Indonesia is the world’s fourth most populous country with over 280 million people and Southeast Asia’s largest economy. As a rapidly growing emerging market, Indonesia offers tremendous opportunities for international businesses across sectors including manufacturing, technology, finance, and natural resources. With its strategic location, large domestic market, skilled workforce, and government initiatives to attract foreign investment, Indonesia has become an increasingly attractive destination for global expansion.
Unlock growth opportunities in Indonesia with Cerity Global as your trusted partner. We offer end-to-end support for establishing your legal entity, navigating Indonesia’s often complex regulatory landscape with clarity and efficiency.
From company registration to ongoing back-office support, including HR, payroll, benefits, accounting, tax and compliance, Cerity Global simplifies the process so you can focus on growing your business.
Need to hire quickly before your entity is set up? We offer interim EOR services in Indonesia, enabling you to onboard talent fast. Once your entity is established, we ensure a smooth transition of your employees from the EOR Structure to your own legal entity, without disrupting payroll or compliance.
Our experts stay ahead of regulatory changes to keep your operations aligned with Indonesia’s employment and tax laws, helping you scale confidently and compliantly.
The most popular choice for foreign companies, PT PMA is a limited liability company that allows foreign ownership. It offers limited liability to shareholders and is suitable for businesses seeking to establish a permanent presence in Indonesia. A PT PMA requires a minimum investment plan of IDR 10 billion (approximately USD 650,000) with at least 25% paid-up capital and allows 100% foreign ownership in most sectors.
A limited liability company for domestic investors or foreign investors who choose to be treated as domestic investors. This structure may have different investment requirements and sector access compared to PT PMA.
A representative office allows foreign companies to conduct market research, promotional activities, and liaison functions without engaging in direct commercial activities. It cannot generate revenue or sign contracts on behalf of the parent company in Indonesia.
A branch office is an extension of a foreign company that can conduct limited business activities in Indonesia. The parent company is fully liable for the branch’s obligations, and this structure is less common due to regulatory restrictions.
A domestic limited liability company structure that requires local ownership or nominee arrangements for foreign investors who want to access sectors restricted to domestic investment.
At least one director must be an Indonesian resident. The company must have a minimum of one director and one commissioner (supervisory board member). Foreign directors require proper work permits and visas to legally perform their duties in Indonesia.
Must have a chief representative who can be a foreign national but must obtain proper work permits. The representative must be registered with Indonesian authorities and comply with reporting requirements.
Must have a chief representative or branch manager who can be a foreign national with proper work permits. The individual must be authorized by the parent company to represent its interests in Indonesia.
In Indonesia, bank account setup follows a structured process that can occur both before and after entity incorporation:
Bank Account Setup in Indonesia: Process and Requirements
Before Incorporation:
After Incorporation:
Note:
Indonesia’s banking sector is modernizing under the oversight of Bank Indonesia (BI) and the Financial Services Authority (OJK). While account opening is structured, enhanced due diligence and in-person verification remain mandatory, particularly for foreign-owned companies. Entities should plan for additional compliance checks under Indonesia’s AML regulations.
Required documents include deed of establishment and Ministry approval, articles of association, tax identification number (NPWP), Business Identification Number (NIB) from OSS system, Directors’ identification and address proof, Board resolution for opening bank account, domicile letter from local authorities, and Investment plan (for PT PMA).
Cerity Global supports companies in their global expansion plans and helps in legal entity setup, registration and ongoing support services. With us, you can quickly set up a legal entity, operate compliantly, and expand globally. The process typically takes a few days to a week, depending on the bank.
Employment in Indonesia is primarily governed by comprehensive labor legislation:
Employment contracts must be written in Indonesian and some of the standard details mentioned in the written contract include:
The different types of employment relationships are:
Permanent Employment (PKWT Tidak Terbatas)
The most common form of employment with indefinite duration contracts. Employees work standard hours with full benefits including social security, health insurance, and statutory leave entitlements.
Fixed-Term Employment (PKWT)
Employment contracts with specific end dates, typically used for project-based work, seasonal activities, or temporary assignments. The maximum duration is generally 2 years with possible extension, and total duration cannot exceed 3 years.
Part-Time Employment
Employees work fewer hours than standard full-time (less than 7 hours per day and 35 hours per week). They receive proportionate wages and benefits based on working hours.
Outsourcing/Contract Workers
Workers provided by outsourcing companies for specific non-core business functions. This arrangement is regulated and limited to certain types of work activities.
The probationary period in Indonesia is maximum 3 months for all types of employment contracts and cannot be extended.
The standard working hours in Indonesia is typically:
Overtime
Overtime in Indonesia is usually limited to 3 hours per day and 14 hours per week.
