The Local Company has differences with the foreign company, especially on the amount of minimum capital, scope of business and the procedure to obtain business license

There are several differences of having local company than foreign company in Indonesia. Before going into that, we should know that the main different between local and foreign company. For Local Company it is required that all of the share holders must be Indonesian citizen, as for Foreign Direct Investment Company or known as PMA/Penanaman Modal Asing, it is eligible for foreigners or foreign entity to become a shareholders of the company.

Because local company is limitedly own only for Indonesian Citizen, there are some advantage in term of exercising the business in Indonesia, there are three significant advantage for local company compared to a PMA company.

First, the mininum authorized capital of local company is less than what has been required for the foreign company. The Indonesian Company Law only requires IDR 50 Millions of the minimum of authorized capital, while the foreign company should have minimum above IDR 10 Billions when it wants to start the business in Indonesia. However, if the local company wants to be eligible to hire expatriate, it should prepare above IDR 1 Billion for authorized capital.

Second, the local company has wider scope of business. The local company is eligible to be involved in all business area as long as it is not contradicting to the prevailing Law and the Regulation. However, the foreign company could not exercise all business area in Indonesia. Every year, the Indonesian Government will issue the List Negative Invesment that mentioning the business area that are not allowed for the foreign company.

Third,  the local company can directly receive the Business License after submit and comply with all the requirement. While, the foreign company should apply for the Principle License first, before receiving the Permanent Business License.

How can ELSON help you?

ELSON Indonesia is a company that focus on providing comprehensive legal solution for expatriates, foreigner, and mix marriage couple in Indonesia.

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Author: ELSON