Indonesia’s growing market is attracting a significant number of foreign investors who wish to establish their businesses in the country. They can operate commercial activities, like managing rental properties and running a hotel or restaurant, through a PT PMA, which is a foreign-owned company. This guide will explain how to establish a PT PMA in Indonesia.
What is a PT PMA?
PT PMA, which stands for Perseroan Terbatas Penanaman Modal Asing, is a limited liability company with foreign investment in Indonesia. This entity allows foreigners to engage in commercial activities in Indonesia. According to Law No. 25/2007 regarding investment (New Investment Law), foreigners can only operate a business and generate income through a PT PMA. A foreign individual, a foreign company, or a foreign government body can establish and operate a PT PMA in Indonesia.
A PT PMA can be fully foreign-owned or partially foreign-owned. This means the company can be established with either only Indonesian citizens or a combination of Indonesian and foreign shareholders. Law No. 40/2007 (Company Law) provides the guidelines for establishing a PT PMA. Every PT PMA must have at least two shareholders: a director and a commissioner. One of the shareholders must be a foreigner, while the other(s) can be a foreigner or an Indonesian citizen. The director of the PT PMA is required to reside in Indonesia. If the director is a foreigner, they must obtain a Tax Identification Number (NPWP) and a stay permit (KITAS or KITAP).
How much does it cost to establish a PT PMA in Indonesia?
The average cost to establish a PT PMA in Indonesia lies between IDR 20 million ($1,220) and IDR 28 million ($1,708). It takes about 2 to 4 weeks to establish a PT PMA in Indonesia.
Even though foreigners can establish their PT PMA themselves at the BKPM (Indonesia Investment Coordinating Board), this process is generally considered very challenging. It is not only time- and energy-consuming, but also prone to small mistakes with significant consequences. Therefore, most foreigners use an agency to establish their PT PMA in Indonesia. In addition to the company registration fee, there are other costs to consider, such as legal fees, corporate taxes, and additional expenses.
Buying an existing PT PMA
One option for foreign investors looking to enter the Indonesian market is to establish a new PT PMA. Another option is to purchase an existing PT PMA or PT (Perseroan Terbatas) owned by an Indonesian national. After acquisition, the PT can be converted to a PT PMA. Buying an existing PT PMA or PT is a more cost-effective and time-efficient option, although finding one available for sale can be challenging.
Requirements to register a PT PMA in Indonesia
These are the requirements for foreigners to establish a PT PMA in Indonesia:
- There must be a minimum of two shareholders: The shareholders can be individuals or legal entities and must fulfill the director and commissioner roles.
- Valid passport or company registration document: Individuals can only set up and be shareholders when they have a valid passport. A company registration document is needed when a legal entity becomes a shareholder of the PT PMA.
- Minimum capital requirement: The minimum capital requirement per shareholder is IDR 10 billion ($610,000). According to Perka BPKM No4 Year 2021, the paid-up capital is set at 25% of the minimum required investment, which is IDR 2.5 billion ($152,500). In some industries, shareholders can sign a Capital Statement Letter, where they pledge to invest money without ever transferring it. This means you don’t have to invest any money at the moment of the PT PMA registration.
- There has to be a company address: You can use your living address as a company address as long as it’s in Indonesia. You can also rent a virtual office address, mainly provided by the notary or agency you use to set up the PT PMA.
7-step guide to establishing a PT PMA in Indonesia
Establishing a business in Indonesia as a foreign investor requires a structured and systematic approach to comply with local regulations and successfully enter the market. Below is a detailed guide based on the provided steps.
Step 1: Consult the Negative Investment List
Before entering the Indonesian market, referring to the Negative Investment List is essential. This document outlines the sectors that are fully open, partially open, or closed to foreign investment. Understanding these restrictions and requirements is crucial to determining the viability of your chosen business sector for foreign investment.
Step 2: Select a business entity and company name
Choosing the appropriate legal entity for your business is a fundamental step. Most foreign investors prefer establishing a PT PMA in Indonesia. Additionally, obtaining approval for your company name from the Ministry of Law and Human Rights is necessary to ensure uniqueness and compliance with Indonesian naming laws.
Step 3: Obtain the Deed of Incorporation
The next crucial step is drafting and legalizing your Articles of Association through the Deed of Incorporation. This process, which requires ratification by a public notary, formalizes your business’s operational framework and governance structure. Approval from the Ministry of Law and Human Rights solidifies your company’s legal standing.
Step 4: Acquire required licenses and permits
A range of licenses and permits is necessary to operate a PT PMA legally in Indonesia. This includes acquiring a Domiciliary Letter from local authorities to confirm your business location and a Business Identification Number (NIB), which is a comprehensive permit for your business operations. Additional industry-specific licenses, such as KBLI 6811 or KBLI 55120, may be required depending on your company’s industry.
Step 5: Register the PT PMA for taxes
Tax compliance is mandatory in Indonesia. All businesses must register for taxes and obtain a Tax Identification Number (NPWP). This registration is vital for fulfilling tax obligations, conducting banking transactions, and facilitating other business-related activities. You might also have to get a PKP or Taxable Entrepreneur Confirmation, which is crucial for companies engaged in taxable sales of goods and services.
