Comparing company setup in Singapore and Indonesia  

Indonesia is one of the world’s emerging markets and is 16th largest economy in the world. Whilst a small city-state, on the other hand, Singapore is ranked the 3rd richest country in the world by GDP per capita in 2023.

As the two key players in Southeast Asia, Singapore and Indonesia, though geographically close, present vastly different opportunities and challenges for businesses. In this blog, we will delve into the process of setting up a company in both nations, comparing crucial aspects such as the business environment, taxation policies, company setup procedures, and filing and compliance requirements.

Business Environment

Understanding the fundamental differences in the business environment of Singapore and Indonesia is vital when comparing the two. The business environment in Singapore and Indonesia varies significantly. Singapore is the second easiest place to do business in the world. Comparatively, Indonesia, is not one of those easiest countries to operate a business. However, with ongoing reform efforts in place, Indonesia now stands among the world’s top 10 improvers.

As the largest economy in Southeast Asia, Indonesia’s economic growth is driven by the demand for infrastructure for urbanisation. Notably, petroleum and minerals constitute the majority of its exports. The government’s commitment to reforming the investment climate is evident through measures aimed at reducing red tape, opening sectors for investment, and enhancing public services.

On the other hand, Singapore, a highly developed and trade-oriented economy, stands out as a global leader in high-end manufacturing, engineering, biotechnology, and financial services. Its well-established institutions, effective policymaking, free trade philosophy, and a diversified economy collectively contribute to its status as a major attraction for investors.

Company setup in Singapore

Taxation Policies

One striking difference between the two countries is their legal systems. Indonesia follows one of the civil law systems as its basis for legal matters. Conversely, Singapore adopts the English Common Law system. This difference impacts a lot on taxation policies. Businesses in Indonesia have to make 52 tax payments annually, while businesses in Singapore only need to make five tax payments annually, making paying taxes in Singapore more convenient.

Moreover, Singapore has a lower corporate tax rate of 17% compared to Indonesia’s 25%. Furthermore, Singapore offers more attractive tax exemptions and incentives for businesses, such as full tax exemption on the first S$100,000 of chargeable income for the first three years for newly incorporated companies.

Company Officers and Shareholders

In Singapore, Private Limited Company is the most common type of corporate entity. The requirements for setting up a company include having at least one resident director and one shareholder.

On the other hand, the preferred vehicle for businesses in Indonesia is the foreign investment company, known as Penanaman Modal Asing (PT PMA), offering an array of services and features tailored to local investors. In Indonesia, a foreign individual wishing to establish a business must obtain approval from the Indonesia Investment Coordinating Board (BKPM) and maintain a minimum paid-up capital of IDR 10 billion (approximately S$1 million).

The contrasting procedures highlight the simplicity and flexibility of Singapore’s company setup, making it more appealing to foreign investors. Meanwhile, setting up a company in Indonesia can be more complex and time-consuming, making it essential for investors to carefully consider the potential challenges before arriving at a decision.

Company setup in Jakarta, Indonesia

Filing and Compliance

The differences in tax-related tasks and filing requirements between Singapore and Indonesia are noteworthy. Different compliance requirements could potentially impact businesses’ operational efficiency and overall profitability.

Businesses in Singapore spend less time on tax-related tasks and have fewer filing requirements. This includes the submission of annual financial reports and the lodging of an Annual Return (AR) with the Accounting and Corporate Regulatory Authority (ACRA) within one month of the Annual General Meeting (AGM).

Conversely, in Indonesia, the scenario is more intricate. Companies must present annual reports to their General Meeting of Shareholders (GMS) after the conclusion of each financial year. Notably, certain companies, including public companies and those with a turnover exceeding IDR 50 billion, have to undergo financial statement audits by a public accountant. Publicly listed companies must also submit financial reports to Indonesia’s financial services authority, Otoritas Jasa Keuangan (OJK).

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