As stipulated by Indonesian Manpower Law No. 13 of 2003, the standard notice period is 30 days. A longer notice period can be mandated if it is specified in their employment contract or a Collective Labor Agreement (CLA).
The amount for severance pay depends on the employee’s length of service, ranging from one month’s salary for less than one year to nine months’ salary for eight or more years of service.
Foreign nationals intending to work in Indonesia must obtain the appropriate visa and work permit. The process involves sponsorship by a registered Indonesian entity and compliance with Ministry of Manpower requirements.
Work Visa & Permit Options in Indonesia
1. B211A/B211B Work Visa
Initial entry visa for foreign workers to apply for work permits and residence permits in Indonesia.
2. VITAS (Visa Tinggal Terbatas) – Limited Stay Visa
For foreign workers with approved work permits planning to work in Indonesia.
3. ITAS (Izin Tinggal Terbatas) – Limited Stay Permit
Residence permit for foreign workers after entering Indonesia with work visa.
4. Work Permit (IMTA – Izin Menggunakan Tenaga Kerja Asing)
Mandatory work authorization for foreign employees.
Key Requirements:
Indonesia’s immigration framework is closely monitored and regularly updated. Early preparation, employer sponsorship, and strict compliance with manpower regulations are critical to avoid delays or penalties.
Employees are entitled to 12 working days of annual leave after working for 12 consecutive months. Leave entitlement increases with length of service, with some companies providing additional leave days beyond the minimum requirement.
Female employees are entitled to 3 months of maternity leave (1.5 months before and 1.5 months after delivery). Additional leave may be granted for medical complications.
Male employees are entitled to 2 days of paternity leave when their wives give birth.
Employees are entitled to leave for religious observances, including annual religious holidays and pilgrimage leave for eligible Muslim employees.
Paid sick leave provisions vary but typically include coverage for medical treatment and hospitalization with continued salary payments based on length of service.
The following statutory national holidays are observed in Indonesia:
The payroll cycle in Indonesia is generally monthly. Payslips must be provided showing gross salary, deductions, and net pay.
Indonesia's 13th-month salary, a mandatory bonus, also known as the Tunjangan Hari Raya (THR) is given to employees before major religious holidays like Eid al-Fitr.
Indonesia has a comprehensive social security system (BPJS):
Mandatory Social Security Contributions:
Indonesia follows Financial Accounting Standards (SAK) which are largely converged with International Financial Reporting Standards (IFRS). Public companies and certain large entities must apply SAK ETAP (for entities without public accountability) or full IFRS.
Indonesian companies must file annual financial statements and tax returns:
Statutory audit requirements apply to:
Audits must be conducted by registered public accountants (CPA) licensed by the Ministry of Finance.
In general, a corporate income tax rate of 25 percent applies in Indonesia.
Reduced rates available for:
VAT rate increased to 12% on January 2025 for luxury goods, while the standard VAT rate remains at 11% for most goods and services.
Corporate income tax returns must be filed by March 31 following the tax year. VAT returns are typically filed monthly by the end of the following month.
Penalties for late filing and non-compliance include administrative penalties of 2% per month of unpaid tax and late filing penalties of IDR 500,000 to IDR 5 million, including criminal penalties for serious tax evasion.
Indonesia has comprehensive transfer pricing regulations:
Indonesia has implemented CbC reporting requirements:
Indonesia has implemented OECD-aligned transfer pricing documentation rules requiring multinational enterprises (MNEs) to maintain detailed Master File and Local File records. These ensure transparency in cross-border transactions and compliance with global tax standards.
Master File
Local File
Indonesia enacted the Personal Data Protection Law (UU PDP) in 2022, establishing comprehensive data protection requirements similar to GDPR principles.
Indonesia’s AML framework is governed by Law No. 8 of 2010 on Prevention and Eradication of Money Laundering:
Obligated entities: Banks, financial institutions, money changers, insurance companies, securities companies, and designated non-financial businesses.
Key requirements:
Penalties: Criminal sanctions including imprisonment up to 20 years and fines up to IDR 1 billion, plus administrative sanctions.
Reasons you should setup legal entity in Indonesia:
Cerity Global ensures your business expansion in Indonesia is fast, compliant, and future-ready, so you can focus on growth while we manage the back-office tasks.
Economic figures are subject to change based on quarterly reports and market conditions.
Cerity Global combines deep local knowledge with proven expertise to make your Indonesia business establishment effortless and compliant. Whether you’re looking for legal entity setup and registration or ongoing support, we’re your trusted partner for sustainable global expansion in Indonesia.
Disclaimer – The information provided is for informational purposes only and does not constitute legal, business, or tax advice. Entity setup requirements, tax rates, and economic data are subject to change and may vary by location.
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