8 Mistakes Setting Up A Company in Indonesia

30 September 2022 By admin

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For many investors and businessperson, Indonesia—and Bali in particular—is a lucrative market. The island is growing into a the thriving business hub in the country, thanks to the rapid growth of tourism. Bali radiates its own charm; it enables entrepreneurs to pursue their business venture and make profit all while enjoying the paradise. Bali has recently experienced a boom in foreign entrepreneurs, elevating this island above the status of being just another resort island. With over 5 million customers, it has developed into a lucrative business opportunity that supports a strong startup ecosystem and offers opportunities for entrepreneurs to cut expenses and increase profits.

There are fantastic chances waiting in Indonesia if you can grab the market. However, if you make a mistake with how you set up your firm, such prospects can be beyond your grasp and much further away. 

Here are the typical mistakes that most investors make while establishing their businesses, which you should be aware of before beginning the company registration process in Indonesia. Knowing them in advance can assist you in avoiding them, ensuring that you achieve the results for which you have gone to such lengths.

Not Understanding the Local Regulation Enough

When you set up a business in another country, you must deal with the law and its complexities. It’s not a good idea to keep yourself blind to the law when you’re putting the legalities of your business at stake. Gather as much knowledge as you can before beginning your market entry. Verify the information using several sources. See if you have the resources to address the legal and regulatory issues.

Not Having An Office for Your Business

having an office for the business help to grow your business

You read it right. You can’t legally build a business in Indonesia if you don’t have an office—even though you are running a small business with a small team. One of the requirement of business registration in Indonesia is having a domicile letter for your company.

Confusing Business Visa, Work Permit, and Business Permit

Indonesian business visas only permit you to engage in a limited range of activities. You may not do any business that involves hiring personnel or paying them a salary.

The business visa would not be available if you planned to launch a business. Some people mistake a work permit (ITMA), which enables you to lawfully work and receive compensation in Indonesia, for a business visa.

You should be careful about whatever visa you are holding since if you do, you will be breaking Indonesian immigration laws and could receive penalties.

Failing to Register Your PT PMA

There is no way you can legally set up a business in Indonesia without administering your PT PMA. Remind you, this is not a work permit. The rights and obligations of PT PMA are on par with those of a locally held business. A limited liability corporation with a shareholder who is not an Indonesian is considered a PT PMA. The organization is qualified to apply for working visas for foreign employees and is permitted to take part in all Indonesian trades or business activities.

You must understand the Law No. 40 Year 2007 concerning The Company Law in order to legally establish a company in Indonesia. Before you begin the process of setting up a business in Indonesia, you must have a thorough awareness of the laws and culture there.

Trying to Do the PT PMA Yourself

After reading a little bit of PT PMA, some businesspersons attempt to do the registration themselves—but getting frustrated by its complexities in the process. No matter how skilled you are in business or how knowledgeable you are in the law, you must recognize that each country has its unique character and culture when it comes to dealing with legal and business issues. Even if you carefully read Indonesian Company Law No. 40 from 2007 and strive to follow every need to set up your business there, you could still be perplexed when it comes time to deal with the bureaucracy.

There are so many thing to deal with PT PMA registration. From a stack of documents and permits for application to the multilevel bureaucracy to deal with, a PT PMA registration is a long and complex process. Save yourself from frustration and trust it to the professionals. With more than 6 years experience and corporate knowledge, Actual Synergy can help you get your PT PMA done with minimum hassles. In the meanwhile, you can put your time and energy to focus on developing the perfect business strategy for Indonesian market.

Not Hiring Enough Local Workers

Having too many foreigners than Indonesian locals in your office could result in a difficult situation with the Ministry of Manpower. You are not prohibited from hiring foreigners, but they should not dominate the office. The law requires international businesses to hire one Indonesian for every foreign worker hired in a move to increase employment opportunities for its residents. Additionally, you will need to pay a few fees and confirm that expats have the proper visa and work permit.

Not Obtaining the Halal Certificate (For F&B Business Outside Bali)

With almost 87.2% of its population being Muslim, Indonesia has the largest Muslim population in the world. In Bali, you can sell alcoholic drinks and pork delicacies with no issues. But if you aim for the general Indonesian market, you need to obtain a halal license. In Indonesia, it is necessary for some consumer goods and services to be halal-certified. The processing, ingredients, and certification of halal products are governed by the Halal Law.

It is crucial that you obtain halal certification for your goods and services in Indonesia as it will help you quickly break into the halal market since the Muslim populace exclusively consumes halal goods.

Rushing Your Set Up

Take your time. While keeping deadlines is essential, you cannot rush the setup process. In Indonesia, things can take longer than you might anticipate. Even while it may be claimed that licenses would be provided in a day or that certain permission will be available in three days, the reality is quite different. Keep a schedule, but allow yourself some flexibility. Setting strict timelines and attempting to rush processes can only result in frustration.