the area of education or research and development that is re-invested in its work

Limitation

  • Yayasan are not allowed to distribute or transfer (directly or indirectly) its assets (including cash, goods or other) among the members of the boards, the employees or any third parties.
  • Members of the Governing Board, Supervisory Board, or Executive Board are required to be a volunteer. This means you are prohibited from benefits and will not receive salary, wages or honoraria.

Documents Required for incorporation

Indonesian individual
  • Colored scanned copy of Indonesian ID card (eKTP).

  • Colored scanned copy of Indonesian Tax ID (NPWP).

  • Colored scanned copy of Indonesian family card (KK).

  • Statement letter from founder(s) stating validation of separation of an assets (more than IDR 10 million) of founder(s) and foundation.
  • Colored scanned copy of the Articles of Association (“AOA”) of the Indonesian company and its amendments and its MOLHR approvals (in Indonesian language).

  • Colored scanned copy of the latest Directors and Commissioners structure of the Indonesian company, in the form of: notarial deed and the related MOLHR notification of deed appointment of latest Directors and Commissioners of the Indonesian company.

  • Colored scanned copy of passport/ eKTP of the directors and the authorized signatory of the Indonesian company.
  • Colored scanned copy of passport/ eKTP of the authorized signatory of the Indonesian company in relation to the participation of the Indonesian company in other company, in this case, for example, the Board of Commissioners of the Indonesian company.

  • Colored scanned copy of Indonesian Tax ID (NPWP) of the directors of the Indonesian company.

  • Colored scanned copy of Indonesian Tax ID (NPWP) of the commissioners of the Indonesian company.

  • Colored scanned copy of SKDP/ Statement Letter of Domicile from building management of the Indonesian company.

  • Colored scanned copy of NPWP of the Indonesian company.

  • Colored scanned copy of SIUP of the Indonesian company.

  • Colored scanned copy of the NIB of the Indonesian company.

  • Statement letter from founder(s) stating validation of separation of an assets (more than IDR 10 million) of founder(s) and foundation.

  • Statement letter from founder(s) that foundation activities that is going to be established not prejudice the citizen, nation, and state of Indonesia.
  • Colored scanned copy of passport of foreign shareholders.

  • Colored scanned copy of ID Card with proof of address of foreign shareholders.

  • Statement letter from founder(s) stating validation of separation of an assets (more than IDR 100 million) of founder(s) and foundation.
  • Colored scanned copy of the Articles of Association (“AOA”) of the foreign company and its amendments (in English language or translated into Indonesian language).

  • Colored scanned copy of the latest Directors and Commissioners structure of the foreign company, in the form of: records of the Commercial Register/ ACRA, as applicable.

  • Colored scanned copy of passport of Directors and Commissioners, and the authorized signatory of the shareholders, as applicable.

  • Colored scanned copy of ID Card with proof of address of Directors and Commissioners, and the authorized signatory of the shareholders, as applicable.

  • Statement letter from founder(s) stating validation of separation of an assets (more than IDR 100 million) of founder(s) and foundation.

  • Statement letter from founder(s) that foundation activities that is going to be established not prejudice the citizen, nation, and state of Indonesia.

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Interested in starting your business in Indonesia?

Accepting payments is a crucial part of businesses. Xendit can help you accept payments from e-Wallets, virtual accounts (bank transfers), credit / debit cards, retail outlets and even cardless credit.

If you’re an individual looking to establish as a new entity (PT, CV, Foundation) in Indonesia, Xendit can help by linking you up with our trusted legal advisors to kickstart your journey.

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