Good to know
Good to Know
- Indonesia cut the minimum PT PMA paid-up capital from IDR 10 billion to IDR 2.5 billion in October 2025, making incorporation notably cheaper than it was previously — but double-check any guide dated before late 2025, since older figures still circulate online.
- The IDR 10 billion 'total investment plan' figure is separate from the paid-up capital — it's a long-term commitment per business activity code that doesn't need to be deposited as cash upfront.
- Because Mentawai itself has minimal legal/notarial infrastructure, most foreign investors handle the notarial and OSS steps through a notary or agent based in Padang or Jakarta — the process itself is fully digital via OSS so this doesn't slow things down much.
- For any tourism, accommodation, or land-related business (very common in Mentawai given its surf-tourism economy), confirm local zoning/spatial-plan (RTRW) compliance for your chosen site early — the wrong KBLI or a residentially zoned plot can block licensing even if the company itself is correctly registered.
- Directors and commissioners can be entirely foreign nationals on paper, but in practice you'll likely need a resident director holding a KITAS to actually open the corporate bank account and deposit capital.
- There is no Mentawai-specific business tax break or incorporation shortcut — every rule here is the same national framework that applies in Jakarta or Bali, run through the same online OSS licensing system.
- As of April 2026, PT PMA companies (any company with even 1% foreign ownership) can no longer use Indonesia's simplified 0.5%-of-turnover small-business tax scheme — plan for full standard corporate bookkeeping and the 22% rate from the start.
- The PT PMA capital requirements (multi-hundred-thousand-USD declared investment) make it a serious commitment, not a casual freelancer setup — many solo nomads doing small-scale remote work choose to remain personally tax-resident and invoice clients from abroad rather than incorporate locally, given how remote and small most Mentawai-based ventures (surf camps, guesthouses, tour operations) actually are.
- Indonesian tax and company rules have changed multiple times in the past two years (paid-up capital cut in late 2025, UMKM eligibility tightened in April 2026) — treat any specific figure as time-sensitive and verify with a licensed Indonesian tax consultant before acting.
Corporate Income Tax
- Standard Rate Percent
- 22
- Listed Company Reduced Rate Percent
- 19
- Detail
- The standard corporate income tax rate in Indonesia is 22 per cent, a figure that has applied since 2020, and this remains in place for 2026.
- Applies Worldwide Income
- Yes
- Listed Company Note
- Listed companies with at least 40% of their shares on the exchange can qualify for a 3-point reduction, bringing their rate down to 19%. This is not realistic for a small foreign-owned Mentawai business.
- Worldwide Income Note
- A resident company is taxed on income from inside and outside Indonesia, with relief available for foreign tax paid. A PT PMA is a resident company, so the worldwide basis applies to it.
Important 2026 Change
- Detail
- As of a new regulation effective April 22, 2026, PT and PT PMA structures are no longer eligible for the 0.5% Final UMKM (micro-business) tax scheme that some small local entities can use; PT PMA companies are not eligible for the permanent 0.5% final tax facility and must use the standard corporate tax and bookkeeping system from day one regardless of revenue size.
- Excluded Threshold Reference Local
- IDR 4,800,000,000
Small Turnover Relief
- Detail
- If your company has annual revenue below IDR 50 billion, you may still benefit from a reduced rate starting at 11% on a portion of taxable income under Article 31E.
- Mechanism
- Article 31E partial rate relief
- Threshold Local
- IDR 50,000,000,000
Freelancer Sole Proprietor Vs Company
- Practical Takeaway
- For a genuinely remote, small-scale nomad-run business in the Mentawai Islands, the realistic choice is binary: either partner/marry into a UD (informal, limited, spouse-dependent) or commit to the full PT PMA process with its six-figure-USD capital declaration and ongoing monthly/quarterly compliance. There is no light-touch 'freelance visa' company structure in Indonesia comparable to some other Southeast Asian jurisdictions.
Full Company Option
- Liability
- Limited liability — company assets and personal assets are legally separated.
- Vehicle Name
- PT PMA (Perseroan Terbatas Penanaman Modal Asing) — foreign investment limited liability company
- Tax Treatment
- Taxed under the full standard corporate regime described above (22% CIT, monthly/annual filings, VAT once thresholds are crossed) from the day it is incorporated — it cannot use the simplified 0.5% micro-business tax scheme.
- Is It Required
- For any foreigner without an Indonesian spouse who wants to legally invoice, generate revenue, sign contracts, or hire staff in Indonesia — including running a guesthouse, surf camp, tour operation, or consultancy from the Mentawai Islands — PT PMA is the only legal vehicle available. A foreign national cannot own a standard local PT.
- Sector Check Needed
- Any planned business activity (e.g. tourism, hospitality, boat charter, diving/surf operations) must be checked against Indonesia's Positive Investment List by its KBLI code before incorporating, since some sectors cap or restrict foreign ownership.
