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Indonesia is a rapidly growing economy with a large and diverse market. Foreign investors who are looking to expand into this market have a number of options, but one of the most popular is to incorporate a PT PMA (Perseroan Terbatas Penanaman Modal Asing) company.
A PT PMA is a limited liability company that is owned by foreign investors. It offers several advantages, including full foreign ownership, legal recognition, and access to the Indonesian market. However, there are also a number of requirements that must be met in order to incorporate a PT PMA, so it is important to do your research before you get started.
In this blog post, we will provide you with an overview of the PT PMA company incorporation process. We will discuss the benefits of PT PMAs, the key steps involved in registration, and the distinction between PT PMAs and representative offices. We will also provide you with some practical tips to help you get started.
So, if you are thinking about expanding your business into Indonesia, then this blog post is for you. We will show you how to incorporate a PT PMA and give you the information you need to make informed decisions about your business.
Why should you care about PT PMA company incorporation in Indonesia?
There are several reasons why you should care about PT PMA company incorporation in Indonesia. First, Indonesia is a rapidly growing economy with a large and diverse market. The country’s GDP is expected to grow by 5.5% in 2023, and the middle class is expected to grow by 50% by 2030. This means that there is a huge potential market for foreign businesses in Indonesia.
Second, PT PMAs offer several advantages over other business structures in Indonesia. For example, PT PMAs offer full foreign ownership, which means that you can have 100% ownership of your business. PT PMAs also offer legal recognition, which means that your business will be protected under Indonesian law.
Finally, PT PMAs offer access to the Indonesian market. This is a huge market with a population of over 270 million people. By incorporating a PT PMA, you will be able to tap into this market and reach a large number of potential customers.
Understanding PT PMA Company Incorporation
Exploring the Benefits of PT PMA
In this section, we will delve into the benefits that come with incorporating a PT PMA (Perseroan Terbatas Penanaman Modal Asing) company in Indonesia. Understanding these advantages will provide you with a strong foundation for your decision to embark on PT PMA company incorporation.
Foreign Investment in Indonesia: A Gateway to Success Indonesia is a thriving economy that attracts foreign investment. By establishing a PT PMA company, foreign investors gain access to a wide range of business opportunities in various sectors. The country’s strategic geographic location, abundant resources, and large consumer market make it an attractive destination for businesses seeking growth and expansion.
Favorable Ownership Structure and Market Access PT PMA companies offer a favorable ownership structure for foreign investors. Unlike other business entities, PT PMAs allow full foreign ownership, providing investors with greater control and decision-making power. Moreover, PT PMAs provide access to the Indonesian market, enabling businesses to tap into the country’s vast consumer base and explore new avenues for revenue generation.
Legal Recognition and Government Support PT PMA companies enjoy legal recognition in Indonesia. This recognition provides businesses with a secure and stable operating environment, fostering trust and confidence among investors and partners. Additionally, the Indonesian government actively supports and encourages foreign investment through various incentives, policies, and programs. These initiatives aim to attract foreign capital, spur economic growth, and create employment opportunities.
By comprehending the benefits of PT PMA company incorporation, entrepreneurs and investors can make informed decisions about entering the Indonesian market. The next sections of this article will delve into the key steps involved in PT PMA company registration, distinguishing PT PMA from representative offices, exploring expansion possibilities, and providing practical examples and case studies to enhance your understanding.
Key Steps in PT PMA Company Registration
|Understand the Negative Investment List
|Familiarize yourself with the list of sectors that are either closed to foreign investment or subject to certain restrictions.
|Use the Online Single Submission (OSS) system
|Submit your company incorporation application, obtain necessary licenses and permits, and fulfill other regulatory requirements through this centralized platform.
|Meet the minimum capital requirement
|Ensure that your company meets the minimum capital requirements, which vary depending on the business sector and location.
|Provide paid-up capital and domicile letter
|Demonstrate the financial capability of your company by providing proof of paid-up capital and a domicile letter.
|Acquire the Business Identification Number (NIB)
|Obtain this unique identification code, which is required for conducting various commercial activities in Indonesia.
|Navigate other license registrations
|Identify and fulfill all the necessary licensing requirements, such as those for employee recruitment, tax registration, and environmental compliance.
