Setting Up A Business in Indonesia: Part 2

Business set up in Indonesia
Image by Bruce Mars on Pexels

Seven Stones Indonesia recently expanded their portfolio of services to include legal advice and market entry services while still maintaining their position as a key real estate and tourism influencer and advisor.

And in a short space of time it’s become clear this was a strategic move in the right direction.

One of the main concerns from new clients this expansion has attracted relates to how foreigners can legally set up and operate medium to larger businesses from scratch as well as restructuring already existing businesses to comply with Indonesia’s regulations.

It’s a good question so we’re going to try and explain things in two blogs.

The first blog looks at setting up a PT PMA or a PT PMDN, Foreign Ownership and something called the Negative Investment List.

This is the second post and we’re going to look at getting the right Permits, JVC’s and Profit Share Agreements.

So, let’s get down to business.

Getting the right permits

Once your business entity has been established you can then obtain the correct type of permits to be able to stay and work in Indonesia, which could, for example, be as an investor or full-time working as a Director.

To comply with the investment value volume we’ve seen a number of investors setting up JVC’s with a strong corporate body to manage various assets under one umbrella as well as managing the independent needs of each respective asset.

More and more sophisticated investors are also using the model of setting up a PT PMA to acquire land and then allowing foreigners to buy in as investors directly to the PT PMA or through a PT PMA owned by an entity in Singapore or HK (as regional hubs) or any other country you choose. Invest-Islands have a good example of a PT PMA guide. Click here to have a look.

Profit Share Agreements

A module that many seem to choose is to set up different forms of JVC, or Profit Share Agreements, with local partners by setting up a PT PMDN, which means all shareholders have to be locals.

This is a common structure for many large investors entering Indonesia. In fact, a few of Indonesia’s unicorns started their entrepreneurial adventures this way.

In these cases a foreigner will operate as an investor and provide access to capital. Typically the investor will demand that a percentage of the shares are pledged as a guarantee to provide the capital or loan.

And in many cases the foreigner may be hired as a Director to control and operate the business together with the local partner.

Security for both parties is typically administrated through arbitration in Indonesia or abroad if there were ever any conflicts between parties.

Some will claim this is a nominee structure, which is not recognized under Indonesian law, however it seems that the Indonesian government is more interested in clarifying the subject/object of tax exposure than seeing it as a threat or circumvention of Indonesian corporate law.

JVC

There are many companies in both Jakarta and Bali that offer operating as a local partner for this type of setup.

One benefit people see to doing this kind of PT PMDN is in most cases the permits and reports are a little easier to comply with than for a PT PMA.

Establishing a JVC or cooperating with a PT PMA and PT PMDN as a specialist providing specific services are other options that seems to work well if your proposed business happens to be on the Negative Investment List.

A few businesses that started their investment journey in Indonesia through a PT PMDN have gone through a process of acquiring pledged shares and managed to upgrade to a full PT PMA.

It’s also worth mentioning that many foreigners believe they can rent villas/restaurants and other businesses in the name of locals to operate and earn money.

Often this involves using a local’s Pondok Wisata license. But please be aware this is NOT the correct way to do it and conflicts with tax obligations, visa status and legal responsibilities.

At the end of the day it’s very important to seek trustworthy advice and evaluate the best possible structure for your needs before you invest in anything, be it villas, restaurants, hotels, jewelry, fashion or coffee shops.

Once you’ve done that you can safely source the right kind of investment strategy and clearly define your investment roadmap.

In the next month or so, (or even sooner) Indonesia is also due to launch what they’re calling the “OMNIBUS LAW.” This is a new law with supported regulations that are set to make it even easier to invest and establish companies with all of the respective permits in Indonesia.

Follow this link for the first part of this blog …

Latest Article
Govt Allocates More Subsidies for Electric Motorcycles
According to reporting from Antara News, Dadan Kusdian, Indonesia’s Secretary General of the Ministry...
Netherlands Consider Easier Visas for Indonesians
Citing Antara News, Tempo is reporting that Indonesia and the Netherlands discussed strengthening consular...
Ministry to Implement KRIS at 3,060 Hospitals by 2025
Indonesia’s Health Ministry is targeting to get more than 3,000 national hospitals to implement...
Hospital-based Specialist Doctor Program Launched
Speaking at the launch of a hospital-based specialist doctor program on Monday (6/5/24,) Indonesia’s...
Indonesia Anticipates Prabowo’s Cabinet
Prabowo Subianto and Gibran Rakabuming Raka will be sworn in as the country’s new president and vice...

Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.

Contact Our Consultants

[wpforms id=”43785″]

Ridwan Jasin Zachrie

CFO of Seven Stones Indonesia, Jakarta

Ridwan is one of Indonesia’s top executives with a long and illustrious career in the financial world. He holds several professional certifications including being a Certified Business Valuer (CBV) issued by the Australian Academy of Finance and Management; Broker-Dealer Representative (WPPE); and The Directorship Certification for Directors and Commissioners, issued by the Indonesian Institute of Commissioners and Directors.

His experience includes being the Managing Director at one of the top investment banking groups in the region, the Recapital Group, the CFO at State-owned enterprises in fishery industry and the CEO at Tanri Abeng & Son Holding. He’s also been an Independent Commissioner in several Financial Service companies and on the Audit and Risk Committee at Bank BTPN Tbk, Berau Coal Energy Tbk, Aetra Air Jakarta as well as working for Citibank, Bank Mandiri and HSBC. His last position was as CFO at PT Citra Putra Mandiri – OSO Group.

Ridwan has won a number of prestigious awards including the Best CFO Awards 2019 (Institute of Certified Management Accountant Australia-Indonesia); Asia Pacific Young Business Leader awarded by Asia 21 Network New York USA (Tokyo 2008); UK Alumni Business Awards 2008 awarded by the British Council; and The Most Inspiring Human Resources Practitioners’ version of Human Capital Magazine 2010.

He’s a member of the Board of Trustees of the Alumni Association of the Faculty of Law, Trisakti University, Co-Founder of the Paramadina Public Policy Institute and actively writes books, publications and articles in the mass media. He co-authored “Korupsi Mengorupsi Indonesia” in 2009, which helps those with an interest in understanding governance in Indonesia and the critical issue of corruption. Ridwan speaks Indonesian and English.

Per Fredrik Ecker

Managing Director of Seven Stones Indonesia, Jakarta

Per is the Managing Director of the Seven Stones Indonesia (SSI) Jakarta office and has more than 25-years’ experience in Indonesia, China, and Western Europe. He previously worked in senior management positions with Q-Free ASA, Siemens AG, and other companies in the telecom sector. Over the last six years, he has been the Chairman of the Indonesia-Norway Business Council (INBC) and recently become elected to be on the board of EuroCham Indonesia.

His most recent experience is within Intelligent Transport Solutions (ITS), Telecom, and other sectors within the Indonesian market. He is today through his position in SSI and by representing Norway Connect, promoting Nordic and European companies that would like to explore business opportunities in the Indonesian market. He’s also playing an active role to help create the Nordic House concept in Jakarta that will provide an excellent platform for Nordic companies entering Indonesia, where they’ll find a community that can offer support with trusted information and affordable services to enter this market.