Indonesia is no different from many other countries when it comes to following company law. It may not appear to be as efficient and organised as most western countries, however, make no mistake, they know what is going on.
Make Sure You Follow Indonesian Company Law
For decades Indonesia has been encouraging foreign investment. This means businesses of all sizes have operations in the countries. This means that they also have decades of experience in how the less scrupulous try to circumvent Indonesian Company Law.
Unlike other countries, Indonesia sends out a single warning to those that are not playing by the rules, and then they come down like a ton of bricks.
It is simply not good practice to assume that they are disorganised and slow. When they decide to clean up they do it with assion and are mecriless.
Protect Yourself
Follow the Law
Thinking of Cutting Corners in Indonesia? Think Again. (A Warning for Foreign Businesses)
Indonesia, with its vibrant economy and growing market, can seem like a land of opportunity for foreign businesses. The allure of a large, developing nation might tempt some to believe they can operate outside the bounds of the Indonesian company law, assuming that oversight is lax or enforcement is weak. This couldn’t be further from the truth, and indulging in that mindset can have devastating consequences, especially for PMA (Foreign Investment Companies) and companies with foreign ownership. It’s easy to fall into the trap of thinking Indonesian bureaucracy is too slow or disorganised to catch every violation. The assumption that rules can be bent, laws fudged, or compliance ignored is a dangerous gamble. You might think you can operate in a “grey” area, sponsor foreign nationals for visas without proper justification, dodge taxes, or disregard licensing requirements. This illusion of freedom is precisely what the Indonesian government is cracking down on.
Indonesia is Not the Wild West: They’re Watching You.
Immigration, the Tax Department (DJP), and corporate registration agencies are actively monitoring business activities. They are aware of who is compliant and, more importantly, who is not. Don’t underestimate their capabilities. Indonesia has embraced technology, and government departments are utilising it effectively to coordinate and identify businesses operating “under the radar.”
Recent Crackdowns: A Sign of Things to Come
Recent events in Bali serve as a stark warning:
- Immigration Blitz: Over 170 companies in Bali received a one-time warning to cease illegal visa sponsorships. The message was clear: stop, or face closure and legal action, including potential deportation.
- Tax Authority’s Villa Crackdown: The Tax Department issued a warning to 5,000 villa operators in Bali failing to meet their tax obligations. Those who ignored the warning faced swift and decisive action.
The Consequences of Non-Compliance with Indonesian Company Law
Don’t think you can push the envelope too far without consequences. Periodically, government departments initiate crackdowns to both enforce regulations and generate revenue. They know precisely which companies, PMA or local, are operating outside the legal framework.
The Process: Warning, Then Action
The typical pattern is clear: a warning is issued, followed by a crackdown. By the time authorities arrive at your doorstep, it’s often too late to rectify the situation. You’re already in the system, and the repercussions can be severe, ranging from hefty fines and business closure to legal action.
A Final Word of Caution about Indonesian Company Law
If you intend to do business in Indonesia, do it the right way. Comply with all applicable laws and regulations. Not only will you avoid costly penalties and reputational damage, but you’ll also contribute to a more transparent and sustainable business environment. Remember, those who choose to operate illegally create a more challenging environment for the vast majority of businesses striving to do things the right way. If you have any questions don’t hesitate to contact us use the “general Questions” check box and ask us anything.
In Indonesian Company Law, ethical and legal operation is not just a suggestion, it is a necessity.
