Your Accounting Company in indonesia

Opening a company in Indonesia.
For a few years, everyone has treated opening a business in Indonesia as a non-binding event. Yes, they always said that there was a certain “investment capital” of 10,000,000,000 rupees, but they also quietly turned a blind eye to it.
Let's briefly discuss what kind of opportunity this is for foreigners, and how things are actually standing with this now OR are actually going on with this now, taking into account the increased attention to foreign companies.

PT - Perseroan Terbatas translates as “Limited Liability Company”,
PMA - Penanaman Modal Asing, which means “foreign investment”.
This kind of company has a number of restrictions:
- at the federal level there is a negative sheet containing a list of activities that a foreign company cannot engage in; there may also be local acts prohibiting certain activities in a certain region,
- there is a list of activities for which a company cannot have 100% of its constituent capital owned by foreigners,
- there is an obligation to invest at least 10 billion rupees in each type of activity, this investment can be made both in cash and in kind, for example land, buildings,
- and some other introductions...

So, your activity begins with paperwork. First of all there is a need to select a suitable KBLI type of activity for you, it will be great if the opening company will indicate restrictions and warn you about how to conduct everything legally correctly. At the moment of signing the main constituent document, you guarantee to the government that you have the investment capital of 10 billion rupees available, but the state gives you time to distribute it - 3 years. You will have to report for your investments during all these 3 years and beyond.

YOU ARE NOT ALLOWED NOT TO REPORT! Investment reports, also known as LKPM, are an obligation of all opened PT PMAs.

Does this mean that if you want to open a coffee house, then you shouldn’t get into it, because you would never invest 670,000 USD in it? Based on the note of the law - yes, that is correct. Based on the practice of supporting foreign businesses, we can say that any company that shows enthusiasm in the development of its enterprise, submits all reports, pays taxes and employs, today is not a subject of attacks from the government. In any case, we recommend you to be aware of the risks.

Many people think, when they open a company in Bali, that they solve the problem of legal residence, while at the same time eliminate the need for regular visa-runs. Some agencies still make KITAS for non-performing organizations this days, without explaining the responsibility and possible consequences. Let's start from the beginning and understand this issue.

“Kartu Izin Tinggal Terbatas” more known as KITA is a limited residence permit card. This is no longer a visa - it is a residence permit. There are two types: KITAS & KITAP - temporary (issued from six months to two years) and permanent (issued up to five years).

Investor KITAS is not an obligation, but just an option for those people who have business in Indonesia. You can open a PT PMA and NEVER receive it if you don't want to. But, you need to remember that if you are a director, then without KITAS there will be a little bit harder to get NPWP - this is a personal tax number, and, therefore, being the person responsible for paying taxes, you will not be able to pay them. Therefore, roughly speaking, for an investor who is a director in his company, KITAS will be a natural consequence.

Let's move on. According to the new law, which officially came into force on November 1, 2023, an investor whose personal investment in a business is less than IDR 10 billion cannot qualify for KITAS.

Why did such a law appear? And what does this mean for already obtained residence permits?
This was done, obviously, for those companies which were opened for the KITAS only, and all the fake organizations would end their activities within the next year. For already issued residence permits, this, in fact, poses no threat. It’s just that the next time you run out of KITAS, you won’t be able to renew it without increasing your investment capital.

And here is an important point: why don’t we all increase the volume of guaranteed investments?
Now imagine, there are three owners in a company, one has 10%, the other two have 45% each. In order to receive KITAS for you all, a person with 10% must have 10 billion, which means the total investment capital of the company will be 100 billion rupees. This is 6,700,000 USD. Do you have faith that no inspection will come to you if you set up such a fund? We do not believe in it!
In addition, as the Ministry for Investment Control guarantees, all companies which investment capital exceeds 30 billion will immediately be subject to inspection by OJK - financial monitoring.

But, for those who are OUR clients, move in accordance with the law and have the right to receive KITAS for themselves, or family KITAS for their partner and children, as well as working KITAS for their foreign employees, we can propose the best price from our partners.

It is customary here that accounting services are basically outsourced to all companies, the reason is that maintaining a good specialist is a costly undertaking, especially if the turnover is small and a full-time employee, in fact, has nothing to do 90% of working hours. And there are also problems here, which we want to highlight in this article.

