How Foreign Companies Can Establish a Subsidiary in Indonesia?

Foreign companies seeking to expand into Indonesia must determine the appropriate corporate structure, prepare the required documentation and understand the regulatory obligations associated with their planned activities. For eligible businesses, a virtual office in Indonesia may provide a practical business address, but it does not replace company registration, operational licences or immigration requirements.

For a foreign parent company, establishing an Indonesian presence typically involves assessing three areas: registering a foreign-owned company, determining whether a representative office is more suitable, and arranging the appropriate immigration documentation for foreign personnel.

LMI Consultancy supports foreign investors and international businesses navigating company establishment, business licensing, immigration and tax requirements in Indonesia and ASEAN.

1. PT PMA Registration: Establishing an Indonesian Subsidiary

A foreign parent company can establish an Indonesian subsidiary through a Perseroan Terbatas Penanaman Modal Asing (PT PMA), subject to applicable foreign investment and sector-specific regulations.

Unlike a branch or representative presence, a PT PMA is a separate Indonesian legal entity. The foreign parent holds shares in the subsidiary, which maintains its own corporate records, assets, contracts and regulatory obligations.

Confirm the Shareholder Structure and Foreign Ownership

Before starting PT PMA registration, the foreign parent should confirm whether its intended business activities permit the proposed ownership structure.

For a conventional private PT PMA, the general rule is that at least two shareholders are required, subject to applicable legal exceptions. A company may be wholly foreign-owned where its business activities permit full foreign ownership, but that is different from having only one legal shareholder.

Where two or more corporate shareholders belong to the same international group, each shareholder must be identified separately in the incorporation documents.

Investors should assess:

• Whether the intended business activities permit foreign investment.
• The applicable foreign ownership restrictions, if any.
• The identity and share allocation of each shareholder.
• The proposed directors and commissioners.
• The ultimate beneficial owners behind the corporate ownership structure.

An overseas company’s authority to conduct business in its home jurisdiction does not automatically establish its eligibility to undertake the same activities in Indonesia.

Prepare the Foreign Parent Company’s Corporate Documents

The parent company’s documents should establish its legal identity, investment approval and the authority of the person acting on its behalf.

The preparation process may involve the following documents, depending on the company’s circumstances and the notary’s requirements:

A resolution approving an investment and a power of attorney serve different purposes. The parent should confirm that both the investment decision and the proposed signatory arrangements are consistent with its constitutional documents and applicable home-country law.

Verify Authentication and Translation Requirements

Documents issued overseas may need notarisation, apostille or other legalisation, certified copies or translation into Indonesian, depending on the document type and applicable requirements.

An apostille authenticates the origin of a qualifying public document, including the signature, the signatory’s capacity and the seal or stamp. It does not independently verify the truth of the document’s contents.

Before commissioning these services, the parent company should ask the Indonesian notary to confirm the required form of each document and the appropriate authentication route for the country of origin.

Resolving these requirements early can help reduce delays during PT PMA registration.

Understand Capital and Business Licensing Requirements

Under BKPM Regulation No. 5 of 2025, the general minimum placed and paid-up capital is IDR 2.5 billion per PT PMA, subject to applicable exceptions and other rules.

The general minimum investment threshold is more than IDR 10 billion per five-digit Indonesian Standard Business Classification (KBLI) business field per project location, excluding land and buildings, subject to the regulation’s specific calculation rules and exceptions.

Investors should distinguish between share capital, the investment plan, operating cash and professional fees. These are separate financial considerations and should be budgeted accordingly.

After incorporation, the subsidiary must also assess the licences and approvals required for its intended activities under Indonesia’s risk-based business licensing framework. Registration does not automatically authorise every planned operation.

2. Virtual Office Indonesia: Choosing an Address for Your PT PMA

A virtual office in Indonesia can offer an alternative to leasing a conventional office, particularly for companies that initially need an administrative address and limited office facilities.

Depending on the provider, a virtual office package may include a registered business address where permitted, mail handling, telephone services and access to meeting rooms.

However, a virtual office should not be assumed to be suitable for every PT PMA.

Can a PT PMA Register Using a Virtual Office?

The suitability of a virtual office depends on the company’s business activities, the proposed location and the applicable registration, zoning and licensing requirements.

Before signing an agreement, investors should confirm:

• Whether the address is acceptable for the proposed business classification.
• Whether the location satisfies applicable zoning and administrative requirements.
• Whether additional premises are required for the company’s operations.
• Whether the provider can supply the documentation required for registration.
• Whether the company’s actual activities will be consistent with its registered information.

A company providing consultancy or certain digital services may have different premises requirements from a business operating a warehouse, clinic, manufacturing facility or retail outlet.

A virtual office can support the administrative side of a business where permitted, but it cannot replace facilities required for regulated activities.

Virtual Office Versus Physical Office

The decision should be based on the company’s operational model and regulatory requirements rather than cost alone.

3. Representative Office (RO): An Alternative to a PT PMA

A foreign parent company may also consider establishing a representative office in Indonesia. Whether this is appropriate depends on the intended activities and the rules governing the relevant representative office category.

A representative office should not be treated as interchangeable with a PT PMA. The two structures serve different purposes and may be subject to different restrictions.

What Is a Representative Office?

A representative office provides a foreign company with an authorised presence in Indonesia under the applicable framework. Depending on the category, its permitted activities may be limited and may not include the same revenue-generating operations as an Indonesian subsidiary.

