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Comparing KPPA vs PT vs PMA in Indonesia

pt vs pma indonesia

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Knowing the differences between PT vs PMA Indonesia is important when considering starting a business or buying a house in Indonesia. KPPA is another type of corporation in Indonesia that many foreigners don’t know yet. Each business type has specific rules, restrictions, and regulations, which makes several differences between the KPPA, PT, and PT PMA in Indonesia.

KPPA vs PT vs PMA Indonesia

Navigating the differences between KPPA, PT, and PT PMA Indonesia is critical for foreign investors seeking to enter the Indonesian market. Each has unique advantages and challenges that align differently with business needs and goals.

Legal structureRepresentative officeLimited liability companyForeign investment company
OwnershipOwned by foreign parent companyOwned by Indonesian individuals or entitiesPartial or full foreign ownership
ActivitiesSupervisory and coordination roles, market research, sales monitoringCan undertake various business activitiesBusiness activities as per BKPM approval
Tax obligationsNot applicable as it cannot generate revenueSubject to corporate income tax, value-added tax, etc.Same tax obligations as PT companies
Capital requirementsNot specifiedBased on business activities; minimum IDR 600 million ($37,800)Minimum investment and paid-up capital of IDR 10 billion ($630,000)
Foreign employee sponsorshipNot specifiedNot specifiedYes, with KITAS

What is KPPA: Representative office in Indonesia

Indonesia’s KPPA, meaning Kantor Perwakilan Perusahaan Asing, is a representative office of a foreign-established company in Indonesia. This business entity is often the first step for foreign businesses seeking to enter the Indonesian market. KPPA’s main objective is to manage its parent company’s interests and prepare for the establishment of a PT PMA (foreign-owned company) or PT (local company).

KPPA’s activities are limited and include playing roles as supervisor, coordinator, connector, and caretaker of the company interests, conducting market research, and monitoring sales in Indonesia. Notably, KPPA cannot generate revenue or pursue sales and purchase transactions.

To set up a KPPA, the following requirements need to be met:

  • Designation letter and Articles of Association from the foreign company to be represented.
  • Photocopies of ID cards for Indonesians or passports for foreign representatives.
  • Statement of willingness to work only as the Executive Representative and not conduct other business.
  • Power of attorney if the foreign company’s management does not submit the petition.

What is PT: Local company in Indonesia

Perseroan Terbatas (PT) is a local company in Indonesia, a so-called limited liability company. It is Indonesia’s most widely used business entity, making it an essential component in the PT vs PMA Indonesia discussion. The PT is established by at least two local citizens (with an Indonesian passport) who serve as shareholders and are shielded from the company’s debts.

PTs offer several advantages, including shareholder protection from company debt, secure company viability, clear management responsibility to shareholders, easy access to additional funds, and defined legal protection. However, PT companies also face challenges such as tax obligations, potential exposure of trade secrets, and complex processes for company changes, including dissolution, mergers, and takeovers.

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What is PT PMA: Foreign-owned company in Indonesia

PT PMA stands for Perseroan Terbatas Penanaman Modal Asing and is a foreign-owned company in Indonesia. Foreign investors seeking to conduct business in Indonesia often establish a PT PMA, using either entire foreign capital or in part with domestic investors. A minimum investment plan of IDR 10 billion ($630,000) is required, and the PT PMA must submit Investment Activity Reports and monthly tax reports.

PT PMA has the same rights and responsibilities as local companies, can sponsor numerous foreign employees, and offers quick license permits and lower import duties. However, the company must regularly submit business activity reports to the BKPM with a minimum investment plan of IDR 10 billion ($630,000).

Can foreigners buy property in Indonesia with PT PMA?

PT PMA companies can obtain a Hak Guna Bangunan (HGB) certificate to own a house built on top of land owned through a leasehold agreement. PT PMAs can also acquire freehold real estate, which foreign nationals can’t.

However, it’s important to remember that buying property through a PT PMA doesn’t give direct personal ownership to the foreign directors or shareholders of the PT PMA. The ownership of the land and the property is tied to the company, not the individuals.

Therefore, while a PT PMA can provide a foreigner indirect access to property ownership in Indonesia, the specific legal circumstances and potential implications should be thoroughly reviewed with legal professionals experienced in Indonesian property and corporate law.

How to establish a company in Indonesia?

Setting up a company in Indonesia can be complex, especially for foreign investors. Navigating the ins and outs of legal entities such as PT, PT PMA, and KPPA requires a solid understanding of Indonesian law and regulations.

Professional service providers specializing in company incorporation in Indonesia can assist you through every step. From advising on the best type of company to establish based on your specific business model and investment plan to handling all the paperwork and communication with local authorities, these experts can make establishing your Indonesian company as smooth as possible.

Start your business in Indonesia with Own Property Abroad

Do you want to start a business in Indonesia? Own Property Abroad can assist you seamlessly and hassle-free, thanks to our extensive knowledge and experience in the Indonesian market and regulations.

With our expert team, you won’t have to navigate the complexities alone. For further information on how we can assist you, kindly drop your details below or email us at [email protected].

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When comparing PT vs PMA Indonesia, it’s essential to consider the company’s specific business needs and objectives. PT is more suited for local or foreign investors keen on specific sectors not open to foreign investment. PT PMA is suitable for foreign investors who wish to establish a business in Indonesia with the flexibility of foreign ownership. Meanwhile, KPPA is an excellent stepping stone for foreign companies to understand the Indonesian market before venturing into a fully-fledged business operation through a PT PMA or PT.

Frequently Asked Questions (FAQs)

What is the difference between PT and PT PMA Indonesia?

The difference between PT and PT PMA in Indonesia primarily lies in their ownership structure. PT is a type of limited liability company for Indonesian locals. On the other hand, PT PMA is a foreign-owned limited liability company, allowing up to 100% foreign ownership depending on the business classification.

What is a PT PMA in Indonesia?

A PT PMA in Indonesia is a limited liability company established under the laws of Indonesia. This company can have foreign ownership, making it a common choice for foreign investors looking to conduct business in Indonesia.

Can a PT PMA own land in Indonesia?

A PT PMA can own land in Indonesia, but the ownership is tied to the company, not the individual shareholders or directors. The company can obtain a Hak Guna Bangunan title to construct the land for business-related purposes.

What are the requirements for PT PMA in Bali?

The requirements for PT PMA in Bali are similar to the rest of Indonesia: a minimum investment plan of IDR 10 billion ($630,000) (excluding land and buildings), a business plan, detailed use of funds, and compliance with the Negative Investment List stipulating the allowed foreign ownership percentage for different industries. Furthermore, specific licenses may be required based on the business activities.

How to establish a PT PMA in Indonesia?

To establish a PT PMA in Indonesia, investors must prepare a detailed business plan and submit an investment plan to the BKPM (Indonesia Investment Coordinating Board). Once approved, the necessary incorporation documents should be prepared and legalized, and the company must be registered with the Ministry of Law and Human Rights. Following registration, obtain required licenses and operational permits, register for tax, and complete other post-incorporation procedures.

How much does it cost to set up a PMA in Bali?

The cost to set up a PMA in Bali can vary greatly depending on factors like the business sector, scale of operation, and professional fees. However, generally, the cost of establishing a PT PMA ranges from IDR 25 million ($1,575) to IDR 35 million ($2,205) and will take around ten weeks. Note that this estimate does not include the minimum capital requirement of IDR 10 billion ($630,000).

Your guide to buying property in Indonesia

Written by Matt Timmermans

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