When you start having consultations, you will realize that everyone tells you different things. The problem is that there are many incompetent specialists, companies that deal with accounting “ALONG with visas” and also that the Indonesians themselves work the way they were able to interpret their law. You will repeatedly encounter the fact that consultants will brush off your questions, smile, say “no big deal,” and everyone will calculate your tax base differently.

How many times have you heard that 0.5% of income is all you need to pay? How many times have you heard that VAT is 22% or salary tax is 4%? Or else: you can safely transfer money through SWIFT and don’t have to pay anything. You’ve also probably been told that you can hire 3 locals for one foreigner and this is legal, because your specialist is something special. Many agents charge money for some “zero reports”. They recommend paying for personal expenses from the company account and say that accounting is a piece of cake: submit a couple of reports a year and that’s it.

Accounting in Indonesia is an ordinary accounting deal, and has a lot identical laws to ALL ACCOUNTINGS IN THE WORLD!!! You must register internal processes, receive goods according to documents, report on all incoming and outgoing payments and pay a LOT of different taxes, including tax for dividends. You must separate the concepts of working capital and investment and much more.

We always study, we constantly update our knowledge, we check up all hypotheses and have already been training different specialists ourselves, who, after talking with us, run to open their books to re-read what is actually written there.

We cannot call ourselves highly specialized specialists, as accounting here is inseparable from tax literacy and a lot of or a big amount of legal issues (не уверена, но many как будто не очень)). But we can definitely say that we provide a comprehensive solution to your problems, both for small businesses and for market giants.

The hackneyed statement that “In Indonesia everyone pays 0.5%” is not that incorrect, but you need to understand that not everything is as simple as it seems at first glance.

Almost every type of activity implies the presence of certain additional taxes, and the well-known 0.5% also has its limitations.

Let's look at some questions in order:

0.5% is a preferential tax that can be assigned to young companies, and it is paid on all funds entering the company’s account (except investments). It is not mandatory; you can also choose regular income tax, avoiding the preferential rate.

A company, regardless of its wishes, loses the right to preferential tax when it crosses the total income of 4.8 billion IDR during a calendar year.

After this, it undertakes to pay 11% of the profit and also become a happy owner of VAT payer status, receiving the so-called PKP status. VAT, by the way, is the same 11%.
This is often confused with some 22% on profit, but in this case it is incorrect! Taxes are calculated on completely different principles, and saying that 22% will have to be paid to the state is the same as saying “the average temperature in a hospital” is 36.7 degrees.

However, 22% may indeed appear in your life one day. This will happen when the company’s income exceeds 50 billion per year.
And these are all just income taxes!

And there is also:
- construction taxes (for developers);
- HoReCa taxes (for restaurants, cafes, food delivery, hotels, SPA salons, etc.);
- taxes on services for business (all B2B contracts);
- income taxes on employees and one-time contracts with individuals;
- taxes on freelance contracts with specialists;
- tax on the acquisition (sublease) of land;
- of course, VAT (for all companies with PKP status);
- import taxes and export payments
and other pigs in a pocket

And you, as an individual, according to the law, will be affected by:
- of course, taxes on dividends
- and a tax on global earnings if the money arrives in a bank account.

However, you also need to remember that not only funds passing through your personal accounts and company accounts are subject to tax. You can also pay with cash if you report receiving it.

Sum it all up. Does it sound scary?
Yes, if you do not organize the flow of funds correctly and do not use the note of the law for the benefit of optimization.

By the way, you don’t have to have a contract with us to talk about optimization. We provide this, including as a separate service, feel free to contact us!

We believe that no further words are needed here. Anyone who once worked in 1C knows what kind of beast this is!
The capabilities of this system cannot be measured: from setting up wage calculations for the hourly work of your specialists to maintaining warehouse records.

Believe it or not, Indonesia still works with just .xls signs and paper notes to control their businesses.
We brought 1C:Enterprise here and adapted it to local needs: three languages ​​(English, Indonesian, Russian), calculation of all taxes and contributions, and much more. And our 1C specialists will make a project according to your custom order, adapting it to all the needs of your business. No copy-paste, only personal interaction, vast experience and quick results.