Guide to Setting Up a Foreign Direct Investment Company in Indonesia

Setting up a foreign direct investment company in Indonesia requires establishing a Limited Liability Company known as a PT PMA (Penanaman Modal Asing), which must have a total investment plan of at least IDR 10 billion (approx. USD 650,000) and a minimum paid-up capital of IDR 2.5 billion.

The process involves checking the Positive Investment List, securing a notary deed, and obtaining licenses through the OSS-RBA system.

If you are considering expanding your business to Indonesia, or planning to set up a new venture, this guide will walk you through the essential steps and requirements for establishing a Foreign Direct Investment company in Indonesia, known as a PT PMA (Penanaman Modal Asing).

Understanding the PT PMA Structure

A PMA (Foreign Direct Investment) company is a limited liability company (PT) that allows foreign investors to establish a legal business presence in Indonesia. A PT PMA can be 100% foreign-owned or have a combination of local and foreign shareholders, depending on the business sector.

Key Requirements for PT PMA Setup

Minimum Investment Amount

The minimum investment required for establishing a PT PMA in Indonesia is IDR 10 billion. This amount excludes land and buildings unless otherwise specified by the relevant ministry or regulatory authority.

This investment may be funded through equity, retained earnings, or loans, with specific requirements for each type of funding.

• Equity: The paid-up capital of the company must be at least IDR 2.5 billion . Each shareholder must own at least IDR 10 million worth of shares.
• Loans: The remaining capital can be sourced from onshore or offshore loans, as long as the total investment meets the IDR 10 billion threshold.

Capital Sources

You must provide a source of capital for your PT PMA company, which could include:

• Equity: Cash or assets invested by the shareholders.
• Retained Earnings: Profits that are reinvested back into the company.
• Loans: Onshore or offshore loans that supplement the required capital investment.

Ownership Limitations

While foreign investors are allowed to hold the majority or complete ownership of a PT PMA, certain business fields may have restrictions on foreign ownership. These limitations are governed by the

Positive Investment List (Presidential Regulation No. 10 of 2021), which identifies sectors with restrictions or caps on foreign ownership percentages.

Business Sector

You will need to ensure your business sector is open for foreign investment by consulting the Positive Investment List. The list outlines sectors that are restricted or closed to foreign investors, and each sector may have different requirements for foreign ownership and capital investment.

Read more: Classification of Companies Based on Capital in Indonesia

Stages of Establishing a PT PMA

Here are the key stages of setting up a Foreign Direct Investment company (PMA) in Indonesia:

Stage 1: Registration of Investment

The first step is to register your investment with the Indonesia Coordinating Investment Board (BKPM).

During this phase, you will submit your investment plan, which includes details about the business sector, investment amount, project location, and other relevant factors.

This step is crucial in ensuring that your business complies with Indonesian laws and regulations.

Stage 2: Deed of Establishment

Once your investment is registered, you must create the Deed of Establishment with the help of a local notary. This legal document formalizes the formation of the company and includes key details such as the company’s shareholders, directors, and purpose.

Stage 3: Obtain Taxpayer Number (NPWP)

After registering the company, you must apply for a Taxpayer Number (NPWP), which is required for tax purposes and ensures compliance with Indonesia’s tax regulations.

Stage 4: Certificate of Domicile (SKDP)

The company must also obtain a Certificate of Domicile (SKDP), which verifies the company’s legal address in Indonesia.

Stage 5: Company Registration Certificate (TDP)

A Company Registration Certificate (TDP) is then obtained to formally recognize the company as a legal entity in Indonesia.

Stage 6: Temporary Business Licence

This is an optional license that allows the company to operate temporarily while working toward fulfilling the requirements for a permanent business license. It is valid for one year and can be extended for another year if necessary.

Stage 7: Permanent Business Licence

The final step is to obtain a Permanent Business License, which allows the company to operate indefinitely.

The permanent business license can only be issued after the company has fulfilled the required investment amount of IDR 10 billion, as evidenced by the company’s financial statements and investment activity reports submitted to BKPM.

Read more: Getting a Business License and Permit in Indonesia

Additional Technical Permits

Depending on the nature of your business activities, you may be required to obtain additional technical permits or recommendations from relevant government institutions. These could include permits for specific industries such as manufacturing, tourism, and services.

Timeline for Issuance of Registration of Investment

After submitting the Registration of Investment application, BKPM will assess your qualifications and investment proposal. If approved, the Registration of Investment will be issued within one working day.

Evidence of Realization of Investment

Before a Permanent Business License is issued, the company must demonstrate that it has invested the required amount (IDR 10 billion). This is done by submitting financial statements and regular investment activity reports to BKPM.

Temporary Business License (Optional)

While obtaining a Temporary Business License is optional, it can be beneficial for companies that need more time to meet the required investment thresholds for a Permanent Business License.

It allows businesses to operate temporarily and obtain additional technical licenses, such as the Import Identification Number (API) and Customs Registration.

The Temporary Business License is valid for 1 year and can be extended for another year, providing up to 2 years for the business to meet the investment requirements.

Final Thoughts

Setting up a Foreign Direct Investment company in Indonesia is a structured and regulated process, but with the right guidance, it can lead to a successful and profitable business venture.

It is highly recommended to work with local consultants, legal advisors, and financial experts who can help navigate the complexities of Indonesian laws and ensure compliance at every stage of the setup process.

With a thriving economy and expanding sectors, Indonesia offers great potential for foreign investors seeking to tap into one of the largest and most dynamic markets in Southeast Asia.

How Visa BaliEasy Can Help You

At Visa BaliEasy, we make the process of establishing a PT PMA and securing an Investor KITAS (Investor Residence Permit) smoother for foreign investors. Our services include:

• PT PMA setup assistance to help guide you through the legal and regulatory process.
• Investor KITAS processing to ensure that you comply with Indonesian immigration and business regulations.
• 24/7 human assistance to answer any questions and provide support at every step of the process.
• No hidden fees, transparency in pricing and services to ensure a smooth experience.

Let Visa BaliEasy handle the complexities of setting up your business in Indonesia, so you can focus on growing your business in one of the fastest-growing economies in Asia. Reach out to us today for personalized assistance!