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This is the establishment of a limited liability company under Indonesian company law. In Indonesia, the investment law stipulates that foreign companies must establish limited liability companies called "PT" to operate their business activities, thus many foreign companies choose this type of corporation.
According to the Indonesian company law, the establishment of PT must be done by contract. Therefore, two or more shareholders are required. And the investment law in Indonesia regulates the capital ratio. The Indonesian government stipulates the negative investment list and amend the list every few years, and the categorization of the industries on the list is indefinite, every companies is required to negotiate with responsible department.
In cases that foreign companies establish limited liability companies, the companies are required to invest at least capital of Rp2.5 billion under the BKPM Chairman Regulations.
Appointment of board members and designation of representation rights are required. It is important for multiple board members to possess the representation right to diversify risk.
We strongly recommend to make a joint venture agreement when doing business with an Indonesian company, as well as when required by a negative list. For instance, the Board of Directors, unlike the Japanese Corporate Law, does not have detailed rules, thus it is necessary to settle the conditions in the joint venture agreement and reflect it in the Articles of Association.
Agreements on the joint venture should be reflected in the articles of association. It is also possible to specify provisions on dividends and limitations on voting rights.
Mainly there are three types of representative offices that foreign companies can establish in Indonesia. Provided, however, purpose of usage of each representative office is limited.
The most common form for a foreign company is representative office. This office is not allowed to engage in business activities or become a contract entity, and its purpose is limited to manage profits and losses in Indonesia and to prepare for the establishment and development of businesses in Indonesia.
This form of representative office can carry out sales promotion and market research, etc. regarding commercial transactions conducted by foreign companies with Indonesian companies. As with a foreign representative office, this form of office is not allowed to engage in business activities or become the contracting entity.
This form be used when a foreign construction company conducts a construction business jointly with an Indonesian construction company in Indonesia. Exceptionally, this representative office can be contracted as it deals with construction matters in the same way as a stock company.
In order to promote investments from foreign companies, Indonesia has various investment incentive measures as follows. In each case, there are detailed rules regarding business activities, region, investment amount, etc., so please contact us regarding individual cases.
New investment from the pioneer industries will be exempt from corporate tax.
New and expanded investments in specific business areas and regions will be provided with corporate income tax benefits such as deduction of taxable income for a portion of the investment amount and shortening of the depreciation period.
In the case that a foreign company is established in a bonded area, they can be exempted from customs duties on the import of raw materials.
For certain investments, you may be exempted from customs duties on the import of machinery, materials and raw materials when the business is started or expanded.
Indonesia has free trade zones, free trade ports, integrated economic development zones and special economic zones. You can receive various tax incentives in these areas.