Indonesia which is an ASEAN member country lies on the crosslink of two continents, Asia and Australia, as well as two oceans, the Indian Ocean and Pacific Ocean. Indonesia is the fourth most populous nation in the world after China, India and the United States. Over two thirds of the population resides in Java, the center of the country’s economic and political power. The Indonesian national motto “Unity in Diversity” points to one of the greatest attractions of Indonesia. There are some 300 ethnic groups, a result of both the country’s unique geography and history. Many Indonesians may see themselves first by their ethnic and cultural group and secondly as Indonesians. The glue that binds the people together is the usage of the Bahasa Indonesia, the national language, and Pancasila, the national philosophy, which stresses the doctrine of unity and universal justice for all Indonesians.
Indonesia is also the third fastest growing economy in Asia and the largest economy in Southeast Asia. With stable politics and strong economy, Indonesia is known to be the emerging power house in Asia. Indonesia’s economic policies are on a firm footing, so are its measures to attract foreign investment.
Indonesia, being a market oriented open economy, with free foreign currency exchange regime, its government realizes that investment is one fundamental factor in accelerating economy; hence they make serious efforts on fixing investment procedures to stimulate the more advantageous investment climate.
- Most lines of businesses are open for foreigners.
- Foreigners can hold up to 100% shares in many lines of businesses.
- There is no requirement for a local director or shareholder, which means all directors can be foreigners
- There is no requirement for a company secretary
- Private company with turnover of less than USD 5 million is exempt from audit
- Equal treatment for domestic and foreign investors.
- Indonesia company formation permits entrepreneurs access to a network of double taxation treaties with countries including Australia, France, Germany, Singapore, South Africa, the US and the UK.
- The Indonesian economy is ranked as the 46th-most competitive economy in the world, according to the World Economic Forum’s Global
- An Indonesian company can be 100% foreign-owned and controlled.
- An Indonesia Representative Office can also be 100% foreign-owned and controlled, but is not permitted to make direct sales in Indonesia.
- Mandatory divestment is no longer applicable and the business license obtained will remain valid as long as the company continues in operations.
- Establishing a company in Indonesia is a highly bureaucratic process, but nonetheless a process that has become relatively easier over the past few years. The first step in this rather complex process is the obtaining of an Investment Approval from the Investment Coordination Board. This approval process is nowadays relatively quick, and can be completed in as little as 14 days in some investment board offices.
Tax and accounting regulations
- Corporate income tax rate is 25%.
- VAT Tax: based on the value added part of the products and applied to trading and manufacturing businesses. The rate is 10%.
- Reporting Requirements: a monthly tax report is required to be submitted to the relevant tax authorities.
Procedure of company registration
The most popular type of Indonesian Company is a Limited Liability Company. The procedure for company formation is as follows:
- Provide scanned copy of a passport for directors and shareholders;
- Provide scanned copy of proof of residence. This can be in the form of a utility bill, bank statement or bank reference and must not be older than 6 months;
- Complete Eltoma’s Company Formation Application form;
- Complete Etloma’s Declaration of Beneficial Owners form;
- Eltoma will review the above and then provide a client summary that must be confirmed by signature of the client and Eltoma for agreed service to be provided;
- At this point Eltoma will issue an invoice for an Indonesian Company Formation;
- Upon receipt of money in our bank account we will start the formation process by submitting a preferred name for approval of Indonesian Registrar of Companies. This takes up to 5 working days;
- Once the Indonesian Company name is approved, a shareholder of a Indonesian Company signs a power of attorney and sends the originals to Eltoma by courier.
Upon receipt of the signed power of attorney, we start the Indonesian Company Formation process. It takes up to 2 months for an Indonesian Company Formation.