Article
3 min read
Author
Anja Simic
Published
August 12, 2021
Last Update
July 04, 2024
Table of Contents
Sole Proprietorship in Indonesia
Characteristics of a sole proprietorship in Indonesia:
Registration of a business in Indonesia
How to register a sole proprietorship in Indonesia
VAT and Taxes in Indonesia
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The Indonesian archipelago has been an important trade region since at least the seventh century. Indonesia is the largest economy in Southeast Asia, and one of the emerging market economies of the world.
Indonesia offers various competitive advantages for investors, including:
Large domestic market and competitive workforce arising from its economy and population
Market-based macroeconomic policy and free foreign currency exchange regime
Potential outsourcing partners stemming from a large pool of small and medium enterprises throughout the country
An abundance of diversified natural resources including agriculture, plantations, fisheries, mining, oil and gas
Strategic location spanning across several vital international sea transportation routes
A democratically elected government committed to reforming and promoting a climate conducive to investment.
Indonesia’s steady economic growth and diverse market are valuable opportunities to start a business.
Sole proprietorships (Usaha Dagang - UD), are among the most common forms of business entities in Indonesia. Only one person owns the company, making this the simplest entity option. It can easily be established by a single person without any legal issues. Anyone can establish a sole proprietorship (UD) by completing the documents through a notary, as well as organizing for the reception of business permit documents.
First, you have two options for your business:
Licensed Sole Proprietorship: Have an operational permit from the technical department. For example, if an individual company is engaged in trade, it can have licenses such as the Trade Business Registration Certificate (TDUP), the Business Trading License (SIUP).
Unlicensed Sole Proprietorship: For example, individual businesses carried out by street vendors, grocery stores, etc. As the sole owner, you get to decide on the minimum capital. If you have a lower capital to start with, this could be the ideal option for you.
Even though there are no official regulations, a UD registration usually requires the following documents:
Business registration in Indonesia cannot be done online. It is advised to hire a local notary to do it. Before you go to a notary, prepare a photocopy of the Identity Card (KTP), name, and address of your UD.
From 1 April 2022, the standard rate is 11% (previously, 10%). Thereafter, the rate will be increased to 12% by no later than 1 January 2025. Certain goods and services are subject to 0% VAT.
VAT is computed on the sales price of goods transferred or taxable services rendered.The tax base in general is the retail selling price, unless specifically mentioned.
By law, all goods and services are taxable unless otherwise stated in the legal negative list.
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Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
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