What is an Offshore Company: Definition and Advantages

What is offshore company

Many foreign investors have an eye for Indonesia to expand their business. But placing a huge amount of funds or capital and moving into an unfamiliar place might seem a little risky.  So, what to do before starting the big business project? An offshore company in Indonesia is a smart way to set up a big investment.

But, before discussing it further, let’s find out what is an offshore company, advantages, the steps of offshore company registration, and other things you need to know about this type of business? Read on for a complete answer.

Also read: The Types of Companies in Indonesia: 2023 Complete Guide

What is an Offshore Company?

What is an Offshore Company: Definition and Advantages (source: Pexels)
What is an Offshore Company Definition and Meaning (source: Pexels)

An offshore company is often considered the best way to expand business with low costs and a safer way. In short sentences, offshoring is relocating and registering your business in another country, in this case, Indonesia. You don’t have to make a huge dislocation with an offshore company and spend much money.

These companies performs the same type of business as locally incorporated companies (read more about What is company incorporation). The shareholders’ responsibility is mostly restricted to the capital number that the offshore company has invested in the company.

The locally incorporated company and offshore company are two private limited companies. Offshore company incorporation in Indonesia has several benefits, such as cheap maintenance and setup costs, low tax obligations, and less administration.

Also read: What is Perseroan Terbatas (PT) in Indonesia?

Advantages of Offshore Company

After discussing the offshore company’s meaning, let’s delve into its benefits and why offshore company is a potential business option.. As briefly mentioned above, an offshore company in Indonesia offers many advantages.

  • Tax Savings

    One of the biggest advantages of the offshore company is that your company can avoid all local taxation, including capital gains, corporate, and income tax. That is why offshore company earns significant savings because it is not subject to local tax obligation.

  • Cost Effectiveness

    How can the this type of company offer cost-effectiveness? Although many foreign investors are interested in this country, the offshoring industry in Indonesia is still relatively new. Compared to other Asian countries such as Singapore and India, Indonesia is a new player.

    Therefore, Indonesian labor wages are still low, and the resources are rich. Furthermore, the Indonesian government also sets investment incentives that bring numerous benefits to foreign investors.

  • Huge Talent Pool

    According to February 2023’s real-time data from World Population Review, Indonesia placed fourth place as the world’s most populated country. Although the population is big, Indonesia still has few entrepreneurs. For this reason, Indonesia is an ideal country to strengthen your company, expand your market, and recruit passionate local teams.

Besides the benefits above, the offshore company offers privacy, confidentiality, operation easiness, asset protection, business law flexibility, and lawsuit protection.

Also read: How to Register a Company in Indonesia: Guide for Foreigner

Who Should Start an Offshore Company?

A local Indonesian company is needed to establish an offshore company. With the local company, the offshore company can merge under Indonesia’s jurisdiction.

The offshore companies are varied. According to the organizational structure, the types of offshore companies are:

According to the purposes of use, the types of offshore companies are:

  • Offshore Holding Company
  • Offshore Trust
  • Offshore Shipping Company
  • Offshore Trading Company
  • Offshore Intellectual Property Company
  • Offshore Recruitment Process Outsourcing Company (PRO)

Also read: 12 Pro Tips for Choosing Your Company Name

Offshore Company in Indonesia

What is an Offshore Company: Definition and Advantages (source: Pexels)
What is an Offshore Company: Definition and Advantages (source: Pexels)

Indonesia opens two business entities for foreign investors. They are:

  • Penanaman Modal Asing (PMA) or Foreign Investment Limited Liability Company

    PMA company is an agreement for companies to be involved in commercial activities in Indonesia.

    You can set up your PMA company in Indonesia with us! Let’s see our package for PMA registration in Indonesia.

  • Kantor Perwakilan Perusahaan Asing (KPPA) or Foreign Representative Office

    KPPA or Representative Office is an entity that a foreign company uses to engage in market supervision, networking, investigating business chances, or offering other managerial needs in Indonesia to the parent company.

    We can help you in setting up your representative office in Indonesia. Let’s see our package for opening Indonesia Representative Office.

Also read: 14 Top Multinational Companies in Indonesia

Requirements for Offshore Company Registration in Indonesia

After knowing what offshore company means, the next question are what are the requirements to open one?

Some requirements must be fulfilled to set up an offshore company in Indonesia. The offshore company registration includes the following:

  • An Indonesia Company

    To legally register an offshore company, you must first merge with a local company. This partnership earns your company privacy, tax savings, asset protection, and the opportunity for your business to grow.

  • Office Space

    You need an office space to start your business and employ some energetic and enthusiastic individuals. Make sure your business location can support your commercial activities.

  • Capital

    Of course, the important thing to start an offshore company in Indonesia is capital. Besides renting and administrative costs, you sure want to offer competitive salaries for your team.

To help you establish your offshore company, InvestInAsia will be a brilliant solution. How can InvestInAsia help you for the offshore company incorporation?

With lots of clients and experiences, InvestInAsia helps the whole process for open company in Indonesia quickly and easily in the most efficient way.

pt pma kitas package

Also read: 7 Reasons and Advantages for Starting a Business in Indonesia

FAQ About Offshore Company

  • What is the difference between overseas and offshore companies?

    An offshore company is different from an overseas company. While an offshore company is registered in an offshore authority but does not operate in this authority, an overseas company is registered in an overseas location. It regards this country as one of its main markets.

    Also read: Difference Between Offshore and Onshore Companies

  • What is an example of an offshore company?

    One of the most well-known offshore companies is Ford Motor Company. Because of the rising production costs and high demand in its domestic market, Ford offshored its manufacturing to several countries like China and Mexico. This practice turns out to be cost-effective.

Also read: What is KBLI in Indonesia: Complete Guide for Foreigner

Above are the explanation of offshore company meaning, advantages, and requirements. An offshore company in Indonesia allows your company to take many benefits for your business and maximize profitability. To guide you through the registration process and gain achievement in your offshore business venture, you can contact us!

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