Indonesia is comprised of over 17,000 islands in Southeast Asia and is the 4th most populous country on the planet. The population count as of 2021 is around 270 million people. The culture of the country is extremely diversified based on several ethnicities, languages, and religions.
Similar to the culture, Indonesia’s economy too is very diversified; relying on several sectors such as agriculture, manufacturing, auto industry, minerals and oil production, services, finance, gold and silver mining, tourism, and others.
The official language of Indonesia is Indonesian while hundreds of local languages are widely spoken across the country. Indonesia’s landscape is as diversified as its economy and society. From active volcanos to pristine beaches and ancient sites can be found in Indonesia.
Types of business structures in Indonesia
Indonesia’s economy is the 16th largest in the world with myriad of opportunities for foreign investment. Due to negligible corruption rates, flexible tax policy, and stable political situation, Indonesia is an attractive destination to form a company. There are several options available for investors to adopt in terms of business format.
The available business format options are tabulated below:
| S# | Type of business structure | Local name | Min. paid-up capital required (USD) |
| 1. | Sole Proprietorship | Perusahaan Perorangan (PP) | Not applicable |
| 2. | Partnership | Firma | Not applicable |
| 3. | Limited Partnership | Commanditaire Vennootschap | $700 |
| 4. | Limited Liability Company | Perseroan Terbatas (PT) | $3,500 |
| 5. | Cooperative | Koperasi | $180 |
| 6. | Foreign Investment Company | Penanaman Modal Asing (PMA) | $70,000 |
Sole Proprietorship
A business owned and operated by a single person requiring no minimum capital is called a sole proprietary business. The owner manages the capital personally and is liable in a personal capacity towards losses and debts.
Partnership
By partnership, it is meant that it is a general partnership formed by two or more individuals. The owners contribute by capital or experience or time or all three. Liability falls on all partners to a personal extent.
Limited Partnership
A limited partnership is akin to a general partnership but differs in that one or more partners are assigned as limited partners. The limited partners are not personally responsible for debts, but only to their extent of share in the business.
Limited Liability Company
An LLC is a formal company that dissociates its owners from debts and liabilities in a personal capacity. An LLC is regarded as a legal person and as such is responsible for losses and debts.
Cooperative
A Cooperative company is formed by two or more persons or companies to engage in business solely to benefit the owners and the association thereof.
Cost of registering a company in Indonesia
The cost of registering a company in Indonesia can vary depending on several factors, such as the type of company, the location, and the amount of authorized capital. Generally, the cost of registering a company in Indonesia ranges from IDR $400 to $1,400), which includes the cost of notary services, legal fees, and government fees.
Some of the typical costs involved in registering a company in Indonesia are tabulated below:
| Head of account | Amount (USD) | Variation dependency |
| Company name approval | $10 – $70 | Type of companyLocationIndustry |
| Deed of establishment | $190 – $400 | Documentation requirements |
| Legalization of deed of establishment | $80 – $200 | Not applicable |
| Articles of Association (Ao) | $150 – $300 | Drafting & notarization |
| Legalization of AoA | $80 – $200 | Not applicable |
| Taxpayer Registration Number (NPWP) | $10 | Not applicable |
| Company Registration Certificate (TDP) | $10 | Not applicable |
Note that the above costs are estimates and may vary depending on the specific requirements and circumstances of each company.
Cost of doing business in Indonesia
The cost of doing business in Indonesia can vary widely depending on the industry, location, and other factors. However, here are some of the typical costs involved in doing business in Indonesia:
Taxes
Indonesia has a complex tax system, and companies are required to pay various taxes, including corporate income tax, value-added tax (VAT), and employee social security contributions. The corporate income tax rate is 22%, and the VAT rate is 10%. Social security contributions are around 5.7% of an employee’s salary.
Labor
Labor costs in Indonesia are relatively low compared to many other countries, but they can still be a significant expense for businesses. The minimum wage varies by region, but it is typically around $300 per month
Infrastructure
The quality of infrastructure in Indonesia varies widely by region, and companies may need to invest in their own infrastructure to operate effectively. This could include building their own warehouses or transportation networks.
Licensing and Permitting
Businesses in Indonesia may need to obtain various licenses and permits to operate legally. The costs of these licenses and permits can vary depending on the industry and the location.
Rental and Real Estate
The cost of renting or purchasing commercial real estate in Indonesia can be a significant expense for businesses, especially in more developed areas like Jakarta.
Import and Export
Companies that import or export goods may need to pay customs duties and other fees to the Indonesian government.
Marketing and Advertising
Companies that want to market their products or services in Indonesia may need to invest in advertising and marketing campaigns.
Overall, the cost of doing business in Indonesia can be relatively low compared to other countries in the region, but it is still important for companies to carefully consider all the costs involved before entering the market.
Advantages of registering a company in Indonesia
Indonesia is a huge market itself by numbers. Additionally, the country has trade ties with almost all major economic players in the region and the world at large.
Here are a few advantages a company may reap if established in Indonesia:
Large and Growing Market
Indonesia is the fourth most populous country in the world and has a rapidly growing middle class. This provides a large and growing market for businesses in various industries.
Strategic Location
Indonesia is strategically located between Asia and Australia, making it a gateway to these regions. The country is also part of the ASEAN Economic Community, which provides access to a market of over 600 million people.
Abundant Natural Resources
Indonesia is rich in natural resources, including coal, oil, gas, and minerals. This provides opportunities for businesses in the mining and energy industries.
Favorable Demographics
Indonesia has a relatively young population, with a median age of around 30 years. This provides a large pool of potential workers and consumers for businesses.
Government Support
The Indonesian government has taken steps to attract foreign investment and support the development of various industries. This includes offering tax incentives and streamlined regulations for certain industries.
Low Labor Costs
Labor costs in Indonesia are relatively low compared to many other countries in the region, providing a cost advantage for businesses.
Cultural Diversity
Indonesia is a diverse country with over 300 ethnic groups and languages, providing opportunities for businesses to tap into different markets and communities.
