As the largest population and economy in Southeast Asia, Indonesia appeals to many expats. But doing business in Indonesia has its own risks. Here are the top 5.

1. The Challenges of Doing Business in
Indonesia and Howto Tackle Them September 2017

2. 1) Foreign Ownership Limitation
Foreigners rights are limited by Indonesian regulations in
terms of owning businesses in the country.
Strategy wise, a foreigner may invest in companies they
want to be part of. The Indonesian government allows
foreigners to invest in certain business sectors, depend
on the Indonesian Negative Investment List (DNI). The DNI
enumerates the sectors or industries that are open for
foreign investments as well as the percentage of the
ownerships allowed for non-Indonesians.
The categories: Closed to Investments, Reserved for Small
and Medium Enterprises (SME), Through Partnership with
SMEs, Limited Foreign Capital Ownership, Defined Location,
Required a Special License, 100% Domestic Capital, and
Foreign Capital Ownership.
The DNI since the authority would change it every few
years.

3. TACKLING THE
CHALLENGE
Local Limited Liability Company (PT). Registering
company under local nominee means letting
Indonesian become the owner of the company.
PT requires a minimum one local director, two local
shareholders, and one local commissioner.
Additionally, a company has to pay a capital of
Rp50 million (USD4,000). The paid-up capital
increases to Rp1.1 billion (USD82,700) if you
appoint a foreign director.
Benefits:
- Conducting several business activities
limited to legal entities
- Participating in all Indonesia’s tenders
- Directing sponsorship for stay permits (for
medium and big size company)
- More security.
It is important to select a nominee that you trust.

4. Foreign Owned Company (PT PMA). The company
open to 100% foreign ownership (or <100% based
on DNI). You can only set up a PMA if your business
is open for foreign investment.
The paid-up capital for PMA is Rp.2.5 billion or
US$187,000 (once the company established) from
the total investment plan, minimum Rp10 billion
(USD1 million) which need to be fulfill in 5 years.
Representative Office. No paid-up capital or large
investments. It is the most efficient and easiest way
to set up your business in the country.
A representative office can only monitor and
coordinate your business without generating
revenue.
You can open a representative office only if you
have a parent company overseas.
TACKLING THE
CHALLENGE

5. 2) Complex Government Regulations
In order to successfully register a business in Indonesia,
you have to get past through several government
regulations and clearances. Additionally, you have to apply
for a principal license from the Indonesia Investment
Coordinating Board (BKPM).
There are several documents required to apply for this
license including a certificate of domicile, proof of tax
payer number, clearance from the Ministry of Law and
Human Rights, among others. Keep in mind that
government is likely to renew or modify the Indonesian
regulations on the matter regularly.

6. TACKLING THE CHALLENGE
As the country’s leading provider of market-entry and
business solutions, Cekindo keeps up with the latest
regulations in the country so you do not have to worry
about the complex rules and any of the new
regulations. Cekindo’s top-notch team of legal
consultants; lawyers; and payroll, accounting, and tax
professionals make sure that your company is up to
date and fully abiding by the country’s business
regulations.

7. 3) Elaborate Taxation System
Taxation regulations in the country apply to both
individuals and companies; there is regional levels and
national levels tax system classifications.
The monthly tax compliance in Indonesia ranges from
corporate income tax, employee withholding tax, value
added tax, and individual income tax. A foreign that
registered the company under a local nominee needs to
follow Indonesian tax regulations.
The same with representative offices which have to
register as taxpayers and pay income tax to employees.
Indonesian companies have to make and submit their tax
reports the moment they get their tax ID number. This also
a requirement even for a company with lack of business
activity or profit.

8. TACKLING THE CHALLENGE
To avoid dealing with taxes, auditing, and other
accountings, consider using a third-party service.
Therefore, Cekindo present as a PEO company leader
in Indonesia that helps expats manage their
businesses’ HR-related concerns from hiring, training,
payroll, legalities, insurance, accounting, auditing, as
well as tax and payroll reporting, among others.

