Starting a business in Indonesia is an exhilarating prospect, but the initial legal decisions you make will define your trajectory for years to come. Many foreign entrepreneurs land in Bali with a vision but stall at the starting line, confused by the alphabet soup of PT, PT PMA, and RO. Choosing the wrong structure isn’t just a paperwork error; it can lock you out of revenue streams, bloat your capital requirements, and even leave you vulnerable to “nominee” risks that threaten your ownership.
The landscape in 2026 is strictly regulated, with the government enforcing clear boundaries between what a local company, a foreign-owned entity, and a representative office can do. A misstep here—like trying to sell products through a non-commercial office or under-capitalizing your investment—can trigger audits and license revocations via the OSS RBA system. The days of “figuring it out later” are over; precision at the setup phase is your only safety net.
This guide cuts through the complexity to provide a clear comparison of the three main business vehicles available to you. We will walk you through the eligibility, capital rules, and step-by-step Company Registration process for each. Whether you are testing the market with a Representative Office or committing to a full PT PMA, this roadmap ensures your entry into Indonesia is built on a solid, compliant foundation.
Table of Contents
- Overview: PT vs PT PMA vs Representative Office
- Eligibility and Core Requirements
- PT and PT PMA Registration Steps
- Representative Office Registration Process
- Real Story: The "Soft Launch" Trap in Seminyak
- Fees, Timelines, and Use Cases
- Key Risks and Common Mistakes
- Choosing the Right Structure for You
- FAQ's about Company Setup
Overview: PT vs PT PMA vs Representative Office
Indonesia offers three primary vehicles for business, each serving a distinct purpose. The Local PT (Perseroan Terbatas) is a limited liability company owned 100% by Indonesian citizens or entities. It allows for full commercial activities and is the standard for domestic business, but it legally excludes foreign ownership.
For foreign investors, the PT PMA (Penanaman Modal Asing) is the gold standard. This is a limited liability company that allows for foreign shareholding (up to 100% in many sectors). It is the required vehicle if you intend to earn revenue, sign contracts, and employ staff directly in Indonesia. Finally, the Representative Office (RO) is a liaison outpost of a foreign parent company. It is strictly non-commercial, meaning it cannot generate local revenue or issue invoices. It is designed for market research, marketing, and coordination, not for active trading.
Eligibility and Core Requirements
Eligibility rules are rigid. A Local PT requires Indonesian shareholders; using “nominees” to bypass this is legally risky and increasingly scrutinized. In contrast, a PT PMA requires at least two shareholders (foreign individuals or entities) and is subject to the Positive Investment List, which dictates which sectors are open to foreign investment.
Capital requirements are the major differentiator. While Local PTs have flexible capital rules depending on their size, a PT PMA faces a high barrier. The Ministry of Investment (BKPM) generally requires a total investment plan of greater than IDR 10 billion per business activity (KBLI), excluding land and buildings. This ensures that Company Registration for foreigners is reserved for serious investors. ROs, conversely, have no minimum capital requirement as they are funded by the overseas parent, but they are limited to non-profit activities.
PT and PT PMA Registration Steps
The process for establishing a limited company (PT or PMA) follows a structured path. First, you must define your structure and select the correct KBLI codes (business classifications) for your activities. Next, a notary drafts the Deed of Establishment, which is submitted to the Ministry of Law and Human Rights (MOLHR) for approval. Once the “SK” (Decree) is issued, the company becomes a legal entity.
Following this, you obtain a Tax ID (NPWP) and proceed to the Online Single Submission (OSS) system. Here, you input your entity details to generate the NIB (Business Identification Number). The OSS system automatically maps your Company Registration to risk levels. Low-risk businesses can operate immediately with the NIB, while medium and high-risk sectors (like construction or tourism) require further “Standard Certificates” or full business licenses before operations can commence.
Representative Office Registration Process
Setting up an RO is streamlined but distinct. You must choose the specific type: a KPPA for general liaison work or a KP3A for trade representation. The process begins with compiling legalized documents from your overseas parent company, including articles of incorporation and a letter appointing a Chief Representative in Indonesia.
