Introduction
To set up a foundation (Yayasan) in Indonesia is an essential process for non-profit organizations looking to serve the public good. This guide covers the legal framework, capital requirements, registration process, and compliance obligations that foundations must follow in Indonesia.
Other types of legal entities in Indonesia include:
- Foreign Investment Company (PT PMA)
- Local Indonesian Company (PT Local)
What is a Foundation (Yayasan) in Indonesia?
A Yayasan is a non-profit legal entity in Indonesia, created to serve charitable, social, religious, or humanitarian purposes. Unlike businesses, which are established to generate profits for owners or shareholders, a Yayasan’s primary goal is to serve the public good, addressing issues like education, healthcare, environmental protection, and community development.
A Yayasan helps fill gaps in services provided by the government or private sector. For example, a Yayasan may focus on building schools in underserved areas, providing healthcare to remote communities, or supporting environmental initiatives.
Legal Framework for a Yayasan in Indonesia
A Yayasan must comply with Indonesian laws to maintain transparency, accountability, and focus on its non-profit mission. Key regulations include:
- Governs the structure, operations, and dissolution of foundations.
- Sets the roles and responsibilities of the governing bodies.
Outlines administrative requirements and compliance procedures for foundations.
Provides guidelines for how foundations and other social organizations must operate in compliance with national governance standards.
How a Yayasan Operates
Once established, a Yayasan must focus on its mission to benefit the public. It must:
- Conduct activities that serve the public good, like education, healthcare, disaster relief, or environmental projects.
- Manage funds responsibly by keeping accurate financial records and following regulations about donations, grants, and other income.
- Report activities and financial status regularly to maintain transparency and accountability.
A Yayasan must comply with tax regulations, including:
- Tax exemptions available to non-profit organizations.
- Other tax obligations, such as withholding taxes and Value Added Tax (VAT), depending on its activities.
Mission: Focused on building schools in rural areas and offering scholarships to children who cannot afford formal education.
Funding: Private donations, international grants, and fundraising events.
Legal Compliance:
- Registered under Law 16/2001.
- Applies for tax-exempt status as a non-profit
- Board of Trustees includes both Indonesian and foreign
- Files annual tax returns and reports all foreign
Impact: Successfully builds schools in remote areas, improving literacy rates and providing access to quality education
Mission: A Yayasan focused on healthcare aims to bring mobile clinics to underserved villages, providing free check-ups, maternal care, and basic treatments.
Funding: Supported by donations from local corporations, international NGOs, and community fundraising.
Legal Compliance:
- Registered with the Ministry of Law and Human Rights (MOLHR).
- Employs licensed Indonesian doctors and nurses, with foreign medical volunteers holding appropriate permits (KITAS and IMTA).
- Submits annual reports on healthcare impact and transparent fund usage.
Impact: Reduces child mortality rates and improves public health in rural areas, ensuring communities receive access to essential medical care.
Key Takeaways for Businesses and Organizations
- Purpose: Define a mission aligned with public benefit (education, healthcare, humanitarian, etc.).
- Legal Compliance: Follow Law 16/2001, Government Regulation No. 63/2008, and Law No. 17/2013.
- Capital Requirements: IDR 10 million for Indonesian citizens; higher for foreign founders (minimum IDR 1 billion).
- Governance Structure: Must have Board of Trustees, Board of Management, and Board of Supervisors.
- Funding: Donations, grants, endowments, or inheritances; foreign donations must be reported
- Tax Obligations: Exempt from corporate tax if income used for non-profit purposes; must still comply with withholding tax and VAT rules.
Key Actions for Organizations Looking to Establish a Yayasan
- Define the mission and
- Ensure compliance with laws and consult legal
- Prepare sufficient capital (especially for foreign founders).
- Establish a transparent governance
- Set up efficient systems for fundraising and donations.
- Stay compliant with tax and reporting obligations
Structure of a Foundation (Yayasan)
Highest authority, oversees strategic direction and mission.
Handles day-to-day operations (Chairperson, Secretary, Treasurer).
Provides oversight and ensures compliance.
Important: No individual can serve on more than one board to avoid conflicts of interest.
Rules for Foreign Founders
Initial Capital & Fund Sources
- Indonesian Citizens: Minimum IDR 10 million.
- Foreign Founders: Minimum IDR 1 billion (individuals); IDR 10 billion (foreign entities).
- Sources of Funds: Grants, donations, endowments, inheritances. Foreign donations must be reported to authorities.
Steps to Establish a Foundation
- Define purpose and
- Choose a name starting with “Yayasan.”
- Draft Deed of Establishment (Akta Pendirian).
- Obtain Ministry of Foreign Affairs (MOFA) recommendation if foreign founders
- Get approval from Ministry of Law and Human Rights (MOLHR).
- Post-registration: Apply for NPWP (tax number), open a bank account, and register with BPJS (social security) if hiring staff.
Compliance Obligations for Foundations (Yayasan)
- Corporate Income Tax: Exempt if used for non-profit
- Withholding Taxes: PPh 21 (salaries), PPh 23 (services), PPh 4(2) (rent).
- VAT: Applicable if engaging in taxable activities.
- Submit annual activity and financial reports in Bahasa
- Public foundations must disclose financial reports to maintain donor
- Report changes to the deed or governance structure to MOLHR and MOFA (if applicable).
Can a Foundation pay salaries to Board Members?
- Board of Trustees & Supervisors: Volunteer-based, no salaries.
- Board of Management: May receive salaries if working full-time and not closely related to other board members.
How MAM Corporate Solutions Can Support You
Setting up a Yayasan in Indonesia is a detailed process. By ensuring legal compliance, building a transparent governance structure, and fulfilling capital and tax obligations, organizations can make a sustainable impact.
Contact MAM Corporate Solutions today or fill in the form below for personalized consultation regarding setting up Foundation (Yayasan) in Indonesia.
