Complete Guide to Establish a Foreign Company (PT PMA) in Indonesia 2020

Many sectors are open to Foreign Investment Companies, and for that many reasons, the investment value keeps rising rapidly in recent years. According to Indonesia’s large population as well as abundant natural resources, this country is considered as one of the most potential countries for a good deal.

Besides open wider sectors, simpler procedures for establishing a foreign company are now offered to attract many more investors. To find out any further information about PT PMA and how to establish a Foreign Company (PT PMA) in Indonesia, here are some simple guides for you.

What Is PT PMA

Based on Law No. 25/2007, PT PMA is a business run or invested by foreign investors, companies, or governments in the territory of Indonesia. PT PMA regulation itself is under the authority of the Company Law No. 40/2007. The foreign company can be either 100% foreign-owned or partially foreign-owned.

Also based on Law No. 25/2007 regarding Capital Investment (the “Investment Law”), Foreign Investment is defined as an investment activity to perform business in the territory of the Republic of Indonesia by foreign investors, either through foreign investment entirely or joint venture with domestic investors.

Who Can Establish PT PMA

Whether it is individuals or legal entities, the two parties can be the shareholders. However, PT PMA must consist of at least two foreign individuals, the foreign company, Indonesian stakeholder, and Indonesian legal presence or more.

In addition, to protect small businesses, only large companies with a total investment above 10 billion Indonesian Rupiah are allowed to have foreign shareholders. Therefore, if a PT FMA wants to set up a foreign company, the investors have to pay up 2.5 billion Indonesian Rupiah (more or less than USD 200,000) as capital. Despite the requirements, there are some industries which are required by law to pay up the minimum capital higher than 2.5 billion Indonesian Rupiah, such as financial industries, logistics and freight forwarding, and 100% foreign-owned e-commerce companies.

What You Need to Know About PT PMA Establishment

It is necessary to set up a business plan and learn about the Negative Investment List (DNI) based on the President Regulation of Republic of Indonesia No. 39/2014. Through DNI, investors will be able to know which business sectors or line of businesses are open or restricted/closed to foreign investment in Indonesia. DNI comprises 3 (three) major sections, namely (1) Open Business Fields; (2) Closed Business Fields; and (3) Open Business Fields with Conditions.

PT PMA must involve at least two shareholders; individual or legal entities are both allowed. While for the business structure, it must have at least the general meeting of shareholders, the board of directors, and the board of commissioner.

PT PMA Establishment Steps

The stages of establishing PT PMA as follow:

  1. Request for a company name approval and wait for The Ministry of Law and Human Rights’ recommendation. If the name you proposed is rejected, they will explain the variety of reasons for that. For example, the same name is already taken, or it may be too improper in Indonesia.
  2. Make an investment registration from The Indonesia Investment Coordinating Board (BKPM). BKPM holds the authorization to receive, review, and approve your investment appliance and proposal. Once BKPM thinks that the investment is complying, they will release a license which is valid for one year and can be lengthened for two years renewal.
  3. After that, obtain an Articles of Association (Akta Perusahaan) through a notary and legalize it to the Ministry of Law and Human Rights. You will also need a Ratification of Legal Entity (SK Kehakiman), Certificate of Domicile, Tax Registration Number (NPWP) and a company identity or Nomor Izin Berusaha (NIB).

That’s a simple and complete guide to establish a Foreign Company (PT PMA) in Indonesia. To attract more foreign investment, the government has simplified its procedures and allowed some new sectors.

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