- Structure Requirements
- Minimum two shareholders, one director, and one commissioner. Neither the director nor the commissioner is legally required to be an Indonesian resident — both can be foreign nationals, though a director physically working in Indonesia needs a KITAS.
Minimum Capital
- Minimum Paid Up Capital
- IDR 2,500,000,000
- Declared Investment Plan Per Business Line
- IDR 10,000,000,000
- Capital Note
- Since an October 2025 regulation, the minimum paid-up capital for a PT PMA was reduced to IDR 2.5 billion; the IDR 10 billion figure is a declared total investment commitment (equity + loans + assets), not cash you must have on day one, and once deposited it cannot be withdrawn for non-business purposes for at least 12 months.
Freelancer Sole Proprietor Option
- Liability
- Not limited liability — the owner's personal/household assets and the business assets are treated as the same pool.
- Scale Limit
- Only tolerated for small businesses; once revenue, assets, or hiring grow, Indonesian practice pushes the business toward forming a PT.
- Vehicle Name
- Usaha Dagang (UD) — Indonesian sole proprietorship
- Tax Treatment
- Individual/personal tax treatment applies since the UD is not a separate corporate taxpayer; this is a personal tax residency matter (covered under this city's Visa & Legal category, not repeated here).
- Who Can Use It
- Only Indonesian citizens can form a UD in their own name. A foreigner cannot open one personally.
- Foreigner Workaround
- The only practical route into this structure for a foreigner is marriage to an Indonesian citizen: the UD is legally the spouse's business, the foreigner works in it informally, and the UD cannot sponsor any KITAS other than a spousal one.
VAT Ppn
- Effective Rate Percent
- 11
- Detail
- The effective PPN (VAT) rate for non-luxury goods and services stays at 11 percent in 2026, even though a statutory 12 percent rate is offset by an adjusted tax base.
- Registration Trigger Local
- IDR 4,800,000,000
- Registration Note
- A PT PMA must register as a PKP (taxable entrepreneur) once gross turnover exceeds this threshold in a fiscal year, with registration running through the OSS and Coretax systems. Below the threshold, registration is optional but common if you want to reclaim input VAT on setup costs.
Jurisdiction Note
The Mentawai Islands (Kepulauan Mentawai Regency, West Sumatra) has no separate local business-tax regime — Indonesian national company law, the OSS licensing system, and national tax law apply uniformly here exactly as they would in Jakarta, Bali, or anywhere else in Indonesia. There is no Mentawai-specific incorporation shortcut, special economic zone status, or local tax incentive documented for this regency.
Withholding Taxes
- Dividend Withholding Default Percent
- 20
- Detail
- A PT PMA must handle a set of monthly withholding taxes: PPh 21 (employee income), PPh 23 (services/rent), and PPh 26 (payments to non-residents, e.g. dividends, royalties, interest, or management fees sent to a foreign shareholder or parent company).
- Dividend Note
- When your company pays dividends to a foreign shareholder, interest on a loan from an overseas lender, royalties to a foreign brand owner, or management fees to a parent company, you need to withhold PPh 26 at a default rate of 20%, though tax-treaty relief can reduce this if applied for in advance.
Filing Obligations
- Annual
- The annual corporate tax return must be filed by the end of month 4 after the fiscal year closes — for a calendar-year filer, this means April 30.
- Detail
- Indonesia uses a self-assessment system; your company is responsible for calculating, paying, and reporting its own tax liabilities each period.
- System
- self-assessment
- Monthly
- Monthly withholding tax filings (PPh 21/23/26) and monthly VAT filing if registered as PKP, plus monthly PPh 25 tax installment payments toward the annual liability.
- Bookkeeping
- Full, localized accounting trails matching Indonesian Financial Accounting Standards must be maintained and stored locally.
- Additional PT Pma Reporting
- Beyond tax, a PT PMA also has quarterly LKPM investment-realization reporting to BKPM (the investment ministry), annual shareholders' meetings, annual financial reporting, and BPJS (social security) compliance for every employee.
Incorporation Process And Requirements
- Ongoing Compliance
- Every PT PMA must file quarterly LKPM investment reports; missing filings can trigger NIB suspension. Companies must also handle monthly tax reporting (even at zero revenue), BPJS social/health security registration for staff, and annual financial statements.
- Entity Type Required
- The only vehicle allowing a foreigner to legally own shares and operate commercially in Indonesia is a PT PMA (Perseroan Terbatas Penanaman Modal Asing) — a foreign-owned limited liability company.