Establishing a PT PMA (Perseroan Terbatas Penanaman Modal Asing) company in Indonesia involves several important steps. In this section, we will guide you through the key procedures required for successful PT PMA company registration.
- Grasping the Negative Investment List Before proceeding with PT PMA incorporation, it is crucial to understand Indonesia’s Negative Investment List. This list outlines the sectors that are either closed to foreign investment or subject to certain restrictions. Familiarizing yourself with this list will help determine if your business falls within the permitted sectors and ensures compliance with relevant regulations.
- Unveiling the Online Single Submission (OSS) System the Online Single Submission system is a crucial component of the PT PMA company registration process. It serves as a centralized platform for various licensing and registration procedures. Through OSS, you can submit your company incorporation application, obtain necessary licenses and permits, and fulfill other regulatory requirements conveniently and efficiently.
- Meeting the Minimum Capital Requirement PT PMA companies are required to meet certain minimum capital requirements. The exact amount varies depending on the business sector and location. Ensuring compliance with the minimum capital requirement is essential for a smooth registration process. Adequate financial planning and capital allocation are necessary to meet these obligations.
- Unpacking Paid-Up Capital and Domicile Letter Paid-up capital refers to the portion of the company’s capital that has been fully subscribed to and paid by the shareholders. It demonstrates the financial capability of the company and plays a significant role in the registration process. Additionally, obtaining a domicile letter, which serves as proof of your company’s registered address, is a prerequisite for PT PMA registration.
- Acquiring the Business Identification Number (NIB) The Business Identification Number (NIB) is a unique identification code issued to PT PMA companies. It serves as a comprehensive business license and is required for conducting various commercial activities in Indonesia. Obtaining the NIB is a crucial step in the registration process and provides legal recognition to your PT PMA company.
- Navigating Other License Registrations Depending on the nature of your business activities, additional licenses and permits may be required. These can include sector-specific licenses, such as those for manufacturing, construction, or finance, as well as other permits related to employee recruitment, tax registration, and environmental compliance. It is essential to identify and fulfill all the necessary licensing requirements to ensure compliance and avoid any legal complications.
By following these key steps in PT PMA company registration, you can navigate the process effectively and ensure a smooth incorporation. In the next section, we will explore the distinction between PT PMA and representative offices, shedding light on their respective roles and implications for foreign investors.
How do you set up a foreign company as a PT PMA in Indonesia?
Foreign Investment (PMA) according to Article 1 point 3 of Law Number 25 of 2007 concerning Capital Investment (UUPM) is the activity of investing capital to carry out business in the territory of Indonesia carried out by foreign investors, whether using foreign capital entirely or joint ventures. with domestic investors (joint venture). A Limited Liability Company (PT) that has elements of foreign investment must be in the form of a PT PMA.
To establish a PT PMA, one of the things you need to pay attention to is what business fields are open or closed to the PT PMA. This is regulated in Presidential Regulation Number 44 of 2016 concerning the List of Closed Business Fields and Open Business Fields with Requirements in the Investment Sector or what is commonly called the Negative Investment List (DNI). DNI or what is known in English as the Negative Investment List functions to find out what business fields are open for investment, both domestic investment and foreign investment and if the business field is open to foreign investment, what is the permitted composition of foreign investment. Apart from being based on the DNI, regulations regarding open or closed business sectors are contained in the Economic Policy Package Volume X which continues to be issued by the government.
Division of business fields that are open or closed to PT PMA (based on DNI & Economic Policy Package X) and several examples of the fields, namely:
– 100% open for PMA: restaurants, bars, cafes, film industry;
– Partially open to PMA: plant and food cultivation businesses, oil and gas contracting services at sea, car maintenance and repair, security consulting services;
– Closed to PMA: retail trade in antiques, laundry services, beauty salons, newspaper/bulletin/magazine publishing.
There are several stages that need to be done to establish a PT PMA, namely as follows:
1. Principle Permit
Application for Principle Licensing is carried out through BKPM’s One Stop Integrated Service (PTSP). Registration to PTSP BKPM is carried out in two stages, namely:
a. Submission of Registration Permit: Registration permit is a means of checking whether the business field that the company will carry out is not included in the DNI.
b. Application for Principle Licensing: the stage begins with completing the required requirements and filling out the application provided. Documents that need to be prepared include: photocopy of passport for foreigners, photocopy of Resident Identity Card (KTP) and NPWP specifically for Indonesian citizens, photocopy of Land and Building Tax for business premises, photocopy of contract letter (if the office has contract status), Domicile Certificate from building manager (if in an office), and 2 3×4 photographs of the person in charge of the business.
