A special purpose vehicle (SPV) company is set up to undertake a special role. Investors who open a SPV in Indonesia will have to follow the general rules for company formation in Indonesia. Find out how a SPV is set up and used below.
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SPV uses in Indonesia
The special purpose vehicle is a company set up for a role that will serve a parent company. Because it is an independent legal structure, for which the founders follow the rules of opening a company in Indonesia, the SPV can be structured to meet various purposes.
Some common uses of a special purpose vehicle are listed below by our team:
- risk sharing;
- securitization;
- property purchase/sale;
- asset transfers.
The special purpose vehicle can be used as an affiliate of a foreign company based abroad. This means that, when set up in Indonesia, it will observe the local incorporation and reporting requirements, but it will be structured in such a way and for such purposes that it will ultimately serve the business scope of its parent company abroad.
The SPV can be created for various purposes, however, most notably as a means for raising capital or protection against bankruptcy or insolvency.
The SPV in Indonesia is required to have legitimate uses. If you are interested in knowing more about the local rules for anti-money laundering or other issues, please feel free to ask our lawyers in Indonesia.
How to set up a SPV in Indonesia
A typical business form used to open a SPV in Indonesia is a limited liability company. This is suitable because the parent company remains fully separate from its Indonesian SPV.
The following steps are relevant for company incorporation in Indonesia:
- Decide the company’s particulars: these are its name and registered address, along with its primary business activity;
- Appoint shareholders and directors: at least two shareholders (natural or legal persons) are required and one company director. Other conditions can apply to appoint a commissioner;
- Prepare for registration: this step involves drawing up the mandatory documents and submitting these as required by the authorities. The registration is made with the Company Registry;
- Obtain the licenses: additional permits or licenses may be required according to the industry in which the company will operate.
Please keep in mind that the requirements for company setup are only briefly listed above and they refer to the general process. Foreign investors who open a SPV in Indonesia have to obtain the proper visa that will allow them to enter the country for this purpose. Additional requirements may also apply.
SPV compliance in Indonesia
Once investors open a SPV in Indonesia, they are required to comply with the local management, tax, and reporting conditions.
The main corporate taxes are briefly listed below by our team:
- The standard corporate income tax rate is 22%;
- Some small companies (such as those with an annual gross revenue of less than IDR 4.8 billion) can be subject to a final income tax rate of 0.5% on their gross revenue (for a limited time);
- Resident companies can be subject to a reduction of the corporate income tax rate on their first IDR 4.8 billion of gross revenue (a 50% reduction, subject to conditions);
- The standard value-added tax in Indonesia is 12%. A 0% rate can also apply to certain types of goods and services.
Once it is incorporated as a local registered legal entity, the Indonesian special purpose vehicle will be subject to the annual corporate compliance requirements. These include filing an annual tax return and observing the self-assessment system for the corporate income tax, among others.
For more information on how to open a SPV in Indonesia, as well as questions about its use or functioning, please contact our local team.