Foreigners can start a PT PMA in Indonesia and engage in commercial activities, including managing properties for rent or running a restaurant or hotel. Given Indonesia’s fast-growing market, a growing number of foreign investors are interested in establishing a business presence in the country. Establishing a PT PMA, which foreigners can wholly own, offers several benefits, such as operating a company in Indonesia, recruiting local staff, and acquiring real estate.
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.
The PT PMA is often confused with the PT, which stands for Pereroan Terbatas. The difference is that a PT can only be established and owned by an Indonesian entity or individual. In contrast, a PT PMA can be wholly owned by a foreign individual or entity.
Shareholders: Director and commissioner
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 number (NPWP) and a work permit visa (KITAS).
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How to start a PT PMA in Indonesia?
You can establish a PT PMA at the BKPM (Indonesia Investment Coordinating Board). However, this can be very challenging for foreigners. It’s not only time- and energy-consuming, but it’s also easy to make a small mistake with significant consequences.
Most foreigners use the services of a local agency to establish a PT PMA. Depending on the agency and the location, this will take up to ten weeks. Establishing a PT PMA in Jakarta costs between IDR 15 million ($975) and IDR 30 million ($1,950). Starting a PT PMA in Jakarta is cheaper than in other regions, primarily due to its thriving foreign commercial presence. Agencies charge between IDR 25 million ($1,625) and IDR 35 million ($2,275) to establish a PT PMA in Bali.
Acquire an existing PT PMA
You can also acquire an existing PT PMA or PT (Perseroan Terbatas). As the PT is a company that only an Indonesian national can own, the PT should be converted to a PT PMA after acquisition. Acquiring an existing PT PMA or PT is cheaper and takes less time, although finding a PT PMA for sale might be challenging.
8 steps to establish a PT PMA in Indonesia
Foreigners can establish a PT PMA in Indonesia in just eight steps:
- Approval of the PT PMA company name: The company name should meet the requirements and be unique.
- Deed of Incorporation: The Deed of Incorporation should include the Article of Association and must be legalized by a public notary. This step will take about two days to process fully.
- Approval of Legal Entity: The Ministry of Law and Human Rights has to approve the legal entity status after the notary has submitted the Deed of Incorporation, which will take about ten days.
- Registration of Tax ID (NPWP) and Taxable Entrepreneur Confirmation (PKP): The tax office will issue the NPWP and PKP required to open a bank account, fulfill tax obligations, and request business licenses. This step will take about three days.
- Domicile Letter: A Domicile Letter from the local district authority is needed to show the location of the business. This step will take about three days to process fully.
- Company Registration Certificate (TDP): This certificate proves the company’s establishment. It takes about 14 days to obtain the TDP.
- Application of NIB: After registration, the company will receive the NIB, Business License, and Location Permit.
- Application of other licenses: Applying for different licenses is now possible depending on the company’s activities.
Requirements to set up a PT PMA in Indonesia
The following are the requirements foreigners should meet before establishing a PT PMA in Indonesia.
- At least two shareholders are needed to set up the PT PMA: 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.
- Foreign investors need to have the intention to invest at least IDR 10 billion ($650,000) in the PT PMA: 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 ($162,500). Foreign investors are required to transfer the paid-up capital to an Indonesian bank account. The required paid-up capital can differ per sector. 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 really have to invest any money at the moment of the PT PMA registration.
- There has to be a company address: It’s possible to 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.
What kind of visa do I need to start a PT PMA?
You don’t need an Indonesian visa beforehand to establish a PT PMA. Establishing such a company is possible when you’re not physically in Indonesia through a visa agency or notary. Once the PT PMA is settled, the director has to reside in Indonesia. Shareholders can obtain a work stay permit (KITAS) once the PT PMA is established:
- Investor KITAS: A director, commissioner, or shareholder with at least IDR 1 billion ($65,000) in shares can obtain this stay permit.
- Working KITAS: The company can sponsor international employees who work for the company. The position needs to be in line with the business of the company.
Benefits of owning a PT PMA in Indonesia
Owning a PT PMA in Indonesia has several benefits, including these four benefits:
1. Fully own and run a business in Indonesia
With a PT PMA, foreigners can own and run a business in Indonesia to generate income. The PT PMA is the only form of company that can be foreign-owned, so this is the only way for foreigners to earn money with their businesses in Indonesia.
2. Employ foreigners
The company can sponsor international employees and issue them a work stay permit (Working KITAS).
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 and not the foreign individuals or entities that are a shareholder in the company. To own property on leased land, the PT PMA must apply for the Hak Guna Bangunan (HGB) land title.
4. Business licenses
It’s possible to obtain various business licenses with a PT PMA to be active in several sectors so foreigners can operate in different sectors.
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Frequently Asked Questions (FAQs)
What is the difference between PT and PT PMA Indonesia?
PT stands for Persoeraon Terbatas, a limited liability company by an Indonesian citizen or legal entity. On the other hand, PT PMA stands for Perseroan Terbatas Penanaman Modal Asing, a foreign-owned company owned by foreign investors.
How much does a PT PMA cost in Bali?
Agencies charge between IDR 25 million ($1,625) to IDR 35 million ($2,275) to establish a PT PMA in Bali.
Does Indonesia allow foreign ownership?
Indeed, non-Indonesians can purchase real estate in Indonesia, but they must possess the property through a PT PMA, lease contract, Hak Pakai, or Hak Guna Bangunan.
What’s the difference between a PT PMA and a representative office (KPPA)?
When you want to run a business in Indonesia to engage sales and generate income streams, then a PT PMA is what you need. Do you have a company abroad, want to explore opportunities in Indonesia (by researching and networking), and have no intentions of engaging in sales in Indonesia? Then, it’s better to set up a representative office (KPPA) to set up a PT PMA later.
How long does it take to set up a PT PMA?
In most cases, it will take about ten weeks to complete the setup of a PT PMA. The total waiting time also depends on how you set up a PT PMA, which you can do yourself or by using an agency specializing in setting up PT PMAs for foreigners. Most foreigners prefer the last option, as setting up a PT PMA yourself can be challenging.