The Principle License functions the same as the Trading Business License (SIUP) at PT PMDN.
2. Making a Deed of Establishment
After the Principle Permit is obtained, the next stage is to prepare the Deed of Establishment of PT PMA to the Notary. Before going to the Notary, parties who wish to create a PT must have prepared matters regarding the name of the company, domicile of the company, amount of capital, composition of shares, and composition of the company’s management to be stated in the Deed of Establishment.
Before making a Deed of Establishment, the Notary will first check with the Directorate General of AHU whether the name of the PT can be used. If the PT name can be used, the Notary will make a Deed of Establishment. A copy of the Deed of Establishment will be completed within a maximum of 14 days from the signing of the Deed of Establishment.
3. Arrange for Domicile Certificate
A Company Domicile Certificate (SKDP) is required as proof that the place where the company operates is legal. SKDP processing is carried out through the Subdistrict Office in the area where the company is located. Making an SKDP usually takes 3-8 days from the time the document is received by the Village Office.
4. Creation of the Company’s NPWP
Making a NPWP for a company takes around 7 working days. Apart from the NPWP, the company also needs to obtain a Taxable Entrepreneur Letter (PKP). NPWP processing is carried out at the Tax Service Office (KPP) in the company’s city of residence.
5. Creation of a Company Account
A bank account is created in the name of the company, then shareholders will deposit share capital in cash into the Company’s treasury. Proof of deposit is submitted to the Notary and then continues with the application for ratification of the company to the Minister of Law and Human Rights of the Republic of Indonesia.
6. Submission of company approval to the Indonesian Minister of Law and Human Rights
After the Deed of Establishment and company accounts are prepared, the Notary will submit a request for ratification of the legal entity to the Directorate General of AHU. This submission has a maximum period of 60 days after the Deed of Establishment is drawn up. The Ministry of Law and Human Rights (Kemenkumham RI) will issue a Decree regarding the Legalization of the PT PMA Legal Entity.
7. Additional State Gazette
The announcement regarding the approval of PT PMA will be made no later than 14 days from the issuance of the Republic of Indonesia Minister of Law and Human Rights Decree (Article 9 paragraph (3) of the 2010 Minister of Law and Human Rights Regulation). PT PMA will receive additional State Gazette which has been published through the Notary who handles the application for ratification of the legal entity.
8. Making a Company Registration Certificate (TDP)
After approval from the Indonesian Minister of Law and Human Rights comes out, the company can process the Company Registration Certificate (TDP). The processing period is 14 working days. Management can be done through the One Stop Integrated Service Agency (BPTSP) website.
9. Manage the required permits
The licensing required by a company varies, depending on the type of business being run. Permits that are generally required include location permits, foreign worker permits, representative office permits, and other permits.
10. Permanent Business License (IUT)
PT PMA cannot always use Principle Permits. After 1 year as an independent company, PT PMA must submit an application for a Permanent Business License (IUT). This IUT is a permit given to PT PMA which already has a Principle Permit to start activities or production. This business permit will only be issued if the company submits an Investment Activity Report (LKPM) to BKPM online every three months.
Source of law
Law Number 25 of 2007 concerning Capital Investment;
Presidential Regulation Number 44 of 2016 concerning List of Closed Business Fields and Open Business Fields with Requirements in the Investment Sector;
Regulation of the Minister of Law and Human Rights Number M.HH-02.AH.01.01 of 2010 concerning Procedures for Announcement of Limited Liability Companies in the State Gazette and Supplements to the State Gazette of the Republic of Indonesia;
Regulation of the Head of BKPM Number 12 of 2009 concerning Guidelines and Procedures for Capital Investment Applications;
Economic Policy Package Volume X;
PT PMA vs. Representative Office (RO)
|Fully incorporated company
|Can engage in commercial activities
|Limited to market research, trade contacts, etc.
|Legal recognition, access to the Indonesian market, flexibility in business operations
|Market research, trade contacts, intellectual property protection, dispute resolution
|More complex registration process, higher costs
|Limited business activities, cannot generate revenue
|Businesses that want to have a full presence in Indonesia and engage in commercial activities
|Businesses that want to conduct market research, build trade contacts, and protect intellectual property
PT PMA vs RO comparison table
When considering market entry in Indonesia, it is essential to understand the differences between a PT PMA (Perseroan Terbatas Penanaman Modal Asing) and a Representative Office (RO). In this section, we will clarify these distinctions and highlight the strategic roles of ROs in market research activities, trade contacts, intellectual property rights, and more.
