Quick Guide for Foreign Investors Establishing a Business in Indonesia

What kind of legal entity must be established by a foreigner who wants to invest in Indonesia? 

A foreign investor who wants to own a business in Indonesia must establish a foreign investment limited liability company. This is referred to as a PT PMA (Perseroan Terbatas Penanaman Modal Asing). 

How is a PT PMA different from a limited liability company that is owned by an Indonesian investor? 

If a limited liability company is wholly owned by Indonesian shareholders, then it is referred to as a local PT (Perseroan Terbatas). Under the foreign investment laws of Indonesia, a limited liability company may be partly or wholly owned by foreign shareholders, provided that the targeted business sector is not restricted by the government’s Negative Investment List. If a local PT is subsequently acquired by foreign shareholders, it will also be referred to as a PT PMA (Perseroan Terbatas Penanaman Modal Asing) 

What is the Negative Investment List in Indonesia? 

The Negative Investment List is the list specifies business sectors or industries that are closed to foreign investors. As the list changes from time to time, you need to check first if a targeted business sector is open for foreign investment. 

It changes from time to Current examples of closed sectors include:  

  • Recover (salvage/retrieve) precious objects from shipwreck. 
  • Liquor (alcoholic) industry. 
  • Retail Business 

 

The current law requires a minimum authorized capital of more than IDR 10 billion. However, an investor is not required to pay this whole amount upfront. Currently, a minimum of 25% must be paid up at the time of establishment.  

 

Assuming the foreign investor is not restricted by the Negative Investment List and they have the required capital, they will also need to acquire the relevant business permits and licenses for their business sector. Examples include, a Business Permit (Izin Usaha/Izin Industri), a construction license (SIUJK), and a shipping license (SIUPAL/SIUPKK).  

Can a PT PMA own property in Indonesia? 

Yes. For certain types of property, foreign corporate ownership is allowed, e.g. Hak Guna Bangunan (Building Rights) title or Hak Pakai (Usage Rights) title. Basically, this is an indirect form of ownership as the foreigner owns the approved foreign investment company (PT PMA), and the company owns the property. For information on foreign corporate ownership of property, see our Quick Guide to Property Ownership by a Foreign Investment Company (PT PMA)

What are the corporate roles for owning and operating the PT PMA? 

There are 3 roles for people involved in owning and operating a PT PMA: (i) the shareholders; (ii) the board of commissioners; and (iii) the board of directors. The only real difference from most overseas countries is that the board of commissioners takes up the role that is normally occupied by the shareholders (sometimes called members). In Indonesia, commissioners are appointed by the shareholders, but are not required to be shareholders. 

How many shareholders are needed to establish a PT PMA? 

To establish a PT PMA, there must be a minimum of 2 shareholders. 

How many commissioners and directors are needed to establish a PT PMA? 

To establish a PT PMA, there must be at least 1 commissioner and 1 director. The commissioners and directors can be either foreign or Indonesian citizens.  

Do the commissioners and directors of a PT PMA have to be domiciled in Indonesia? 

No. The commissioner and directors of a PT PMA do not need to be domiciled in Indonesia.  

Are there any restrictions on the work that a foreign director can do? 

The main restriction in establishing a new business is that the role of a Human Resources director must be undertaken by an Indonesian citizen.  

Do commissioners and directors of a PT PMA need work permits? 

If the commissioners and directors of the PT PMA are also shareholders of the PT PMA, then they may be exempt from obtaining work permits (IMTA). If they are not eligible for an exemption, then the company will need to obtain a work permit (IMTA) and a temporary stay permit (KITAS) for the foreign directors or commissioners to work and stay in Indonesia. 

Can a foreign individual own property in Indonesia? 

Yes. A foreign individual can directly own residential property in Indonesia. For more information on foreign ownership of a landed house or an apartment, see our Quick Guide to Individual Foreign Direct Ownership of a Landed House in Indonesia and our Quick Guide to Individual Foreign Direct Ownership of an Apartment in Indonesia.

How long does it take to establish a PT PMA? 

Assuming there is no delay in acquiring or creating all the relevant documents, then under the new online system (OSS), the estimated time for establishing a PT PMA is 2 months. For some sectors such as real estate, banking or mining, it still takes about 3 months to acquire the Business Permit (Izin Usaha) as the application process is not fully available online.   

What are the actual deliverables that a client receives when establishing a PT PMA? 

In the process of providing guidance on the Negative Investment List, establishing a PT PMA, and obtaining relevant permits and licenses, the typical deliverables for a client include: 

  • Deed of Establishment 
  • Decree of the Minister of Law and Human Rights 
  • Domicile Letter (SKDP) 
  • Tax Identification Number and Registration Letter (NPWP) 
  • Business Identification Number (NIB), replacing Company Registration Certificate (TDP) and may include: 
  • Importer Identification Number (API) 
  • Customs Office Access (NIK)
  • Business Permit (Izin Usaha) 

What documents are required to start the process of establishing a PT PMA? 

The following documents are required:  

  • Company name and scope of business 
  • Shareholding structure (min. 2 shareholders, individual or corporate) 
  • Articles of Association of the shareholders, if corporate 
  • List of Board of Directors of corporate shareholders 
  • ID of legal representative(s) of the corporate shareholders 
  • Registered address of corporate shareholders 
  • ID or passport of shareholders, if individuals 
  • ID or passport of director(s) and commissioner(s) for PT PMA 
  • NPWP of local shareholder(s), director(s) and commissioner(s) 
  • Registered address, email address and fixed line telephone number 
  • Proof of ownership or lease for business location, land and building tax receipt (PBB) 
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The above information is based on the current laws and regulations, which include: 

  • Law No. 24 of 2018 regarding Online Single Submission Regulation 
  • Investment Coordinating Board Regulation No. 14 of 2017 regarding Control of Investment Operations 
  • Government Regulation No. 14 of 2016 regarding Negative Investment List 
  • Law No. 40 of 2007 regarding Limited Liability Companies; and  
  • Law No. 25 of 2007 regarding Foreign Direct Investment. 

Disclaimer 

This Quick Guide is provided for general information purposes only and should not be considered as legal advice for your specific situation. Should you require legal advice, contact an attorney. 

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