Build a company in Indonesia? It's easy, if you know how.

The first time I faced the Jakarta Commercial Office to advise on the process of creating a company in Indonesia,

I faced a complex, slow and bureaucratic reality. All the reports I read on the subject (Doing Business, Regulation, GDG, etc, ...) talked about that creating a company in Indonesia is a titanic task and that it is impossible to establish 100% foreign capital. Now, from experience, I see that this is not the case and that for each lock there is a trick, for each barrier a way to skip it. In the end it is a 60-80 day race and I can assure you that it is not necessary for the Spanish company to set foot in Indonesia. I feel that the mechanisms I expose below are not orthodox, but here we must do business and reduce time and costs. I expose here the false myths on this subject:


Myth 1 - Having 100% of the capital "is not possible", you must have an Indonesian decorative figure This is a lie, it is the way the old school has always used in Indonesia. The foreigner who has married an Indonesian is habitual and everything is in his name, but, honestly, it is not necessary. It is true that there is a negative list of investments of BKPM (Indonesian Investment Board) that requires in certain sectors a percentage of local participation, sometimes up to 51%. However, there are formulas and social objects that do allow 100% and in which there is space for the full operation of the company.


Myth 2 - The minimum paid-in capital for a foreign capital company is 250,000 euros It is true that BKPM demands this requirement, but it is also true that there is a current notarial mechanism that avoids the disbursement of this amount. In addition, it avoids the disbursement of any amount, being able to constitute 0 euros.


Myth 3 - Obtaining import licenses takes more than a year and they are very expensive There are many obstacles to obtaining import licenses, but you should also know what country we are talking about. Indonesia has its "sui generis" mechanisms to do things. As a Chinese friend of a friend of mine said: "While the chicken likes to peck, here we are all saved." Even so, for anyone to be scammed, for obtaining a license, with the sui generis mechanism, they should not charge more than 500 euros per license. That on the one hand. On the other hand, as long as one does not have the licenses, one can import perfectly through the so-called "name licenses". Come on, there are people with import licenses for your product that allow you to import through them. You just have to know who they are.


Myth 4 - Final approval by the Ministry of Justice can take months Technically it is true that the minimum approval period is 21 days and that they generally take a long time. Although there is also an "acceleration mechanism" (as they call it, it is not my thing) that for a certain period this period is reduced to 7 days.


Myth 5 - For every foreign employee you have to have 5 local employees

According to the regulation it is like that. According to reality no. Here, as in other countries, there are so-called nominal employees, straw men, etc ... That is, for a ridiculous amount, you have 5 employees on the payroll who do not step on your office. Of course you need employees, but maybe with 3 come to the beginning.


Myth 6 - The director of the company cannot be a foreigner

Yes it can be, I am one. It is true that to be so you have to reside in Indonesia, but you can do it this way: enter with a tourist visa, sign a rental contract for an apartment, get the letter of the building address saying that you are a tenant and then present it in the moment of the constitution.


Myth 7 - Notary documents must be signed in Indonesia incurring travel costs, etc ...

I wish it were so, because it gives more reliability about the country. However, neither the articles of incorporation, the powers of attorney, nor the declaration of disbursement must be signed in Indonesia. You just have to have an associate notary who sends the documents to Spain, the company signs them and sends them back. Total validity, the notary legitimizes them equally. Of course, they are in Indonesian and you always have to read what you sign before. Someone is needed to check them before.


Myth 8 - Due to all the barriers there are, law firms and law firms charge a sauce for setting up a company

Yes, there are rates of 200 euros per hour. However, don't be fooled by anyone, all the processes they have in place at the Investment Board (BKPM) are free. Speaking one day with BKPM, they told me that the buffets and consultants usually send the interns to do the internship without having any idea to form them and because of that they make the work of the Investment Board difficult. A good margin yes. They should never charge you more than 5,000 - 10,000 euros for the whole process, if they are not scamming you. It is not worth that.


Myth 9 - Indonesia is a legally insecure country

It is true that it is still adjusting its legislation and that year after year there are variations in it, quite large changes, by the way. However, it is also true that the laws in Indonesia, as in other countries, do not apply retroactively. A company incorporated under a formula, with investment requirements, minimum share capital and authorizations to import certain products will not be affected by a new regulation, the regulation in force at the time of incorporation will always apply.


And here for today. Also for those who want it, to say that in the Economic and Commercial Office of Jakarta there is a step-by-step guide to the constitution that I made. I don't know if they charge today. There comes the whole process, yes, doing a "do it yourself" is complex and slow, but everything is learned.


Author: Manuel Alborés





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