Distinguishing PT PMA from Representative Office (RO) A PT PMA is a fully incorporated company that allows foreign investors to establish a legal entity in Indonesia. It provides greater flexibility in conducting business operations, including engaging in commercial activities and revenue generation. On the other hand, a Representative Office (RO) serves as a liaison office representing a foreign company in Indonesia. While an RO cannot generate revenue directly, it plays a crucial role in conducting market research, building trade contacts, and establishing a presence in the Indonesian market.
Strategic Roles of RO in Market Research Activities One of the primary functions of an RO is to conduct comprehensive market research activities. This involves gathering information on potential clients, understanding local consumer preferences, analyzing market trends, and identifying business opportunities. By conducting thorough market research, ROs provide valuable insights for their parent companies to make informed business decisions and tailor their products or services to the Indonesian market.
The Significance of Developing Trade Contacts and Gathering Information ROs play a vital role in developing trade contacts and establishing networks in Indonesia. They engage with local suppliers, distributors, partners, and industry associations to create valuable business connections. These relationships can open doors to collaborations, joint ventures, and strategic partnerships, facilitating market entry and expansion. Additionally, ROs gather information on regulations, laws, and industry practices, enabling parent companies to navigate the Indonesian business landscape effectively.
Intellectual Property Rights and Contractual Agreements Protecting intellectual property rights is a critical concern for foreign companies operating in Indonesia. ROs contribute to this aspect by conducting research on intellectual property regulations, identifying potential risks, and assisting in the registration and enforcement of patents, trademarks, and copyrights. They also play a role in negotiating and drafting contractual agreements, ensuring that the parent company’s interests are protected in business transactions and partnerships.
Dispute Resolution Mechanisms for a Secure Business Environment In an ever-changing business landscape, disputes can arise. ROs assist parent companies in resolving commercial disputes through various mechanisms, such as mediation, arbitration, or legal proceedings. By providing local knowledge, language proficiency, and understanding of the legal system, ROs contribute to a secure and conducive business environment for their parent companies.
Understanding the distinctions between PT PMA and ROs is crucial for foreign investors seeking to establish their presence in Indonesia. In the next section, we will explore the opportunities and benefits of expanding business horizons through PT PMA incorporation.
Expanding Business Horizons with PT PMA
Once a PT PMA (Perseroan Terbatas Penanaman Modal Asing) company is successfully incorporated in Indonesia, it opens a world of opportunities for business growth and expansion. In this section, we will explore the various advantages and benefits that come with PT PMA incorporation, including repatriation of profits, a favorable ownership structure, direct sales opportunities, legal recognition, government support, and more.
Repatriation of Profits, Dividends, and Capital Gains One of the significant advantages of PT PMA incorporation is the ability to repatriate profits, dividends, and capital gains. Foreign investors can transfer their earnings and returns to their home country, enabling them to enjoy the fruits of their investments and allocate resources effectively. This feature provides financial flexibility and encourages further investment in the Indonesian market.
Harnessing a Favorable Ownership Structure for Growth PT PMAs allow full foreign ownership, providing investors with greater control and decision-making power. This favorable ownership structure not only ensures that investors have a stake in the success of their business but also enables them to implement growth strategies and make strategic decisions promptly. The ability to have a significant say in the company’s operations and direction contributes to long-term business growth and success.
Direct Sales Opportunities in Indonesia Through PT PMA incorporation, foreign companies gain the opportunity to perform sales activities directly in Indonesia. This eliminates the need for intermediaries and allows businesses to establish a direct connection with Indonesian customers. By having a local presence and understanding the market dynamics, PT PMAs can tailor their products or services to meet the specific needs and preferences of the Indonesian market, thus enhancing their competitive advantage.
