How to Set Up an Entity in Indonesia

Indonesia is one of Southeast Asia’s most attractive markets for international expansion, offering access to over 270 million consumers, a fast-growing digital economy, and strong government support for foreign investment. Recent regulatory reforms have made it easier and more transparent for foreign companies to establish a legal presence in the country.

While entity setup in Indonesia is more structured than in some neighboring markets, it remains highly achievable with proper planning. The process involves multiple registrations, capital requirements, and ongoing compliance with tax and labor rules. The main challenges include navigating foreign ownership restrictions, meeting minimum capital thresholds, and handling documentation in Bahasa Indonesia. A local entity allows companies to operate compliantly in Indonesia, employ staff directly, and engage with regulators, banks, and counterparties as a local business.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources before acting.

What does “opening an entity” mean in Indonesia?

Opening an entity in Indonesia means formally incorporating a business with the Indonesian government, obtaining legal entity status, and securing the licenses required to operate. Registration grants the company the right to conduct commercial activities, hire employees, open bank accounts, and enter into contracts locally. Foreign companies typically choose between establishing a foreign-owned limited liability company, a representative office, or a branch, depending on their intended activities.

Entity overview in Indonesia

Here is a summary of the key aspects of company formation in Indonesia:

Step-by-step guide: How to open an entity in Indonesia

Step 1: Choose the right structure

Foreign investors most commonly establish a PT PMA, which allows full commercial operations, revenue generation, and direct hiring. Representative offices are suitable for market research or liaison activities, but cannot generate income. Branch offices are less common and typically limited to specific regulated industries.

Step 2: Verify business name availability

Business names are checked and reserved through the Ministry of Law and Human Rights’ AHU Online system. Names must be unique, written in Latin characters, and not conflict with public order or existing trademarks. Reservation is completed electronically during incorporation.

Step 3: Prepare incorporation documents

Incorporation documents must be prepared in Bahasa Indonesia and notarized by a licensed Indonesian notary. Required documents typically include:

• Deed of Establishment
• Articles of Association
• Shareholder and director identification documents
• Statement of capital investment

The deed template and requirements are governed by the Ministry of Law and Human Rights and submitted via AHU Online.

Step 4: Register with the Ministry of Law and Human Rights

The notary submits the incorporation documents electronically through AHU Online to obtain legal entity status from the Ministry of Law and Human Rights. Following approval, the company must register through Indonesia’s OSS system to obtain a Business Identification Number (NIB) and the licenses required to operate.

Step 5: Register for tax and social security

After incorporation, the company must obtain a Tax Identification Number (NPWP) and register for VAT, if applicable, with the Directorate General of Taxes. Employers must also register with Indonesia’s social security agencies, BPJS Kesehatan (health) and BPJS Ketenagakerjaan (employment).

Step 6: Open a corporate bank account

A local corporate bank account is required for capital injection and daily operations. Banks conduct extensive KYC checks, including verification of directors, shareholders, and business activities. Account opening typically takes two to four weeks.

Step 7: Set up payroll and employment compliance

To hire employees, companies must issue compliant employment contracts in Bahasa Indonesia, register employees with BPJS, and implement monthly payroll reporting. Payroll must comply with Indonesian income tax withholding (PPh 21), minimum wage rules, and mandatory benefits.

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Post-registration obligations

After incorporation, companies in Indonesia must stay compliant with local governance, tax, and employment laws. Typical requirements include:

• Tax and financial reporting: File corporate income tax returns, VAT returns, and annual financial statements according to the schedule set by the Directorate General of Taxes, using Indonesian Financial Accounting Standards (SAK).
• Corporate registers: Maintain up-to-date records of directors, shareholders, and beneficial owners and report changes to the Ministry of Law and Human Rights through AHU Online within the required timeframe.
• Compliance tracking: Monitor all tax, licensing, and corporate filing deadlines through a compliance calendar or service provider to avoid administrative penalties.
• Licenses and renewals: Maintain and update business licenses through the OSS system, including risk-based licenses tied to the company’s activities.
• Recordkeeping: Retain accounting, payroll, HR, and transaction records for at least 10 years, as required under Indonesian law.
• Employment law compliance: Comply with labor, social security, and data-protection regulations enforced by the Ministry of Manpower, including compliant contracts, payroll reporting, and mandatory insurance coverage.

Taxes and financial considerations

Key obligations include:

• Corporate income tax: 22%, payable annually with monthly installments
• VAT/GST: 12%, mandatory registration for taxable entrepreneurs
• Payroll/social contributions: Employer contributions apply for BPJS health and employment programs, with rates varying by benefit type
• Accounting standards: Indonesian Financial Accounting Standards (SAK), aligned with IFRS

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Expand internationally with Deel

Whether you’re hiring through an EOR or establishing your own local entity, Deel’s all-in-one platform gives you everything you need to expand into the United Kingdom—quickly, compliantly, and with confidence. From market entry to ongoing operations, Deel helps you hire, onboard, and manage teams seamlessly from day one.

With Deel, you can:

• Test new regions using Deel’s local entities through our Employer of Record service—hire employees compliantly, delegate payroll and taxes, and access localized employment contracts.
• Open entities with Deel Entity Setup, where our team manages everything—from incorporation and tax registration to coordination with local experts.
• Centralize your compliance and records with Deel Entity Management, including automated filings, calendar reminders, and visibility across all entities.
• Integrate with Deel Payroll and Deel HR for compliant payments, benefits, and workforce oversight—all in one platform.

For companies transitioning from the EOR model to owned entities, Deel ensures a smooth handover and consistent compliance every step of the way. Enter new markets, onboard talent, and manage your global workforce—all through one unified platform.

FAQs

How long does it take to open an entity in Indonesia?
Typically 4–8 weeks. Find out how long setup takes with our Entity Setup Calculator.

What is the minimum capital required?
IDR 10,000,000,000 (≈ USD 650,000) for a PT PMA.

Can foreign companies own 100 % of an entity in Indonesia?
Yes, in most sectors, subject to the Positive Investment List.

Do I need a local director or representative?
No local director is required, but at least one director and one commissioner must be appointed.

How much does it cost to register an entity?
Average government and professional fees range from IDR 25,000,000 to 50,000,000 (≈ USD 1,600–3,250), excluding capital. Find out the setup cost with our Entity Setup Calculator.

Can I hire employees before the entity is fully registered?
Typically, no. However, Deel’s Employer of Record (EOR) lets you hire and pay talent immediately while your entity setup is in progress.

Can Deel help me open an entity in Indonesia?
Yes. Deel Entity Setup manages the end-to-end process — from registration to payroll compliance—in over 100 countries. Deel’s local experts handle documentation, filings, and legal requirements on your behalf.

Does Deel offer ongoing compliance and payroll support?
Yes. Deel offers both managed services and self-service tools to help you stay compliant.

If you’re using Deel Entity Management, Maintenance, EOR, or Payroll, our team handles payroll, benefits, filings, and compliance obligations on your behalf.

For teams managing their own entities, Deel Compliance Hub makes staying compliant simple by providing real-time regulatory updates, risk alerts, and workforce insights across 150+ countries. Proactively manage compliance with our Compliance Monitor, Workforce Insights, and an AI-powered Worker Classifier, staying ahead of changing employment laws.

Can I switch from Deel EOR to my own entity later?
Yes. Deel supports seamless transitions when you’re ready.