Setting up a business in Indonesia is just the first step. After incorporation, companies must comply with various legal, tax, employment, permit, and administrative obligations to operate smoothly and avoid penalties. Understanding these post-incorporation compliance requirements is crucial for maintaining a lawful and sustainable business presence in Indonesia.
This article provides a comprehensive guide to key post-incorporation compliance under Indonesian laws and regulations, covering Legal Compliance, Tax Compliance, Labor & Employment Compliance, Permit Compliance, and Other Administrative Post-Incorporation Compliance.
Legal Compliance
Businesses in Indonesia must ensure compliance with corporate governance and legal regulations to avoid penalties or revocation of business licenses. Key legal compliance requirements include:
1.1 General Company Laws and Regulatory Compliance
- Companies must operate in accordance with Law No. 40 of 2007 on Limited Liability Companies (UU PT), which governs business activities; corporate structure; shareholders’, directors’, and commissioners’ duties and responsibilities; etc.
- Companies must comply with investment related matters in Indonesia under Law No. 25 of 2007 on Investment Law which regulates both domestic and foreign investment activities within Indonesia, it mandates that foreign investment must be conducted through a limited liability company (PT PMA) established under Indonesian law and supervised by the Investment Coordinating Board (BKPM).
- Law No. 6 of 2023 on Job Creation (Omnibus Law) introduced significant changes to corporate compliance, which aims to significantly simplify regulations, streamline business processes, and attract investment by amending multiple existing laws across various sectors, essentially consolidating them into one large piece of legislation, with the primary goal of boosting economic growth and job creation in the country; it is often referred to as the “Job Creation Law” as well.
- Businesses must adhere to Indonesia Antitrust & Competition Law (Law No. 5 of 1999) on the Prohibition of Monopolistic Practices and Unfair Business Competition; it governs and prohibits anti-competitive practices like collusion, monopolies, and unfair business conduct, aiming to promote fair market competition and protect consumers.
- Compliance with consumer protection laws under Law No. 8 of 1999 on Consumer Protection is essential for businesses engaging in B2C transactions.
Tips: consult with trusted Indonesia Business Lawyer to seek a precise legal advice and ensure legal compliance.
1.2 Business Registration and Corporate Documents
- Businesses must ensure that their corporate documents, such as the Deed of Establishment, Articles of Association, and Business Identification Number (NIB), remain updated.
- Any changes in company structure (e.g., shareholders, directors, or capital) must be reported to the Ministry of Law and Human Rights (MOLHR) within 30 days under Law No. 40 of 2007 on Limited Liability Companies.
- Failure to update company documents may lead to administrative sanctions, fines, or potential legal disputes.
Kusuma & Partners assist businesses in handling company deed of amendment, ensuring a smooth process while complying with all legal requirements.
1.3 Investment Compliance (For PT PMA)
Foreign-owned companies (PT PMA) must:
- Submit Investment Activity Reports (LKPM) to the Indonesia Investment Coordinating Board (BKPM) on a quarterly or annual basis as per BKPM Regulation No. 5 of 2021.
- Maintain the minimum investment capital requirements of IDR 10 billion per business activity, excluding land and buildings.
- Report any expansion, mergers, or acquisitions to BKPM to maintain investment compliance.
Read more our article to get better understanding: A Guide to Setting Up a Foreign-Owned Company (PT PMA) in Indonesia.
1.4 Annual General Meeting of Shareholders (A GMS)
- Indonesian companies must hold an Annual General Meeting of Shareholders (A GMS) at least once a year under Article 78 of Law No. 40 of 2007 to approve financial statements, dividend distributions, and appoint or dismiss directors.
- The A GMS must be recorded in the company’s Minutes of Meeting (MoM) and reported to MOLHR if there are changes to the company structure.
Kusuma & Partners assist businesses in handling Annual General Meeting of Shareholders, ensuring a smooth process while complying with all legal requirements.
1.5 Intellectual Property (IP) Protection
- Businesses dealing with proprietary products, trademarks, or patents should register their Intellectual Property (IP) Rights with the Directorate General of Intellectual Property (DGIP) in compliance with Law No. 20 of 2016 on Trademarks and Geographical Indications.
- Unregistered trademarks may be subject to legal disputes, counterfeiting, or business identity theft.
Tips: consult with trusted Indonesia Business Lawyer to seek a precise legal advice and ensure legal compliance on Intellectual Property protection.
Tax Compliance
Tax compliance is a critical aspect of post-incorporation obligations in Indonesia. Businesses must ensure timely tax registrations, filings, and payments to avoid penalties.
2.1 Taxpayer Registration
- All companies must register with the Indonesian Tax Office (DJP) to obtain a Taxpayer Identification Number (NPWP) and be classified under the appropriate tax regime as per Law No. 7 of 2021 on Tax Regulation Harmonization.
- Companies with foreign ownership (PT PMA) must also register for VAT (PPN) obligations if their annual revenue exceeds IDR 4.8 billion under Minister of Finance Regulation No. 197/PMK.03/2021.
2.2 Monthly and Annual Tax Reporting
Businesses must fulfil the following tax obligations:
- Corporate Income Tax (PPh Badan) – Companies must file annual tax returns, with the general tax rate set at 22% under Law No. 7 of 2021.
