Legal Process of Establishing a PT in Indonesia
Indonesia’s dynamic economy and growing consumer market make it an attractive destination for entrepreneurs and investors. One of the most common business structures chosen in Indonesia is the PT (Perseroan Terbatas), or Limited Liability Company. Establishing a PT provides credibility, limited liability protection, and access to broader opportunities, both domestically and internationally.
This article offers a comprehensive overview of the requirements, procedures, and estimated costs and timelines for establishing a PT in Indonesia.
Why Choose a PT Structure?
A PT is the preferred business entity in Indonesia for several reasons:
- Legal recognition: Provides an official status as a legal entity under Indonesian law.
- Limited liability: Protects shareholders’ personal assets from company liabilities.
- Professional credibility: Essential for contracts, government tenders, and partnerships.
- Access to financing: Banks and investors often require PT status before providing funding.
Foreign investors who wish to participate in Indonesia’s market often establish a PT PMA (Foreign Investment Limited Liability Company), while local entrepreneurs usually form a PT Local.
Legal Process of Establishing a PT in Indonesia
The requirements for establishing a PT vary slightly depending on whether the company is locally owned (PT Local) or involves foreign shareholders (PT PMA). However, the general requirements include:
1. Shareholders
- Minimum of two shareholders (can be individuals or corporate entities).
- For PT Local: shareholders must be Indonesian citizens or entities.
- For PT PMA: can include foreign individuals or companies, subject to the Negative Investment List (DNI) and its successor, the Positive Investment List.
2. Minimum Capital
- PT Local: no fixed minimum capital requirement after the Omnibus Law reforms, but adequate capital must be declared.
- PT PMA: generally requires a minimum paid-up capital of IDR 10 billion, as regulated by BKPM.
3. Company Structure
- A PT must appoint at least:
- 1 Director
- 1 Commissioner
- Shareholders (owners of the company)
4. Business Address
- A valid business domicile in Indonesia is required. Virtual offices may be acceptable in some areas, but certain sectors require physical office space.
5. Other Documents
- Deed of Establishment prepared by a notary.
- Approval from the Ministry of Law and Human Rights (Kemenkumham).
- Tax Identification Number (NPWP) for the company.
- Business Identification Number (NIB) issued via OSS.
- Sector-specific permits depending on the type of business.
Application Steps for Establishing a PT
The process has been streamlined since the implementation of the Omnibus Law and Government Regulation No. 5 of 2021 on Risk-Based Licensing. Below is the standard procedure:
1. Draft the Deed of Establishment
- Prepare the company’s Articles of Association with a notary.
- Include details of shareholders, directors, commissioners, and capital structure.
2. Register with Kemenkumham
- Submit the deed for approval to the Ministry of Law and Human Rights.
- Once approved, the company officially becomes a legal entity.
3. Obtain a Tax Identification Number (NPWP)
- Register at the Tax Office to receive NPWP.
- Required for all financial and tax-related obligations.
4. Register via OSS System
- Apply for a Business Identification Number (NIB), which serves as the main license.
- NIB also functions as:
- Importer identification (API).
- Customs access (if applicable).
5. Secure Additional Licenses
- Depending on the sector, apply for further permits such as:
- Environmental permits (UKL-UPL).
- BPOM registration for food, beverages, or cosmetics.
- SIUP-MB for alcohol distribution.
6. Operational Readiness
- Open a corporate bank account.
- Register employees with BPJS (social security and health insurance).
- Ensure compliance with labor laws and reporting obligations.
Estimated Cost and Timeline
The cost of establishing a PT in Indonesia varies depending on the business structure (local vs. PMA) and additional permits required.
- Base Cost: Starting from IDR 10,000,000 for standard incorporation services.
- Foreign Investment (PT PMA): Costs are typically higher due to capital requirements, translations, and investment approvals.
Timeline:
- Company Deed & Kemenkumham Approval: ± 7–10 working days.
- Tax Registration & NPWP: ± 3–5 working days.
- NIB & OSS Registration: ± 3–5 working days.
- Sectoral Licenses: ± 10–15 working days depending on business type.
Overall, the process usually takes 20–30 working days, assuming documents are complete and approvals are not delayed.
Challenges in Establishing a PT
While Indonesia has simplified procedures, challenges remain:
- Regulatory updates: Laws and investment lists change frequently.
- Sectoral complexity: Some industries require multiple permits.
- Foreign ownership restrictions: Certain sectors are closed or limited to foreign investors.
- Language and bureaucracy: Non-Indonesian speakers may find legal terms difficult.
Best Practices for Entrepreneurs
- Consult professionals: Legal consultants or corporate service providers can ensure compliance.
- Prepare documents early: Delays often occur due to incomplete requirements.
- Understand capital requirements: Particularly important for PT PMA to avoid rejection.
- Stay compliant post-establishment: Filing annual reports, renewing permits, and paying taxes are mandatory.
Conclusion
The legal process of establishing a PT in Indonesia is essential for entrepreneurs seeking to build a strong and sustainable business. With requirements such as shareholders, deed of establishment, tax registration, and OSS licensing, businesses gain legal recognition and protection.
While the process typically takes 20–30 working days, professional assistance can expedite approvals and ensure compliance with Indonesian law. For both local and foreign investors, a PT offers the legal foundation necessary for long-term success in one of Southeast Asia’s most promising markets.