There are three different types of non-profit organizations in Indonesia – Yayasan (foundation), Perkumpulan (Association) and Lembaga (Institute). The definitions, governing laws, structures and steps to set up each are described below:
This is the most common types of non-profit organization in Indonesia. Governed under Law Number 28 (2004), a Yayasan is defined as a non-membership legal entity, established based on the separation of assets, and intended as a vehicle for attaining certain purposes in the social, religious, or humanitarian fields. Law 16/2001 acknowledges the right of foreigners to establish yayasan. However, as per Law 17 (2013), foreign individuals and Indonesian party, must have initial assets of IDR 1 Billion, while a Foundation established by foreign entity must have initial assets of IDR 100 Billion (1 USD = IDR 14,463 as on July 25, 2018). Also, a foreign member of the board of the foundation must hold a working permit, IMTA and temporary stay permit, KITAS.
The foundation must have an Indonesian citizen as one of the founders. Beyond that it should have a Chairman, Secretary, Treasury and at least one or both of Advisor and Supervisor.
Step 1: Submit an application for processing and approval of the foundation’s electronically through Legal Entities Administration System Sistem Administrasi Badan Hukum/SABH under the Directorate General of Law Administration by providing the following documents: -Registration number of the name of the foundation; -Approved name of the foundation; -Date of registration; -Expiration date; and -Code for the administration fee payment.
Step 2: The applicant must start using the name within 60 days of receiving the approval. Using the name, draft and sign the deed of establishment in Indonesia by submitting the following documents to SABH: -The foundation’s deed of incorporation; -A written statement providing the address of the foundation, acknowledged by the local village head (lurah); -Proof of a capital deposit or a written statement from the founders stating the value of the foundation’s initial assets. This statement requires a separate letter from the founders confirming the initial assets; -Proof of payment for approval of the foundation’s name; -A recommendation from the Minister of Foreign Affairs or Minister of Defence, if the foundation is established respectively by foreign and domestic legal entities; and -The deed of the last will and testament if the foundation establish under a will or testament.
Step 3: Get the approval of the Ministry of Law and Human Rights On The Deed Establishment Of Yayasan
Step 4: Receive Yayasan Registration Number
Step 5: Receive Tax Registration Number
Step 6: Confirm residential address with a domicile letter
Note that even after this, additional documents could be required depending on the field of business.
Associations are membership-based organizations which established due to the common identity or goals among its members. They are non-legal entities but can be registered as legal entities.
Since Perkumpulan are associations which are member based, it can have any number of members, including foreigners as founding members.
To register a Perkumpulan as a legal entity one needs to send a registration letter to the Chairman of the District Court (Ketua Pengadilan Negeri) in the association’s resident region. After the registration is approved by the district court, a ratification letter can be requested from the Indonesian Ministry of Justice and Human Rights. Once the letter is received the organization can be announced under the Indonesian Legal Entity Administration System.
Governing Law and Definition – An institute does not have to be an independent legal entity and is usually a subsidiary of an organization or a foundation.
The organizational structure of a Lembaga is dependent on the purpose and field in which it operates. Case in point – if the institute is a research institute then it is supposed to have a director, secretary, treasurer and other researcher members in its organizational structure.
The underlying law in Indonesia is mixed (civil law and adat) law. The section describes how to set up an LLC in Indonesia and types of for profit companies that a foreigner can set up in the country.
The most common type of company that can be established locally is a Limited Liability Company. The Incorporation of a LLC is governed by the Company Law No. 1 of 1995 (the “Company Law”). The conditions for setting up an LLC are as follows: -it must only have local shareholders and no foreign participation is allowed; -the minimum share capital depends on the size of the company and starts at 50 million RP; -only PTs deemed as medium-sized entities can apply for work permits for foreign employees; -the time for incorporation of a local limited liability company is around 8 weeks.
The steps to set up an LLC are as follows: Step 1: prepare the Articles of Association by drafting and notarizing them;
Step 2: provide information about the owners of the company (name, address and nationality);
Step 3: appoint the board of director, where at least one should be from Indonesia;
Step 4: name a commissioner for the company, regardless of the nationality;
Step 5: notarize the owners’ signatures and submit them with the Companies Registrar;
Step 6: pay the registration fee and obtain the receipt which will be appended to the incorporation documents;
Step 7: register for VAT and other tax purposes and obtain the business registration number;
Step 8: provide all the notarized documents with the Ministry of Law and Human Rights.
Foreigners can register a company in Indonesia under Law No. 40 (2007) in three ways: a representative office, a local company or a foreign direct investment as a limited liability company (in Indonesia it is called PT PMA). Based on size of the company the PT can be divided into small (<IDR 600 million), medium (IDR 600 million – 10 billion) and large IDR (more than 10 billion).
The requirements for setting up a PT PMA are as follows: it requires an investment plan and a minimum share capital of 1,2 million USD; the PT PMA can be fully or partially owned by foreign investors; at least 25% of the share capital must be deposited upon the registration of the PT PMA; there are no restrictions related to the number of business and work visas released for this type of company;
The process of setting up a PT PMA are summarized below. The registration process for such company takes on an average around 10 weeks to complete.
Step 1: Prepare and send the application with required documentation, compiled according to the investment plan. Set up a joint venture agreement if you are making the investment with Indonesian partners.
Step 2: Obtain the Initial License (SPPP BKPM), valid for 3 years.
Step 3: Incorporation of SPPP BKPM -Establish Articles of Association with a Public Notary detailing proof of capital investment, and send it to the Ministry of Justice for approval and issuance of State Gazette -Registration of company address with local council (domicile) -Get IRD registration (NPWP + PKP) -Register with the Department of Industry and Trade (TDP)
Step 4: Key expatriate positions (work permits) and Fixed Operating License (30 years)
Step 5: Prepare and send the 6-month report (LKPM) to the provincial BKPM office as well as UUG (HO) nuisance act to the regional office of BKPM
Step 6: Incorporate facilities- Master list/APIT or property ownership
Step 7: Provincial approval for Fixed Licenses (BAP)
Step 8: Fixed License (IUT) for 30 years is issued
Before an investor decides to register a PT PMA in Indonesia, he has to investigate his exact business activities regarding the Negative Investment List, which notes foreign ownership limits in certain business classifications. It issued by the Investment Coordination Board, also called BKPM.
-Quick guide to establishing a presence in Indonesia
-Establishing a Business In Indonesia
-Non-Profit Organizations in Indonesia
-New procedures for validating a legal entity, approving an amendment of article of association and company’s data