As one of the biggest developing countries, Indonesia has tremendous business opportunities for foreigners. For those of you who want to start developing your business in Indonesia, you might want to know about Indonesia’s Foreign-owned Limited Liability Company (PT Penanaman Modal Asing) regulations; or we might call it PT PMA for short.
Just like the name implies, PT PMA is a business entity in the form of PT (Perseroan Terbatas/Limited Liability Company) which the establishment is regulated by Law Number 40 / 2007 about Limited Liability Companies (Company Law). This form of a company can be either 100 percent foreign-owned or partially foreign-owned. Another note to be taken is that there are a few business sectors in Indonesia which are closed to foreign investment.
However, PT PMA is a legal entity that allows you to earn revenue and pass along all the restrictions which you might have if you establish a business as a Representative Office (KPPA).
Key Requirements to Be Noticed In Establishing a PT PMA
Before you decide on establishing a PT PMA in Indonesia, these are few main things you should pay attention to;
- Shareholders for PT PMA
As a Legal entity, a PT or LLC requires at least two shareholders, of which at least one of them are foreigners. It should also be noted that all corporate shareholders in Indonesia’s PT PMA should have Articles of Association; which must be approved by a public notary. There are also a few business industries that are prohibited to have local shareholders, which is the business sector that isn’t listed in the Positive Investment List.
- Business Sector and Negative Investment List (Daftar Negatif Investasi)
Before you start investing your PT PMA in Indonesia, make sure about your business activity and sector. Why? There are certain sectors of business that are completely restricted for foreigners (PT PMA) and some others that restrict the ownership of a foreigner to up to 95%. You can do the research for the list of restricted industries in Indonesia’s Negative Investment List (Daftar Negatif Investigasi). The government may change the list from time to time so keep up with it!
- Minimum Investment Plan and Paid-Up Capital
Paid-Up Capital is the amount of funds injected by the shareholders of a company. These paid-up capitals will then be utilised for daily operational expenses. BKPM (or The Investment Coordinating Board in Indonesia) gave a specific minimum capital requirement for a PT PMA to be at least IDR 10 Billion (or roughly around USD 700.000). This number equals to the requirement for a Large enterprise local LLC (PT), and this number doesn’t need to be fully in cash but it can be in the form of pre-incorporation asset purchases and expenditures.
PT PMA or Representative Office (KPPA); Which one do you need?
We have explained to you about the introduction regarding the Representative Office (KPPA) before. By now, you might decide which business entity is the most suitable for you. However, if you are still confused about this two type of businesses, we can give you a conclusion; if you only want to explore business opportunities in Indonesia for your head company, then you only need Representative Office, but if you are planning to generate revenues, profit, and do sales directly in Indonesia, then you need a PT PMA. However, if your Representative Office shows positive results and you want to expand your business, do sales, and gain revenues, you still can establish a PT PMA later on.
Izin Foreign Service
We can help you through all your business establishments, both PT PMA or Representative Office. We can also help you decide which form of legal entity you need the most for your purposes. All processes will also be notified through our tracking system. Click the link below for further information!
