A Comprehensive Guide to Setting Up Your PT PMA In Indonesia
Are you planning to invest in Indonesia?
For foreign investors seeking to enter Indonesia’s thriving economy, establishing a Foreign-Owned Limited Liability Company (PT PMA) is a critical step. A PT PMA allows foreign entities to legally conduct business and generate revenue within Indonesia.
Understanding the legal framework, structural requirements, and regulatory considerations is essential to ensure compliance and long-term success. This guide provides a detailed overview of the procedures, obligations, and key factors involved in setting up a PT PMA in Indonesia.
Why Register a Company in Indonesia?
The benefits of a foreign company set up in Indonesia include the following:
- Indonesia is the fourth-largest economy in Asia, following China, Japan, and India, making it a major economic player.
- It is also the fourth most populous country in the world, offering a large consumer base and labour market, attracting both local and international businesses.
- Positioned at the heart of Southeast Asia, Indonesia offers easy access to major regional markets, enhancing its appeal for company registration and foreign investment.
- Indonesia is a member of the Association of Southeast Asian Nations (ASEAN) and benefits from trade partnerships with countries such as Malaysia, Singapore, Thailand, and Vietnam. Through the ASEAN framework, businesses in Indonesia enjoy reduced or zero tariffs, creating cost advantages for cross-border trade.
- You have full control over the direction you want your business to go.
- There is no restriction on where your company can operate in Indonesia.
- Only some business sectors in the country require that you have a local partner before you can establish your company. Details of these sectors are in the Negative Investment List.
What is a PT PMA in Indonesia and How Does It Work?
In Indonesia, a foreign company is also known as a PT PMA. A PT PMA (Penanaman Modal Asing) is a type of Limited Liability Company (PT) established in accordance with Law No. 40 of 2007 on Limited Liability Companies (Company Law). This business structure allows for partial or full ownership by foreign individuals or entities. However, it is essential to note that specific sectors of the Indonesian economy remain restricted or closed to foreign investment, in accordance with national regulations.
Under Law No. 25 of 2007 on Investment (New Investment Law), foreign investment is defined as any investment activity conducted by foreign investors to operate a business within Indonesia’s territory. A PT PMA serves as the official legal entity that enables foreign individuals, companies, or government agencies to carry out commercial activities in Indonesia, generating revenue and earning profits within the country.
What are the types of PT PMA’s in Indonesia?
Foreign company registration in Indonesia involves two primary types of legal entities.
Two types of companies fall under this category:
- Limited Liability Companies (LLC) – These are called PT (Perusahaan Terbatas) companies. If your company falls under the limited liability category, the law considers it a PT irrespective of your capital structure type.
- Limited Liability Companies with Foreign Ownership – In this case, the authorities will designate your company as a PT PMA (Penanaman Modal Asing), meaning it remains a limited liability company with foreign ownership.
Local shareholders will not affect your company’s capital requirements. It is only affected if you do not own any shares in the company. The capital you pay will be based on the following:
- A Micro Company: Less than Rp.50 million
- A Small Company: Rp. 50 – 500 million
- A Medium Company: Rp. 500 – 10 billion
- A Large Company: More than Rp10 billion
A PT PMA foreign company only needs to pay 25% of the total equity. If you want to change your capital, you must convert to become a company that is locally owned or increase your existing capital.
What is the Investment Capital Required for PT PMA’s in Indonesia?
A foreign investor needs more than USD1 million to invest. In the local currency, this is IDR 10 billion. This is the initial investment plan that requires a USD250,000 paid-up capital.
The capital can be in the form of fixed assets or cash. This capital must be paid once the company has been established with a bank account. You must reach more than USD1 million in investment realisations to get a business license, as well as your permanent, import, and other licenses that are related to your business sector.
How to Set Up Your PT PMA Foreign Company in Indonesia?
To set up your company here, these are the steps that must be taken:
- Obtain Approval for Your Company Name – This should take about two days. The Ministry of Law and Human Rights issues the approval. Your company name should consist of only three words. It should be easy to understand, and it should not contain any profanities or vulgar words that are considered offensive locally.
- Principal License Approval – This will act as your temporary license. You would need to get this reviewed, revised, and approved by the BKPM. The process takes about 14 days to complete.
- Prepare Your Articles of Association – This will take about 4 days, and it is done with a Notary.
- Obtain Your Deed of Establishment – You will then need to legalise your Deed of Establishment, otherwise known as your Legal Entity. Locally, it is called SK Kehakiman. This will be issued by the Ministry of Law and Human Rights within 3 Days.
- Acquire Your Certificate of Domicile – You can obtain this from the landlord of the office building and the Local Council within 3 days.
- Get Your Taxpayer Registration Number – The second-to-last step is to get your taxpayer registration number, also known as an NPWP. Once you have that, you will need your letter of registered tax (SKT). This can be acquired within 3 days from the taxpayer’s office.
Once you have done all that, the final stage is to get your Nomor Izin Berusaha (NIB) from the Provincial Government. You should be able to get this within one day.
Ready to Set Up Your Business?
The government might have made the process easier, but you would still need assistance navigating foreign territory. In Indonesia, the rules can appear complicated if you don’t understand the local language and requirements. That is the common challenge with operating abroad, which is why we are here to help you.
Let us take the stress out of establishing your PT PMA by doing the hard work for you. Our professionals have years of industry insight and experience, and this is invaluable when you are starting a business of your own. For more information about our services, contact the 3E Accounting team today.
