Services » Foreign Investment Company (PT PMA) Establishment

Foreign Investment Company (PT PMA) Establishment

Written by Riska Destriyanti on 12/09/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

Introduction

Establishing a foreign investment company (Perseroan Terbatas Penanaman Modal Asing/PMA Company) in Indonesia is a strategic move for foreign investors seeking to tap into the country’s large population and abundant natural resources. With many sectors open to PMA Companies, and simpler procedures for establishing them, Indonesia has become an attractive destination for foreign investment.

Definition

A Foreign Investment Company, or Penanaman Modal Asing (PMA) Company, is a type of business entity established in Indonesia under the governance of Law Number 25 Year 2007 concerning Investment and Law Number 40 Year 2007 concerning Limited Liability Companies. This legal entity enables foreign investors to engage in business activities within Indonesia, adhering to specific regulations and requirements.

A PMA Company can be formed by foreign individuals or entities, including companies, partnerships, and other organizations, with the objective of conducting business operations in Indonesia. Foreign investors can hold up to 100% of the shares in a PMA Company, subject to certain restrictions and requirements. Additionally, the company must comply with specific capital requirements, investment value thresholds, and other regulatory obligations.

The Importance of Establishing PMA Company

PMA establishment in Indonesia is vital for foreign investors aiming to penetrate the country’s expansive market and capitalize on its abundant resources. The theoretical significance of setting up a PMA Company includes:

Government Support: The Indonesian government has enacted various policies and regulations to bolster foreign investment, such as tax incentives, subsidies, and streamlined regulatory procedures. By forming a PMA Company, foreign investors can leverage these governmental benefits to reduce operational costs.
Access to a Large Market and Resources: With a population exceeding 270 million, Indonesia represents one of Southeast Asia’s largest markets. The country is also rich in natural resources, including oil, gas, minerals, and timber. Establishing a PMA Company allows foreign investors to exploit these resources and meet the growing demand for goods and services.
Competitive Advantage: As a member of the Association of Southeast Asian Nations (ASEAN), Indonesia offers a platform for regional trade and economic cooperation. By setting up a PMA Company in Indonesia, foreign investors can access ASEAN’s vast market and compete effectively with other regional players.

Best Time to Establish PMA Company

Determining the optimal timing for establishing a PMA Company in Indonesia is crucial for foreign investors planning market entry. The following considerations highlight the best time to set up a PMA Company:

Early Market Entry: Establishing a PMA Company early in the business expansion process is advantageous for gaining a foothold in the Indonesian market. This timing allows foreign companies to conduct preliminary market research, understand consumer preferences, and assess the competitive landscape.
Preparation for Expansion: Setting up a PMA Company serves as a preparatory step for potential future expansions or investments in Indonesia. By establishing an initial presence, companies can evaluate the feasibility of long-term business ventures and expansion strategies.
Building Local Networks: Early establishment of a PMA Company enables foreign companies to start building local networks and engage with potential partners, suppliers, and stakeholders. This networking is valuable for future business collaborations and relationship-building.

Benefits of Using Professional Services in Establishing PMA Company

Engaging with professional services can significantly benefit foreign investors seeking to establish a PMA Company in Indonesia. The customer-centric benefits include:

Expert Knowledge: Professional service providers possess extensive knowledge and experience in Indonesian laws, regulations, and business practices. They can guide clients through the complex process of establishing a PMA Company, ensuring compliance and efficiency.
Streamlined Process: These providers can streamline the establishment process by managing paperwork, documentation, and regulatory compliance. This approach saves time and reduces the risk of errors or delays, allowing investors to focus on strategic business decisions.
Access to Networks: Professional service providers often have established networks with government agencies, business associations, and other stakeholders in Indonesia. They can facilitate valuable connections and introductions that may benefit clients in navigating the local business environment.
Risk Mitigation: Engaging with professional services helps mitigate risks associated with establishing a PMA Company in Indonesia. Providers can identify potential issues and develop strategies to address them, ensuring a smoother establishment process.