Step 6: Obtain the TDP and NIB
After successfully registering your PT PMA, the next step is to acquire the TDP and NIB. The TDP, also known as the Company Registration Certificate, is a crucial document that confirms your company’s official establishment. Obtaining the TDP typically takes around 14 days and solidifies your company’s legal status in the business registry.
The NIB, or Business Identification Number, is a comprehensive permit that combines your company’s business license and location permit. It plays a vital role in the Online Single Submission (OSS) system, which simplifies the regulatory process for businesses operating in Indonesia. Upon successful application, the NIB grants you access to the Indonesian market and allows you to commence operations by your business scope.
Step 7: Establish a bank account and apply for KITAS
Setting up a business bank account is necessary for managing financial transactions and even an official requirement set by the BPKM. This step is often a prerequisite for further business processes, including applying for a KITAS. The KITAS is necessary for foreign directors planning to reside and work in Indonesia, ensuring legal compliance.
What kind of visa do I need to start a PT PMA?
At least one of the directors must have a stay permit in Indonesia. This means applying for a KITAS when establishing a PT PMA in Indonesia is necessary. However, starting a PT PMA without being in Indonesia is still possible, as foreigners can apply off-shore for a KITAS. In addition to the directors, other shareholders can also obtain a KITAS through the PT PMA.
A shareholder can apply for two types of KITAS: Investor KITAS and Working KITAS. The Investor KITAS can be obtained by a director, commissioner, or shareholder with at least IDR 1 billion ($61,000) in shares. Another visa type is the Working KITAS. This visa is issued with the company as a sponsor and allows foreigners to work for the company in Indonesia. The position needs to be in line with the company’s business. Besides that, one might also have to apply for a work permit (IMTA).
Benefits of starting a PT PMA in Indonesia
Owning a PT PMA in Indonesia has several benefits, including these four benefits:
- Own and run a business in Indonesia: Foreigners can generate income by starting a business in Indonesia through a PT PMA, the only foreign-owned company.
- Employ foreigners: The company can sponsor international employees and issue them a KITAS, which allows them to stay in Indonesia for two years. After that, the foreigner can again apply for a two-year KITAS renewal.
- Right to buy land or property: Foreigners can buy land and property with a PT PMA. It’s important to note that the company will have ownership, not foreign individuals or entities that are shareholders. To own a building on leased land, the PT PMA must apply for the Hak Guna Bangunan (HGB) land title.
- Business licenses: A PT PMA can help foreigners obtain various business licenses to operate in several sectors.
Need help establishing a PT PMA in Indonesia?
Starting a PT PMA in Indonesia can be complex, but our expert team is here to assist you. Leave your name and email below, and we’ll guide you through every step of the process, ensuring a smooth and successful establishment. Whether you have questions or need comprehensive support, we’re ready to help you confidently start your business. You can also email us at hello@ownpropertyabroad.com for personalized assistance. Get started on your business journey today!
Frequently Asked Questions (FAQs)
What is the difference between PT and PT PMA?
PT (Perseroan Terbatas) is a local limited liability company established by Indonesian citizens or entities. It primarily serves the domestic market. PT PMA (Penanaman Modal Asing) refers to a foreign direct investment company in Indonesia that allows foreign ownership. The key difference lies in ownership: PT is for local investors, while PT PMA permits foreign investors.
How much does a PT PMA cost in Bali?
Establishing a PT PMA in Bali through our services costs around IDR 25 million ($1,525). This cost-effective solution provides foreign investors with a streamlined process to enter the Bali market, covering necessary registrations and initial setup requirements.
How much is the PT PMA minimum capital requirement?
The minimum capital requirement for a PT PMA in Indonesia is generally set above IDR 10 billion ($610,000) per shareholder. However, this amount can vary depending on the business sector and specific activities undertaken by the company.
What is the difference between a PT PMA and a representative office (KPPA)?
A PT PMA is established for full-scale operations in Indonesia, allowing foreign ownership and the ability to generate revenue. In contrast, a KPPA (Kantor Perwakilan Perusahaan Asing) or representative office is set up by a foreign company to conduct market research or coordination activities without directly engaging in sales or generating income in Indonesia.
How long does it take to set up a PT PMA?
Setting up a PT PMA typically takes 1 to 2 weeks, depending on the complexity of the business, required licenses, and the efficiency of the approval processes by Indonesian authorities. This timeframe includes obtaining necessary permits and registrations and fulfilling all legal requirements.
Can foreigners establish PT PMA in Indonesia online?
Yes, foreigners can establish a PT PMA in Indonesia online through the Online Single Submission (OSS) system. This platform streamlines the application for business identification numbers, licenses, and permits, facilitating a more efficient setup process. However, specific steps may still require physical submission of documents or in-person verification.
2 Responses
Hello Matt,
I am planning to invest in Indonesia as a medical clinic most properly in Medan or any other province as recommended local agent. I gained significant knowledge reading online about the investment program in Indonesia. I believe PT PMA is the best option for the foreign investors. If you can simplify the requirement for PT PMA is appreciated.
Thanks,
Sam Ratna
Hi Sam,
Setting up a PT PMA in Indonesia involves specific requirements and regulations. For a simplified explanation and assistance with the process, please email your questions and details to hello@ownpropertyabroad.com.
^ Matt