Before choosing this route, a foreign company should establish:

• The appropriate representative office category.
• The activities permitted under that category.
• The relevant registration and licensing requirements.
• The documentation required from the foreign parent.
• The obligations associated with its Indonesian operations.

Can a Representative Office Use a Virtual Office?

The suitability of a virtual office for a representative office depends on the applicable rules, the relevant authority and the activities the office will perform.

Companies should verify whether the proposed address is accepted for the intended registration and whether a dedicated physical workspace is required.

A virtual office agreement alone does not establish that a representative office has been properly registered or authorised to undertake its proposed activities.

The key decision: Choose a PT PMA if the intended business model requires an Indonesian subsidiary and the relevant activities permit that structure. Consider a representative office only after confirming that its permitted activities align with the foreign parent’s objectives.

4. Work Permits and Immigration Requirements for Foreign Employees

Establishing a PT PMA or representative office does not automatically grant foreign personnel permission to work in Indonesia.

Foreign directors, managers, specialists and other expatriate personnel must meet the applicable manpower and immigration requirements for their intended roles and activities.

Does a Virtual Office Allow a Company to Employ Foreign Workers?

Not automatically. The company’s legal status, permitted activities, employment arrangements and applicable regulatory requirements remain relevant.

Depending on the circumstances, the process may involve the required foreign worker employment approval or documentation, an appropriate visa and the relevant stay permit.

Before arranging an expatriate’s employment, businesses should assess:

• Employer eligibility: Whether the Indonesian entity or representative office can support the proposed employment arrangement.
• Manpower requirements: Which approvals and supporting documents apply to the position.
• Immigration requirements: Which visa and stay permit are appropriate for the intended activities.
• Corporate documentation: Whether the company’s registration and licensing records support the proposed arrangement.
• Ongoing obligations: Any applicable reporting, renewal and compliance requirements.

A virtual office may support administrative arrangements where permitted, but it does not replace work authorisation or immigration compliance.

Align the Company’s Activities With the Expatriate’s Role

Businesses should ensure that the employee’s actual responsibilities are consistent with the employer’s activities and the relevant immigration arrangements.

They should also review whether the company’s working arrangements require physical premises. A virtual office may be sufficient for certain administrative functions, but it may not meet the operational needs or regulatory requirements of every business.

LMI Consultancy assists clients with immigration consultation and relevant business setup requirements, helping them understand the procedures and documentation applicable to their circumstances.

5. Corporate Governance and Transactions Between the Parent and Subsidiary

Once the Indonesian subsidiary has been established, the parent company should implement governance arrangements that clearly distinguish the responsibilities of the two entities.

Under Indonesian Company Law, shareholders, directors and commissioners have separate roles. The parent exercises control through its shareholder rights and the subsidiary’s governance arrangements, rather than assuming that group ownership removes the need for formal corporate decisions.

Before operations begin, the group should establish clear procedures covering:

• Approval of budgets, borrowing and significant commitments.
• Authority to sign customer, supplier and employment contracts.
• Banking instructions and financial reporting.
• Reporting between the Indonesian subsidiary and its parent.
• Conflicts of interest involving related parties.

Transactions between related companies also require attention. Minister of Finance Regulation No. 172 of 2023 addresses the arm’s-length principle for transactions affected by special relationships.

Companies should document arrangements involving goods, services, intellectual property and financing, and obtain tax advice on pricing, withholding and applicable documentation requirements.

A group policy alone does not establish that a related-party transaction complies with Indonesian tax rules. The supporting agreements and evidence should reflect what each entity provides, pays and receives.

6. Checklist Before Establishing a Subsidiary in Indonesia

Foreign parent companies can use the following checklist to prepare for registration and operational planning.

• Confirm the intended business activities and permitted foreign ownership.
• Decide whether a PT PMA or representative office is appropriate.
• Identify all shareholders and relevant beneficial owners.
• Approve the investment and confirm signatory authority.
• Prepare and authenticate the required overseas corporate documents.
• Confirm the applicable capital and investment requirements.
• Assess whether a virtual office address is suitable for the intended activities.
• Complete the relevant incorporation and business licensing procedures.
• Review manpower and immigration requirements for foreign personnel.
• Establish corporate governance and related-party transaction procedures.
• Assess ongoing tax, reporting and compliance obligations.

Resolving these matters before signing the incorporation deed or committing to office premises can help businesses plan their market entry more effectively.

Establish Your Indonesian Business With LMI Consultancy

Establishing a subsidiary in Indonesia requires coordination between corporate structuring, registration, business licensing, office arrangements and immigration compliance.

LMI Consultancy supports foreign investors and international businesses with Immigration Consultation, Legal and Business Setup Consultation, and Tax Consultation in Indonesia and ASEAN.

Our team can assist with PT PMA registration, representative office requirements, business licensing and immigration procedures for foreign personnel. We can also help assess whether a virtual office is appropriate for the proposed business structure and activities.

Whether you are establishing your first Indonesian subsidiary or expanding an existing regional operation, the appropriate structure should be determined by your commercial objectives and the regulatory requirements applicable to your business.

Planning to establish a subsidiary in Indonesia? Contact LMI Consultancy to discuss PT PMA registration, representative office options, virtual office eligibility and immigration requirements.

Visit Lets Move Indonesia to explore our business setup and immigration services.