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Set Up a Subsidiary in Indonesia

Set Up a Subsidiary in Indonesia

Foreign investors interested in starting a business in Indonesia have several options in terms of company structure. The same is available for foreign companies interested in setting up their presence on the local market. Among the preferred options for foreign companies is the subsidiary.

The main type of company used to create a subsidiary in Indonesia is the limited liability company (PT). However, there are several types of Indonesian limited liability companies and the most suitable one for foreign companies is the foreign-owned limited liability company, also referred to as the PT PMA.

Our Indonesian company formation consultants can explain the main differences when setting up a subsidiary as a PT and PT PMA. Foreign company owners do not need to immigrate to Indonesia in order to open these business forms.

Opening a subsidiary in 2024 is subject to the same steps for incorporation and registration, as already in place in recent years and as per the relevant local rules. Setting up the permanent establishment of a foreign company is easier with the help of a local team of experts, such as our own. We recommend getting in touch with us as soon as the company Board decides to open a permanent establishment in Indonesia.

Requisites for starting a subsidiary in Indonesia

The registration of a subsidiary company in Indonesia falls under the commercial legislation which encompassed several laws. The law covering the registration of a fully foreign-owned subsidiary company is the Foreign Capital Investment Law which provides for the following:

  •          the foreign company must present an investment plan;
  •          the minimum share capital of the subsidiary PT PMA is USD 7000.000 irrespective of the business activity;
  •          the subsidiary must have at least one director who has a Indonesian residence permit;
  •          certain licensing requirements apply for subsidiaries with activities in specific domains, such as the financial one.

Our company registration agents in Indonesia can explain all the requirements related to setting up a subsidiary in this country.

You can also watch our video on how to open a subsidiary in Indonesia:

Registering a subsidiary in Indonesia

The Indonesian company registration process for a subsidiary taking the form of a PT PMA must begin with the Capital Investment Coordinating Board once the investment plan is submitted for approval. Once the plan is accepted, the incorporation process of the Indonesian subsidiary will continue with the Companies Registrar. The procedure is completed following the usual business formation process of any other type of company.

Setting up a subsidiary in Indonesia implies registration with the local tax authorities, as the company will be considered a resident taxpayer. However, the government offers many tax incentives and fiscal facilities.

If you need to set up a company in another country, such as Saudi Arabia, we can put you in touch with our local partners.

Common questions related to opening a subsidiary in Indonesia

1. Is it hard for a foreign company to register a subsidiary in Indonesia?

No, the company registration process is not complicated in Indonesia.

2. What taxes will the Indonesian subsidiary pay?

As a tax resident company, the subsidiary will be subject to the corporate tax of 22%.
Nonetheless, in some cases, a permanent establishment in Indonesia can also be subject to a branch profits tax. This term is used for a permanent establishment, not a branch per se, however, it can be reduced under an applicable double tax treaty.
Our team can tell you more about the taxation of the subsidiary in 2024.

3. Do I need a local address for the company in Indonesia?

Yes, the Commercial Code requires the subsidiary to have a local address. For this purpose, we can help you with virtual office services. The one who opens the subsidiary does not, however, need to immigrate to Indonesia.

4. When do I open the bank account for the subsidiary?

The bank account opening should be completed after the company is registered with the Indonesian authorities.

5. How much does it cost to register a subsidiary in Indonesia?

The company registration process is not costly, however, foreign investors must take into consideration the registration fees required by the Trade Register, the notary fees, and the share capital requirements. 

Indonesia’s economic growth

Foreign investors who decide to open a subsidiary in the country in 2024 should know that the country’s GDP according to current market prices reached a value of IDR20,892.4 trillion (approx. USD1,337.4 billion). Other data released by BPS-Statistics Indonesia show that:

  • The country’s economy grew by 5.05 % in 2023, on a year-on-year basis;
  • The highest growth for production was in the Transport and Storage sector, with an increase of 13.96% (year-on-year);
  • On a quarterly basis, the country’s economy increased by 5.04 percent in Q4 2023, compared to Q4 2022; The highest growth rate was also in the Transportation and Storage sector (with an increase of 10.33%).

For information on the advantages of the Indonesian subsidiary company, please contact us. You can also rely on us for assistance with the registration of the chosen business form in 2024. We can also help you with company incorporation in Sweden.