- Value-Added Tax (VAT / PPN) – Companies must submit monthly VAT reports and payments as per Law No. 42 of 2009 on VAT.
- Withholding Tax (PPh 21, PPh 23, and PPh 4(2)) – Companies must withhold tax on employee salaries, service fees, rental income, and dividends.
Kusuma & Partners assist companies in handling Monthly and Annual Tax Compliance, ensuring a smooth process while complying with all legal requirements.
2.3 Payroll and Employee Tax Compliance
- Employers must deduct, report, and remit employee income tax (PPh 21) to the tax office by the 10th of the following month.
- BPJS contributions for employees must be reported and paid to BPJS Ketenagakerjaan and BPJS Kesehatan monthly under Law No. 24 of 2011 on BPJS.
2.4 Tax Audit and Compliance Reviews
- The Indonesian Tax Authority (DJP) regularly audits businesses. Companies should maintain accurate financial records and be prepared for tax reviews.
- Failure to comply may result in tax penalties, interest, or even legal proceedings.
Kusuma & Partners assist companies in handling Tax Due Diligence, ensuring a smooth process while complying with all legal requirements.
Labor & Employment Compliance
Compliance with Indonesian labor laws is essential for businesses employing workers. Key aspects include:
- Employment Contract – Must comply with Law No. 13 of 2003 on Manpower as amended by Law No. 6 of 2023 on Job Creation Law, distinguishing between permanent and fixed-term employment contracts.
- Minimum Wage Compliance – Companies must adhere to provincial or sectoral minimum wage regulations set annually by regional governments.
- Employee Benefits and Social Security Contributions (BPJS Contributions) – Mandatory contributions to BPJS Kesehatan (Health Insurance) and BPJS Ketenagakerjaan (Employment Insurance).
- Foreign Employment Compliance:
- Companies hiring expatriates must obtain a Foreign Worker Utilization Plan (RPTKA) and a Work Permit (IMTA) under Minister of Manpower Regulation No. 8 of 2021.
- Foreign workers must obtain a Limited Stay Visa (VITAS) and Stay Permit (KITAS) through the Directorate General of Immigration.
Kusuma & Partners assist companies in handling Labor & Employment Compliance, as well as Immigration matter, ensuring a smooth process while complying with all legal requirements.
Permit Compliance
Businesses must comply with various sectoral and operational permits to maintain legal operations. Key permits include:
- Business License (NIB & OSS) – Issued via the Online Single Submission (OSS) system under Government Regulation No. 5 of 2021.
- Sector-Specific Licenses – Additional licenses are required based on business activities, such as:
- Industrial Business License (IUI)
- Construction Business License (SIUJK)
- Trading Business License (SIUP)
- Environmental Permits – Required for businesses impacting the environment under Law No. 32 of 2009 on Environmental Protection and Management.
Other Administrative Post-Incorporation Compliance
Additional administrative obligations for businesses include:
- Company Reporting Obligations – Submitting annual financial reports to the Ministry of Law and Human Rights and BKPM for PT PMA entities.
- Data Protection Compliance – Companies handling customer data must comply with Law No. 27 of 2022 on Personal Data Protection.
- Business Address and Office Updates – Any changes must be reported to relevant authorities.
- Company Domicile Compliance – Ensuring business locations comply with local zoning laws.
- Renewal of Licenses and Permits – Certain business licenses require periodic renewal, such as import-export permits and environmental impact analysis approvals.
Important Considerations for Company
- Consult a Professional – Due to the complex nature of Indonesian regulations, seeking guidance from a local legal and tax professional is crucial for ensuring proper compliance.
- Regular Monitoring – Regularly review and update compliance procedures to stay informed about any regulatory changes.
- Penalties for Non-Compliance – Failure to comply with post-incorporation regulations can lead to significant fines and legal consequences.
Conclusion
Post-incorporation compliance is essential for companies’ continuity in Indonesia. Ensuring Legal, Tax, Labor & Employment Compliance, Permit, and Other Administrative Post-Incorporation Compliance helps companies avoid penalties, build credibility, and operate efficiently. Partnering with Kusuma & Partners Law Firm guarantees that your company stays compliant with Indonesian regulations, allowing you to focus on growth and success.
Need Assistance? Contact Us Today!
For expert legal and tax compliance services in Indonesia, consult Kusuma & Partners Law Firm today. Our team is ready to assist your business in navigating Indonesia’s regulatory landscape with confidence.
Why Choose Kusuma & Partners Law Firm?
Navigating post-incorporation compliance in Indonesia can be complex and time-consuming. Kusuma & Partners Law Firm offers expert legal, tax, employment, and business advisory services to help businesses stay compliant and grow successfully. With our deep expertise in Indonesian corporate, tax, and employment law, we provide practical solutions tailored to your business needs. Our team ensures your business remains legally sound, tax-efficient, and operationally secure, avoiding any regulatory pitfalls.
“DISCLAIMER: This content is for general informational purposes only and is not a substitute for professional advice. Users rely on its content at their own risk. For professional advice, please consult us.”