Leveraging Legal Recognition and Government Support PT PMA companies enjoy legal recognition in Indonesia, which provides a secure and stable operating environment. This recognition fosters trust and confidence among investors, partners, and customers. Additionally, the Indonesian government actively supports and encourages foreign investment through various incentives, policies, and programs. This support can range from tax incentives and subsidies to streamlined administrative processes, creating a conducive environment for business growth and expansion.
Unleashing the Potential for Business Expansion With its vast consumer market and diverse economy, Indonesia offers ample opportunities for business expansion. PT PMA companies can explore new market segments, expand their product lines or services, and tap into emerging industries. The dynamic nature of the Indonesian market allows businesses to adapt and innovate, seizing growth opportunities and establishing themselves as key players in their respective sectors.
By leveraging the benefits of PT PMA incorporation, businesses can position themselves for long-term growth and success in Indonesia. In the next section, we will showcase practical examples and case studies of companies that have thrived with PT PMA incorporation, providing real-life insights and lessons learned.
With its immense growth potential, Indonesia beckons entrepreneurs and investors seeking to establish their presence in this dynamic market. Through PT PMA company incorporation, businesses can unlock a wealth of opportunities while navigating the regulatory landscape effectively. By harnessing the Online Single Submission system, meeting the capital requirements, obtaining necessary licenses, and strategically leveraging market research activities, entrepreneurs can position themselves for success. Moreover, the secure business environment, favorable ownership structure, and government support contribute to the long-term growth and expansion prospects. Armed with the knowledge gained from this comprehensive guide, you can confidently embark on your PT PMA incorporation journey and seize the potential that Indonesia has to offer.
“Ready to Tap into Indonesia’s Vibrant Market? Contact Us Today for Expert Guidance on PT PMA Company Incorporation.”
What are the restrictions on foreign ownership in a PT PMA in Indonesia?
Here is a table outlining the restrictions on foreign ownership in a PT PMA in Indonesia:
A PT PMA must have at least two shareholders
The business activities of a PT PMA must comply with the Indonesian Standard Classification of Business Fields ("KBLI")
In summary, while foreigners can own up to 100% of a PT PMA in Indonesia, there are certain restrictions and requirements to be aware of. A PT PMA must have at least two shareholders, and the business activities must comply with the Indonesian Standard Classification of Business Fields. Additionally, PT PMA companies are subject to minimum capital requirements based on the business sector.
Q.What are the minimum capital requirements for a foreign-owned PT PMA in Indonesia
Based on the search results, the minimum capital requirement for a foreign-owned PT PMA in Indonesia is IDR 10 billion (approximately USD 700,000) or the equivalent in other currencies
This minimum capital requirement serves as an indication of the seriousness and financial capacity of the investors to support the establishment and operation of the PT PMA, and ensures that the company has sufficient funds to carry out its intended business activities and fulfill financial obligations in Indonesia
However, certain sectors such as banking, insurance, and energy may have higher minimum capital requirements
The capital can be in the form of cash, assets, or a combination of both
Paid-up capital is generally set at 25% of the minimum capital requirement (hence IDR 2.5 billion) in certain capital-intensive industries
Q.What are the consequences of not meeting the minimum capital requirement for a foreign-owned PT PMA in Indonesia
According to the search results, the minimum capital requirement for a foreign-owned PT PMA in Indonesia is IDR 10 billion (approximately USD 700,000) or the equivalent in other currencies. This minimum capital requirement serves as an indication of the seriousness and financial capacity of the investors to support the establishment and operation of the PT PMA, and ensures that the company has sufficient funds to carry out its intended business activities and fulfill financial obligations in Indonesia. If a foreign-owned PT PMA fails to meet the minimum capital requirement, it may face the following consequences:
The company may not be able to obtain the necessary licenses and permits to operate in Indonesia
The company may not be able to fulfill its financial obligations, which could lead to legal and financial consequences
The company may not be taken seriously by potential partners, clients, or investors, which could harm its reputation and growth prospects.
In addition, it is worth noting that the Indonesian government has recently increased the paid-up capital requirements for foreign investors, with a foreign investment company (PT PMA) now required to have IDR 10 billion in paid-up capital, up from the previous IDR 2.5 billion
This change aims to attract more high-value investments into the country.