Foreign investment (PMA) is an investment activity to conduct business in the territory of Indonesia carried out by foreign investors, both those who use foreign capital entirely or in partnership with domestic investors. This activity is a strategic step for foreign investors who want to take advantage of the rapidly growing market potential in Indonesia. As we know, Indonesia is one of the largest economies in Southeast Asia, with a population of more than 270 (two hundred and seventy) million people, offering a large market for products and services. In addition, PT PMA allows foreign investors to own and operate businesses in Indonesia with a share ownership of up to 100%, depending on the business sector chosen. The establishment of a PT PMA also offers several benefits, such as ease of obtaining permits, lower taxes and import duties, providing jobs for foreign workers, etc.
Before investing foreign capital in Indonesia, there are several things that investors need to pay attention to, including:
- Must be a Limited Liability Company (Perseroan Terbatas) (“PT”)
PMA must take the form of a PT in accordance with Indonesian law and be domiciled within the territory of the Republic of Indonesia. Apart from that, it is necessary to distribute shares at the time of establishing PT. - Business Field
PT PMA can only be carried out in activities with a large business scale. In this case, the government divides business sectors in investment activities into three, including:
- The open business sector is a business sector that is carried out without requirements for capital investment and allows foreigners to own 100% of it. Example: restaurant.
- Closed business fields are certain business fields that are prohibited from being operated as capital investment activities. Examples: alcoholic beverage industry, class I narcotics industry, gambling and/or casino activities, use or extraction of coral, use or extraction of coral from nature, industrial chemical industry, etc.
- Business fields that are open with certain requirements are business fields with certain location requirements, special permits, etc. Example: palm oil industry.
- Organizational Structure
PT PMA is required to have a director, a commissioner, and two shareholders, where these positions can be filled by foreign or local individuals or business entities. If there is more than one commissioner, then one of them must be the president. - Investment Value and Paid-in Capital
PMA must meet the investment value requirement, which is more than IDR 10,000,000,000 (ten billion rupiah), excluding the value of land and buildings for each line of business with a 5-digit KBLI code per project location. However, this requirement does not apply to PMA in Special Economic Zones (KEK) engaged in technology-based start-up businesses, where they can make investments with a value equal to or less than IDR 10,000,000,000 (ten billion rupiah), excluding the value of land and buildings.
The value of issued capital is the same as paid-up capital, namely at least IDR 2,500,000,000 (two billion five hundred million Rupiah);
Furthermore, the procedure for establishing a PT PMA in Indonesia is carried out by:
- Prepare supporting documents
Documents that need to be prepared include the applicant’s statement regarding the PT founding documents, PT establishment deed, minutes of the PT establishment deed, and proof of capital deposit. - Fill out the PT establishment form
This activity is carried out by a notary by filling out the establishment form through the Legal Entity Administration System (SABH) and attaching supporting documents. - Issuance of PT certificates
Based on the registration carried out, the Minister of Law and Human Rights issues a PT registration certificate electronically.
Then, business actors are also required to fulfill other requirements, such as:
- Basic requirements
Basic requirements, which consist of suitability for space utilization activities (KKPR), environmental approval, building approval (PBG), and functional worthiness certificate (SLF). - Risk-Based Business Licensing
PMA activities that can only be carried out in large-scale business sectors will require NIB (Nomor Induk Berusaha), standard certificates, and permits appropriate to the level of risk. In this case, the NIB also applies as a Company Registration Certificate (Tanda Daftar Perusahaan) (TDP), Import Identification Number (Angka Pengenal Impor) (API) (if the business actor will carry out import activities), and Customs Access (if the business actor will carry out export and/or import activities).
Establishing a PT PMA is quite complicated and requires a careful approach to comply with applicable procedures and regulations. However, you don’t need to worry because Solusi Idjin Indonesia (SOLID Indonesia) has an understanding of the relevant regulations and is ready to help make your dream business a reality. Contact us now for further information.