You then submit an application via the OSS or the relevant ministry portal (e.g., Ministry of Trade for KP3A). Upon approval, the RO receives an NIB and a representative office license. This license typically defines the tenure (often 3-5 years) and the specific scope of permitted activities. Post-registration steps include obtaining a tax number and opening a bank account, but remember: this account is for funding operations, not receiving sales revenue.
Real Story: The "Soft Launch" Trap in Seminyak
Meet Lucas, a 34-year-old fashion designer from Canada. In early 2026, Lucas arrived in Seminyak to launch “Tropical Threads,” a sustainable linen brand. To save on initial capital, he opted for a Representative Office (KPPA) setup, intending to “test the market” before committing to a full PMA. He set up a small showroom and began selling his shirts directly to tourists.
Three months in, the local tax office conducted a routine check. They found Lucas issuing handwritten receipts and collecting cash revenue—a strict violation of his RO license. The cool air of his showroom felt suddenly stifling as officers explained that an RO is for research, not retail. He faced immediate closure and potential deportation for misuse of his business permit.
Lucas contacted a trusted tax management company to salvage his business. They helped him freeze operations and urgently transition his structure to a PT PMA. It took a significant capital injection to meet the IDR 10 billion requirement, but it was the only way to legally sell his stock. “I thought I was being smart with a ‘soft launch’,” Lucas admitted. “But in Indonesia, you can’t be half-in. You’re either a research office or a real business.”
Fees, Timelines, and Use Cases
For a PT or PT PMA with complete documents, the Company Registration timeline is typically 2 to 4 weeks. Costs involve notary fees, government legalization fees, and sector-specific licensing costs. Representative Offices can often be set up slightly faster, in 2 to 6 weeks, depending on the ministry’s workload.
Investors typically choose a PT PMA when they are ready to commit capital and need to invoice clients locally. An RO is the preferred choice for large multinationals establishing a cost center to supervise local distributors or conduct feasibility studies without the burden of corporate tax filings on revenue. Local PTs are best left to purely domestic arrangements or genuine partnerships where the foreign investor does not require direct control or visa sponsorship.
Key Risks and Common Mistakes
A critical mistake is using a “nominee” structure for a Local PT to avoid the high capital requirements of a PMA. This practice involves paying a local person to hold shares on your behalf. In 2026, this is legally risky; nominee agreements are often unenforceable in court, leaving you with no control over your assets.
Another common pitfall is “RO scope creep”—using a Representative Office to conduct commercial business, as Lucas did. This invites scrutiny from both tax and immigration authorities. Finally, many investors face delays due to mismatched data between their Deed of Establishment and the OSS system. Ensuring consistent KBLI codes and address details across all documents is essential to avoid manual review bottlenecks during Company Registration.
Choosing the Right Structure for You
Selecting the right vehicle comes down to your commercial intent and capital capacity. If you have the required IDR 10 billion investment plan and need to generate profit, the PT PMA is the only compliant path. It offers security, control, and the ability to sponsor work visas for foreign staff.
If your goal is strictly non-transactional—such as quality control for exports or brand marketing—an RO offers a lower barrier to entry. However, if you attempt to force a commercial business model into a non-commercial structure, the regulatory backlash will likely cost more than the capital you tried to save.
FAQ's about Company Setup
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Can foreigners own 100% of a company in Indonesia?
Yes, through a PT PMA structure. Most business sectors are open to 100% foreign ownership under the Positive Investment List, though some specific sectors remain restricted or require a local partner.
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What is the minimum capital for a PT PMA?
The current regulation requires a total investment plan of greater than IDR 10 billion per business classification (KBLI), excluding land and buildings.
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Can a Representative Office sell products?
Generally, no. A standard KPPA cannot generate revenue or issue invoices. Some specialized trade offices (KP3A) may act as selling agents but usually bill through the parent company.
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How long does the setup process take?
With all documents ready, a PT PMA typically takes 2-4 weeks to complete Company Registration and obtain the NIB.
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Is it safe to use a local nominee?
No. Nominee arrangements are legally gray and often unenforceable. The government encourages foreign investors to use the official PT PMA structure for legal protection.
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Can I convert my RO to a PT PMA later?
Yes. You can close the Representative Office and incorporate a new PT PMA once you are ready to start commercial operations and meet the investment requirements.
