Indonesia, with its rich cultural diversity and booming economy, is an enticing destination for entrepreneurs looking to start a small business. However, for foreigners, breaking into the Indonesian business landscape can be a challenging but rewarding journey.
In this article, we’ll explore the possibilities and challenges of starting a small business in Indonesia as a foreigner.
Classification of Small Businesses in Indonesia
The Indonesian government classifies small businesses into three categories based on their annual turnover and total assets:
- Micro businesses: Annual turnover of up to IDR 500 million (approximately USD 34,000) and total assets of up to IDR 500 million.
- Small businesses: Annual turnover of IDR 500 million to IDR 3 billion (approximately USD 204,000) and total assets of IDR 500 million to IDR 10 billion (approximately USD 680,000).
- Medium businesses: Annual turnover of IDR 3 billion to IDR 15 billion (approximately USD 1 million) and total assets of IDR 10 billion to IDR 50 billion (approximately USD 3.4 million).
Can a Foreigner Start a Small Business in Indonesia?
Yes, foreigners can start small businesses in Indonesia, but there are some restrictions. For example, foreigners cannot own more than 49% of a business in certain sectors such as retail and transportation. However, there are many other sectors where foreigners are allowed to own 100% of their businesses.
Overall, Indonesia is a welcoming country for foreign entrepreneurs. There are many opportunities for foreigners to start their own businesses and be successful.
Types of Small Businesses that Foreigners Can Start in Indonesia
Here are some examples of small businesses that foreigners can start in Indonesia:
Indonesia is a popular tourist destination, so there are many opportunities for foreigners to start businesses in the tourism industry, such as tour operators, hotels, and restaurants.
Indonesia has a large and growing population, so there is a high demand for education services. Foreigners can start businesses such as language schools, vocational training schools, and private schools.
Indonesia has a young and tech-savvy population, so there is a growing demand for technology products and services. Foreigners can start businesses such as software development companies, IT consulting firms, and e-commerce businesses.
Indonesia has a rich culture and heritage, so there is a growing demand for creative products and services. Foreigners can start businesses such as fashion design studios, graphic design studios, and film production companies.
Common Structure for Foreign Small Business in Indonesia
The most common company structure for foreign small businesses in Indonesia is the Perseroan Terbatas Penanaman Modal Asing (PT PMA), or foreign-owned limited liability company. PT PMAs are allowed to operate in most industries in Indonesia, and they offer the same legal protections as Indonesian-owned companies.
To establish a PT PMA, foreign investors must meet the following requirements:
- A minimum paid-up capital of IDR 10 billion (approximately USD 696,000).
- At least two shareholders, either foreign individuals or corporations.
- At least one director and one commissioner, who can be foreign or Indonesian nationals.
The PT PMA structure is relatively straightforward, and it is the most popular choice for foreign investors due to its flexibility and legal protections.
The PMA establishment process can be complex and time-consuming, but don’t worry; you can rely on InvestinAsia’s Indonesia PMA company registration services to simplify the process.
Requirements for Starting a Small Business in Indonesia
The following are some of the general requirements for starting a small business in Indonesia:
Business visa and work permit
Foreigners must register their business with the Indonesian government. This process can be done online through the Online Single Submission (OSS) system.
You can check our services for Company registration Indonesia to simplify the process.
Foreigners must register their business for taxes with the Indonesian government. To assist you through the process, you can rely on our Indonesian tax service.
Business licenses and permits
Foreigners may need to obtain additional Indonesian business licenses and permits depending on the type of business they are starting.
As Indonesian market entry experts, the team at InvestinAsia can assist you throughout the entire process of establishing your business in Indonesia. You can check our complete services for more details.
If you have any questions or inquiries, you can chat with us for a FREE consultation!
How to Start a Small Business in Indonesia for Foreigners?
Here are some steps on how to start a small business in Indonesia:
Conduct market research
Before starting any business, it is important to conduct market research to understand the needs and wants of your target customers.
Choose a business structure
There are different types of business structures available in Indonesia, so it is important to choose one that is right for your business.
Register your business
Foreigners must register their business with the Indonesian government through the OSS system.
Obtain necessary licenses and permits
Foreigners may need to obtain additional business licenses and permits depending on the type of business they are starting.
Open a bank account
Foreigners will need to open a bank account in Indonesia to operate their business.
Foreigners may need to hire employees to help them operate their business. Foreigners must obtain work permits for their employees.
Starting a small business in Indonesia can be a challenge, but it can also be a rewarding experience. By following the steps above, foreigners can increase their chances of success.