How to Register a Trading Companies in Indonesia – The business market, where businesses trade raw materials, resources and components, can undergo significant changes from international trade. This can be caused by the times and the effects of uncertainty or speculation about the trading business. Changes in trade policy can change the cost of raw materials and import and export tariffs. Changes in prices and profitability in business markets, and can lead to attempts to find alternative sources or materials.
Uncertainty about the trading business can also cause instability in the business market.
Before going further in the discussion. Do you know,
What is the Trading Companies?
Trading companies are businesses working with different kinds of products which are sold for consumer, business, or government purposes. Trading companies buy a specialized range of products, maintain a stock or a shop, and deliver products to customers.
There are two types of trading companies: general trading companies and specialized trading companies.
General Trading Companies
General trading companies operate in a variety of fields and focus more on business investment than basic trading business. In doing so, general trading firms expand the value chain by combining trade with business investment.
Specialized Trading Companies
A specialized trading company is a company that does business in a certain field and covers everything both in operations and procedures for the export and import process in the trading.
How to Set Up a Trading Company in Indonesia?
If foreign investors intend to conduct commercial activities in Indonesia, they are required to establish in Indonesia a foreign investment limited liability company (Indonesian: Perseroan Terbatas Penanaman Modal Asing –PT PMA).
The formation of a PT PMA is regulated by Law no. 40/2007 concerning Limited Liability Companies (UU PT). Such a company can be 100 percent foreign owned or partly foreign owned. Several sectors in Indonesia were closed, or partially closed, for foreign investment. The Investment Negative List, i.e: sectors that are closed to foreign investment.
What is Negative Investment List (DNI)?
Negative Investment List is a of business sectors compiled by the government as information for potential investors about businesses that are not allowed in Indonesia and its various regulations, especially regarding joint ownership.
DNI Indonesia was created to protect the Indonesian economy, as well as to provide investors with more business opportunities. Over time, the DNI may change to suit government regulations. Therefore, it is important for investors to know the current DNI in Indonesia before making further planning regarding investment in Indonesia.
The most important thing that investors need to know about the latest Indonesian DNI is about which business sectors are opened on terms and which are closed completely. The business sectors currently open to 100% foreign ownership in trading are the cold storage, production-affiliated distribution businesses, direct selling via network marketing, and brokers.
In tourism and the creative economy, such as opening bars, cafes, restaurants and sports facilities. Meanwhile in the communication and information sector, there is an investment involving an investment of IDR 100 billion allowed for 100% foreign ownership.
Others, in the energy and mineral resources sector, there is a biomass pellet industry for renewable energy which is open for 100% ownership.
In case a sector is partially closed to foreign investment, the list states the maximum allowed percentage of foreign capital. Thus, sectors open with conditions require a local partner. On the other hand, there are several business sectors that have been closed by the government for foreign investment as well as domestic investment.
These fields consist of 20 positions, including the alcoholic beverage industry, the arrangement and operation of land passenger transportation terminals, gambling, certain types of fishing, and the pesticide active ingredient industry. A complete list of Negative Investments in English can be found on the BKPM website http://www.bkpm.go.id.
The Head of the Investment Coordinating Board (BKPM) said the negative list of investment or DNI would be trimmed down to six points. The DNI, which originally numbered 20 business fields, will be regulated in a presidential regulation that is now being prepared by the government.
The six lists referred to, the government will open up opportunities for investors to invest. Although there is no prohibition, the government will still provide conditions.
The negative list of prohibited investments includes the cannabis business, casinos or gambling places, industries that use mercury in the production process, to the chemical weapons industry.
Citing the previous regulation, i.e: Presidential Regulation Number 44 of 2016, the six DNIs refer to the following business sectors. Among them, cannabis cultivation with the HS code 01289, the removal of valuable objects from the sinking of the ship’s cargo, and the mercury-making industry using mercury processes coded HS 20111.
Then, catching fish species listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) with HS code 10719; pesticide active ingredients industry, such as dichloro diphenyl trichioroethane (DDT), aldrin, endrin, dieldrin, chlordane, heptachlor, mirex, and toxaphene; serts chemical industry Industry and industry of ozone depleting substances (BPO).
Step by Step Establishing a PT PMA in Indonesia
There are several steps you need to go through when you want to set up a foreign investment company in Indonesia (PT PMA), especially if you want to have a trading company in Indonesia:
- Principle License & Business License from BKPM;
- Deed of Establishment (containing the Articles of Association) legalized by a Public Notary;
- Legalization of the legal entity status of the PT PMA by the Ministry of Law and Human Rights;
- Domicile Letter from the local district authority;
- Tax Identification Number (NPWP) and taxable entrepreneur confirmation (PKP) from the tax office;
- Company Registration Certificate (TDP) from the agency for integrated licensing services;
- The Investment Coordinating Board (BKPM) facilitates services for investors by changing the term Principle License (IP) to Investment Registration or Investment Registration (PI). This investment licensing service is regulated in BKPM Regulation Number 13 of 2017 concerning Guidelines and Procedures for Licensing and Investment Facilities and;
- Company Domicile Certificate (SKDP), Trading Business License (SIUP), and Company Registration Certificate (TDP) have been deleted.
As a simplification of licensing in Indonesia and to increase the ease of investing in Indonesia, the Government issued Government Regulation Number 24 of 2018 concerning Electronically Integrated Business Licensing Services. Government Regulation Number 24 of 2018 concerning Electronically Integrated Business Licensing Services (“PP 24/2018) or OSS are permits issued by the OSS Institution for and on behalf of ministers, institutional leaders, governors, or regents / mayors to Business Actors through integrated electronic system. One of the important breakthroughs in OSS is the introduction of a Business Identification Number (NIB).
NIB in the form of 13 (thirteen) random digit numbers that are secured and accompanied by an electronic signature. In accordance with Article 26 PP concerning OSS, NIB also applies as TDP as referred to in the laws and regulations in the field of Company Registration, Imprort Identification Number (API), and customs access rights.
How many person are the shareholders of PT PMA? and what is the Minimum (Paid Up) Capital Requirements for PT PMA?
At least two shareholders are required (President Director and President Commissioner) for the establishment of a PT PMA. At least one of the shareholders needs to be a foreign individual (or foreign legal entity). The Director needs to reside in Indonesia to take care of all daily activities. The foreigner who works and resides in Indonesia is required to obtain a tax number (NPWP) and a work permit (KITAS).
To establish a PT PMA, foreign investors must meet the minimum capital requirements for foreign investment. Currently, the minimum requirement is IDR 10 billion, equivalent to US dollars.
The Indonesian government has high requirements to attract large-scale companies and investors, and protects smaller local businesses. Paid-in capital is generally set at 25% of the minimum capital requirement (i.e. IDR 2.5 billion). However, in certain industries the requirement for paid-up capital is higher.
For more details, you can contact us Indoservice regarding the establishment of PT PMA.
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