- Jurisdiction Note
- Mentawai Islands (Kabupaten Kepulauan Mentawai) is a regency of West Sumatra, Indonesia. There is no separate local business registry for Mentawai — foreign company incorporation follows the same national Indonesian legal framework (PT PMA via the OSS-RBA system) as anywhere else in the country. Because Mentawai itself has limited notarial/legal-services infrastructure, foreign investors setting up a business there (commonly surf lodges, dive/tour operators, or hospitality ventures) typically engage a notary and registration agent based in Padang (the nearest provincial capital) or Jakarta, since the entire registration process is completed online.
Timeline
- Nib Specific
- With complete documentation and correct KBLI selection, the NIB (Business Identification Number) itself can be issued within 10-14 working days through the OSS-RBA system, with the remaining time consumed by notarial drafting, sector licensing, and bank account setup.
- Typical Range
- 4 to 6 weeks end-to-end for a standard PT PMA without special sector licenses, from name reservation through NIB issuance.
- Extended Range
- 8 to 12 weeks if the business activity falls under a regulated sector (e.g. hospitality/tourism licensing, food & beverage, environmental permits relevant to island/coastal development) requiring additional standard certificates or approvals beyond the base NIB.
- Remote Presence Note
- Physical presence in Indonesia is not required for incorporation — the notarial deed can be signed via a specific notarized Power of Attorney, and OSS-RBA submissions can be handled remotely.
Core Steps
- Confirm the intended KBLI business classification code and check it against Indonesia's foreign investment list to confirm the sector is open to foreign ownership (and to what percentage).
- Reserve a unique company name (following the 3-word naming rule) through the Ministry of Law and Human Rights' AHU Online system.
- Draft and notarize the Deed of Establishment (Akta Pendirian) before an Indonesian notary, covering shareholders, capital, directors, commissioners, and business objectives.
- Submit the deed to the Ministry of Law and Human Rights (Kemenkumham) for ratification; once approved, an SK Kemenkumham is issued confirming the company's legal entity status.
- Register with the local Tax Office to obtain the company's NPWP (Tax ID).
- Apply for the NIB (Business Identification Number) through the OSS-RBA system; depending on the risk level of the KBLI code, additional standard certificates or full sector licenses may be required before commercial operations can start.
- Open a corporate bank account (requires the NIB and Kemenkumham approval; a resident director is generally needed) and deposit the paid-up capital.
- File quarterly LKPM (Investment Activity Report) with BKPM on an ongoing basis to demonstrate realization of the declared investment plan.
Minimum Capital
- Capital Lock Up
- The paid-up capital must be deposited and generally cannot be withdrawn for at least 12 months from the deposit date, except for verified operational costs, asset purchases, or building construction, and this commitment must be declared through the OSS system.
- Paid Up Capital
- IDR 2,500,000,000
Minimum paid-up capital required to be deposited into the company's Indonesian bank account at incorporation, effective under BKPM/Minister of Investment Regulation No. 5 of 2025 (effective 2 October 2025), reduced from the previous IDR 10 billion requirement.
- Total Investment Plan Threshold
- IDR 10,000,000,000
Beyond the paid-up capital, each registered business activity (KBLI code) must be backed by a total investment plan exceeding this amount (excluding land and buildings), which can be realized progressively over several years and does not need to be cash.
Typical Setup Costs
- Professional And Government Fees Low Estimate
- IDR 25,000,000
Lower end of typical notary/consultant package covering Deed of Establishment, PNBP fees, NIB registration via OSS, NPWP/PKP registration, and bank account opening assistance (excludes the paid-up capital deposit itself).
- Professional And Government Fees High Estimate
- IDR 50,000,000
Higher end of a comprehensive setup consulting package.
- Note On Cost Variation
- International advisory firms offering English-language, full-service handling can charge considerably more (some sources cite USD 3,000-10,000 total), while government/OSS processing fees themselves are typically well under USD 1,000.
Official Registry Links
Local Partner Or Sponsor Mandates
- General Rule
- A PT PMA does not require an Indonesian shareholder by default — many business sectors permit 100% foreign ownership. However, whether full foreign ownership is permitted depends entirely on the company's registered KBLI (business classification) code.
- Director Residency
- At least one director is required, and while directors and commissioners can be entirely foreign nationals, in practice banks require a resident director (holding a valid KITAS) to open the company's corporate bank account.
- Sector Restrictions
- Foreign ownership rules vary by sector, and some business lines cap foreign ownership or require local participation under Indonesia's investment list rules.
- Shareholder Minimum
- A minimum of two shareholders is required (individuals or entities, and both can be 100% foreign); one shareholder cannot hold all shares, but a 99%/1% split between two foreign shareholders is acceptable.
- Nominee Arrangements
- Using an Indonesian nominee to hold shares on a foreigner's behalf to bypass ownership rules is illegal under Article 10(1) of Investment Law No. 25 of 2007, void in Indonesian courts, and exposes both parties to criminal liability.
AI-generated estimateData refreshed July 2026
This section has no cited sources.
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Data last updated July 2026 · Verify anything important.