How to Establish a PMA Company in Indonesia

Establishing a PMA Company in Indonesia involves several steps, which are outlined below:

Management Structure Appointment: The PMA Company must have a minimum of two shareholders and a management structure consisting of at least one Director and one Commissioner, who will be responsible for managing the business.
Investment Value and Capital Preparation: Foreign investors must meet the investment value requirements of more than IDR 10,000,000,000 (ten billion Rupiah), excluding land and buildings per 5-digit KBLI business sector per project location. Additionally, PMA Companies must adhere to a minimum issued/paid-up capital requirement of more than IDR 10,000,000,000 (ten billion Rupiah).
Business Sector and Shareholding Limitations: Define the business sector of the PMA Company by consulting the KBLI (Indonesian Standard Industrial Classification) and the DNI (Negative Investment List). Determine the percentage of shares that can be held by foreign investors.
Documents Preparation: Prepare and submit various documents, including:
• Deed of Establishment of the Company (Article of Association),
• Identification documents of the shareholders and Board of Directors (Director) and Board of Commissioners, such as Passport, Limited or Permanent Stay Permit (KITAS/KITAP), National ID card.
Signing of Deeds and Issuance of Key Documents: Complete the signing of the deeds, followed by the issuance of the Deed of Establishment, Certificate of Incorporation, and Tax Identification Number (NPWP).
Registration with Online Single Submission (OSS) System: Register the PMA Company through the OSS system to obtain a Business Identification Number (NIB).
Business Identification Number (Nomor Izin Berusaha/NIB) Issuance: Obtain an NIB from the Indonesian Investment Coordinating Board (BKPM). For businesses with low risk, this step is typically completed once the NIB is issued.
Issuance of Business Permits: Depending on the business sector, additional permits may be required:
• For medium-risk businesses, a Standard Certificate (Sertifikat Standar) is necessary.
• For high-risk businesses, other specific licenses will be required from relevant authorities, such as the Ministry of Trade or the Ministry of Industry.

How We Can Help

At Putranto Alliance, we recognize that establishing a PMA Company in Indonesia can be a complex and time-consuming process. We offer comprehensive support services to help navigate the requirements and regulations involved in setting up a PMA Company. Our team of experienced professionals will guide you through every step, from initial business consultation to obtaining necessary permits. We also assist in preparing and submitting required documents, such as the deed of establishment and articles of association.

Some of the specific services we offer include:

Business Registration: Assistance with registering your PMA Company with the Indonesian Investment Coordinating Board (BKPM) and obtaining the necessary permits to operate.
Tax Compliance: Support in obtaining a taxpayer identification number (NPWP) and ensuring that your business complies with all tax regulations.
Director and Commissioner Appointment: Guidance in appointing directors and commissioners for your PMA Company, ensuring you have the necessary leadership to manage your business.
Document Preparation: Help in preparing and submitting all required documents, including the deed of establishment, articles of association, and a business plan.

By choosing Putranto Alliance as your partner, you can rest assured that you’re getting expert guidance and support every step of the way. Contact us today to learn more about our services and how we can help you establish a successful PMA Company in Indonesia.

FAQs

What are the requirements for establishing a PT PMA in Indonesia?

To establish a PT PMA in Indonesia, you need to obtain a permit from the Indonesian Investment Coordinating Board (BKPM), register with the Ministry of Trade and Industry, and obtain a business license. Additionally, a minimum capital investment of more than IDR 10 billion is required, along with compliance with other regulatory requirements.

How long does it take to establish a PT PMA in Indonesia?

The time frame for establishing a PT PMA in Indonesia can vary based on the complexity of the application and the speed of document submission. On average, it can take around 6-12 months to obtain all necessary permits and licenses. Depending on the business sector, acquiring relevant permits may take longer.

Can I establish a PT PMA in Indonesia if I am not a resident of Indonesia?

Yes, you can establish a PT PMA in Indonesia even if you are not a resident. However, you will need to appoint a local representative or director responsible for managing the company’s operations and ensuring compliance with Indonesian laws and regulations. Foreigners can also serve in company management, but it is advisable to appoint an Indonesian citizen.

Can I change the ownership structure of my PT PMA after it has been established?

Yes, you can change the ownership structure of your PT PMA after establishment. This process involves updating your Articles of Association and other company documents, obtaining a new Certificate of Incorporation (SK), and updating your licensing data accordingly.

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