Establish a PT PMA in Indonesia

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, be it in Bali, Jakarta, or any other part of the country.

What is a PT PMA?

PT PMA, which stands for Perseroan Terbatas Penanaman Modal Asing, is a limited liability company with foreign capital in Indonesia. This entity allows foreigners (WNA) to conduct commercial activities in Indonesia. As stated in Law No. 25/2007 regarding investment (New Investment Law), foreigners can only run a business and generate revenue through a PT PMA. A foreign individual, a foreign company, or a foreign government body can run the PT PMA.

A PT PMA can be 100% foreign-owned or partially foreign-owned, which means the company could be established with an Indonesian citizen but doesn’t have to be. Law No. 40/2007 (Company Law) states how a PT PMA can be found. Each PT PMA should at least have two shareholders: the director and the commissioner. One of the shareholders needs to be a foreigner, and the other(s) can also be a foreigner as an Indonesian citizen. The director of the PT PMA needs to reside in Indonesia. If the director is a foreigner, they must obtain a Tax Identification Number (NPWP) and a work permit visa (KITAS).

How much does it cost to establish a PT PMA in Indonesia?

The cost of establishing a PT PMA in Indonesia varies depending on several factors. Establish a PT PMA through Own Property Abroad costs around IDR 25 million ($1,575) and take about 1 to 2 weeks. Although foreigners can establish their PT PMA themselves at the BPKM (Indonesia Investment Coordinating Board), this process is mainly seen as very challenging. It’s not only time- and energy-consuming, but it’s also easy to make a small mistake with significant consequences.

That’s why 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 costs.

Buy an existing PT PMA

Another option is buying an existing PT PMA or PT (Perseroan Terbatas). As a company only an Indonesian national can own, the PT should be converted to a PT PMA after acquisition. Buying an existing PT PMA or PT is cheaper and takes less time, although finding a PT PMA for sale can be challenging.

Requirements to set up a PT PMA in Indonesia

The following are the requirements foreigners should meet before establishing 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 ($630,000). 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 ($157,500). 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.

Process of 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

Obtaining 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. Depending on your sector, additional industry-specific licenses may be required.

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 ($63,000) 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:

1. 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.
2. Employ foreigners: The company can sponsor international employees and issue them a KITAS, which allows them to stay in Indonesia for 2 years. After that, the foreigner can again apply for a KITAS renewal for 2 years.
3. 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 property on leased land, the PT PMA must apply for the Hak Guna Bangunan (HGB) land title.
4. Business licenses: A PT PMA can help foreigners obtain various business licenses to operate in several sectors.

Establish your PT PMA in Indonesia with Own Property Abroad

Our team is here to help you establish a PT PMA in Indonesia. Whether you want to start a PT PMA in Bali, Jakarta, or other parts of Indonesia, Own Property Abroad will ensure a seamless and hassle-free company establishment.

Avoid the hassle and confusion. Start your PT PMA in Indonesia with confidence. For detailed information on how we can assist you, leave your name and email in the form below or email us at [email protected].

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