The most common way to establish a business presence in Indonesia is by incorporation, or establishing a company. Local Investors can establish a local company, while Foreign Investors can establish a FDI Company.

A FDI Company, short for a Foreign Direct Investment Company is the only form of corporate business presence in Indonesia that can be owned directly by foreign investors, either by foreign individuals or entities.

First of all, you must understand that your FDI Company will be established in Indonesia and will be subject to Indonesian laws and regulations with an Indonesian domicile.

It means that your FDI Company must obliged all requirements stipulated in the Indonesian laws and regulations, especially the prevailing Company Law (Law No. 40/2007), Investment Law (Law No. 25/2007)and BKPM Regulations.

The capital commitment required to be paid up in order to establish a FDI Company in Indonesia must be greater than or of equal value asIDR 2.500.000.000,- (two billion five hundred million rupiah). After ensuring that you can meet that required commitment, you can start the process of establishment by executing the Deed of Establishment and applying for a Principle License to the BKPM.

BKPM is short for Badan Koordinasi Penanaman Modal, which translates to Indonesia Investment Coordinating Board. Basically, it’s the government entity that regulates the establishment of a Foreign Business Presence in Indonesia, and the operation of such business in the country. BKPM will issue an approval of, or reject foreign investment applications, and will issue other necessary licenses to operate your business.

No. Prior to your commitment to invest in Indonesia, BKPM will first check whether your business is eligible for a FDI Company to operate in  Indonesia. Some of the business fields in Indonesia are closed to FDI Companies, and others require a limited amount of foreign ownership in the FDI Company itself.

It depends on the business field of your FDI Company. It is always advised for foreign investors to first consult with Legal Consultants about the business field of the FDI Company they want to establish in Indonesia. The legal basis of such limitations is the Investment Negative List, the newest of which was issued in 2014.

Not yet, because there are several documents and licenses you need to secure, including but not limited to Deed of Establishment, Approval from Ministry of Law and Human Rights Taxpayer ID (NPWP), Company Registration Certificate (TDP) and a Bank Account.

Permanent Business License (Izin Usaha Tetap) for a FDI Company is issued by BKPM. Usually in order for the license to be issued, the FDI Company is given a certain amount of time to first establish and start their business, in order to sort their projects and investments, and establish their relationship with clients. Before you acquire the Permanent Business License, you are allowed to use your approval or Principle License which was issued by BKPM to establish and operate your business.

If you do not want to establish a company in Indonesia, you can establish a Foreign Representative Office instead, which requires no capital commitment. However, a Representative Office is not allowed to generate income. They also won’t be able to act as separate entities and acquire crucial documents under their name such as import licenses and land or property titles. Even with such limitations, a  Representative Office is sufficient as a business presence in Indonesia, especially if you want to survey the vast market and business opportunities in the country.

Fairus Harris Senior Associate
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