Let’s Talk Numbers: Minimum Capital of a PT PMA
Money is the bloodline of any business. You need to make sure you have enough funding for your dream company, especially if you are building it from scratch.
In Indonesia, the amount of minimum capital requirements varies according to the types of companies as dictated by the Indonesian Investment Coordinating Board.
That being said, the minimum capital of a PT PMA—which means Perseroan Terbatas Penanaman Modal Asing—might be higher than other types of companies. The reason behind this is that it is a large-scale firm allowed to onboard foreign investors.
A PT PMA is a limited liability company. It means that the debts of the stakeholders are only limited to the percentage of their ownership. Basically, the company cannot go against their personal assets to settle its financial obligations.
Moreover, a PT PMA can be fully or partially owned by foreign entities.
Paid Up Capital vs. Investment Value
Before we discuss the amount of minimum capital of a PT PMA, let us first define these basic terms: paid-up capital and investment value.
Paid-up capital refers to the actual contribution of money and other assets so you can establish your company. Basically, it is your starting capital to fund your business activities.
Investment value, meanwhile, is the total estimated capital you are intending to channel into your company in the next few years. The capitalization can cover your equipment acquisition, inventories, and salaries of your employees, among others.
Now, let us talk about the numbers. The minimum investment value of a PT PMA is IDR 10 billion. This is substantially higher compared to other types of companies:
- Micro – less than IDR 50 million
- Small – IDR 50 million to IDR 500 million
- Medium – IDR 500 million to IDR 10 billion
The paid-up capital, meanwhile, should be equal to 25 percent of the minimum investment value. In this case, it would be IDR 2.5 billion.
However, a higher paid-up capital is needed for other industries. These include the financial sector, logistics, and freight forwarding, and fully foreign-owned e-commerce firms.
While the investment is a huge sum, do not forget that you can actually use it for business operations. The size of the capital can also determine if a PT PMA can hire foreign employees.
Rationale Behind the Minimum Capital Requirement
The Indonesian government has its reasons to place a minimum cap for capitalization of a foreign investment company.
- It is earmarking the small to medium businesses for the local firms. The higher required capital imposed on PT PMA encourages the inflow of direct foreign investment into large companies.
- Putting a standard on minimum paid-up capital and investment value actually protects the company. The minimum capital of a PT PMA ensures that it has enough assets to operate in the long term.
Concerns Over Paid-Up Capital
You might wonder when you need to secure the paid-up capital. The short answer is soon. Meaning? This should be reflected right away in your company’s bank account after completing the business incorporation process.
Remember that you can only create a bank account after your business has been incorporated. While waiting, accomplish a capital statement letter—to be signed by shareholders—first to confirm the availability of funds.
Another question that you might have in mind is: does the paid-up capital have to be in cash? Yes. As mentioned earlier, your paid-up capital is a fund directly deposited to your company’s bank account.
If you want to contribute to other assets, these can be included in your investment plan instead. Doing so, however, requires third-party assessors to evaluate the market value of the assets.
After some time, you might consider increasing your capital for whatever reason. Maybe you are raising funds for your expansion, another investment, or acquisition of much-needed equipment.
Whatever your reason may be, the process of increasing the capital of a PT PMA is the same with other local companies. Add new shares and offer them to your current shareholders.
You would also need approval from your shareholders. This is usually settled during a general meeting.
If you have further questions about the minimum capital of a PT PMA, do not hesitate to contact 3E Accounting Indonesia.
We offer top-of-the-line accounting and incorporation services in Indonesia.