9. 4) Labyrinth & Visa Permit Processing
Acquiring visa and stay permits is one of the
most difficult challenges in doing business in
Indonesia. There are four types of permits to
stay (doing business) in the country.
FIRST, tourist visa. You are required to have
a return ticket back to your country of origin
and a valid passport. The can only stay for 7
to 30 days.
SECOND, business visa. You can do business
in Indonesia (attending meetings, exhibitions,
training, or seminars). There is two types of
business visas: the multiple-entry visa
(valid for 1 year and grants a maximum of
two months’ stay for one visit) and
single-entry visa (valid for 60 and will expire
once leaving the country).
THIRD, KITAS. This allows expats to be
employed. When applying for KITAS, the
company has to explain why it needs foreign
skills. But, the limitation ratio of local
workers to foreign workers is 10:1.
A company’s expat director will have a KITAS
valid for 1 year, while others only valid for 6
months. They can renew the visa once the
validity over.
FOURTH, KITAP. This is the permanent
permit for expats who are married to an
Indonesian. A Foreigner may also apply for
KITAP if they already applied KITAS for three
consecutive years

10. TACKLING THE CHALLENGE
We can say that applying for visas and permits may
not be that difficult. But, many foreigners make the
most common mistake of not being mindful of their
visas and permits. Particularly, keeping in mind the
visas validity or the activities they can do with their
permits.
Furthermore, to avoid any problems with Immigration
authorities, get help from Cekindo and its relevant
visa and permit processing services that guarantee
you a hassle-free stay in the country. You only need to
provide the documents needed for your visa and/or
permit processing, and Cekindo sorts everything out
for you.

11. 5) The Language Barriers
The major cities of the country located across the big
islands in the archipelago. Indonesia has hundreds of
inhabited islands where each has their own unique culture
and means of conducting business. You need to know that
there are more than 700 dialects spoken across the
country. For this reason, you need to adapt to the language
on where you’re at in the archipelago.
It should go without saying that effectively marketing your
product in Indonesia will require localizing it in the
targeted market. To help your business with this concern,
you may hire a local employee with the knowledge to
speak the dialects that will help your business maximize
your presence in your target market.

12. TACKLING THE CHALLENGE
There are several consulting firms that can help
foreigners settle in Indonesia. However, Cekido takes
pride in its experience of providing local knowledge
and its prominence. Cekindo’s team are well-versed
on localizing your products or services. We will also
help make your target market love what your
business has to offer.

13. References:
http://2016.export.gov/indonesia/doing-
businessinindonesia/index.asp
http://gpa-global.org/wp-content/up-
loads/2017/02/indonesia-2017-HBNW.pdf
https://uk.practicallaw.thomsonreuters.
com/5-501-2646?transitionType=De-
fault&contextData=(sc.Default)&first-
Page=true&bhcp=1
https://www.indonesia-investments.com/
business/risks/infrastructure/item381

14. PT. Cekindo Bisnis Grup is a leading consulting firm of Market-Entry and Corporate
secretarial services to clients expanding and operating in Indonesia and further to
Southeast Asia.
Our Vision
To be leading consulting firm of business services
to clients expanding and operating in Indonesia.
Our Mission
To provide full-range of market-entry and corporate
services to enable our clients to focus on their core
business and activities in Indonesia and beyond.
Our Values
C lient-focused
E xcellence performance
K nowledgable locally
I ntegrity moral
N ormative operations standards
D elivered on-time
O ne stop services provider
C O M P A N Y P R O F I L E

15. Cekindo’s main services:

19. PT. Cekindo Bisnis Grup
Business Park Kebon Jeruk, Blok H1-2
Jl. Meruya Ilir No.88
Kebon Jeruk, Jakarta Barat, 11620
Indonesia
info@cekindo.com
+6221 80660999
www.cekindo.com cekindo @Cekindo Cekindo Business Group, PTCekindo Business Group

20. W
S E L E C T E D C L I E N T S