Business Ownership Options for Foreign Entrepreneurs in Indonesia

Opening a business in Bali as a foreigner isn't a walk in the park, much like anywhere else. Navigating unfamiliar laws and languages can pose significant challenges.

In this article, we explore the options available for foreign investors looking to establish a company. 

In Indonesia, there are two primary avenues: PT and PT PMA.

This type of company has Indonesian capital and is set up on behalf of an Indonesian citizen. However, a foreigner can be appointed as the actual director. PTs can engage in various activities and sponsor work visas for foreigners. The tax rate for this type of company is 10%.

Alternatively, you can establish a PT PMA, a company with foreign investment, registered under the name of a foreign citizen. PT PMA operates similarly to PT, but with different titles for comparable roles. To ensure compliance and handle administrative duties, an Indonesian citizen as a director is required. This setup simplifies obtaining work visas (KITAS) for foreign staff, with no limitations on quotas. However, it's important to note that the tax rate for this type of company is 30%. Additionally, certain sectors such as banking and the nuclear industry have restrictions on foreign ownership.

The choice between these two options depends on your Indonesian partner and the advice of your legal representative in Indonesia. Both options have their pros and cons, and the decision ultimately depends on your goals, needs, and resources.

For those interested in Indonesian business ventures, additional options exist beyond PT and PT PMA. Representative Office (Kantor Perwakilan Perusahaan Asing or KPPA) and Subsidiary Company offer unique opportunities with specific requirements. Further information on these company types can be found here.

However, it's crucial to note that other business structures in Indonesia, such as Private Enterprises (Badan Usaha Milik Swasta or BUMS) and Sole Proprietorship (Usaha Dagang or UD), are typically reserved for Indonesian ownership.

Attempting to establish a company with Indonesian ownership may prove challenging for foreigners. This option often does not facilitate the issuance of work visas for foreign employees, presenting a significant hurdle for those requiring legal authorization to work in Indonesia.

For foreign entrepreneurs eyeing Indonesian business endeavors, the primary options are PT and PT PMA. These entities offer various levels of foreign ownership and investment opportunities, establishing a solid legal foundation for business activities in the country. Crucially, they facilitate work visa issuance for foreign employees, ensuring a stable and secure path for conducting business operations in Indonesia.