In Indonesia, foreigners can establish a PT PMA and engage in commercial activities, including managing rental properties or running a restaurant or hotel.
An increasing number of foreign investors are interested in establishing a business presence in Indonesia due to the country’s rapidly growing market.
The establishment of a PT PMA, which can be wholly owned by foreigners, offers several advantages, such as the ability to operate a business in Indonesia, the ability to hire local staff, and the ability to acquire real estate.
What is a PT PMA?
PT PMA, meaning Perseroan Terbatas Penanaman Modal Asing, is a foreign-owned limited company incorporated in Indonesia.
This company allows foreigners (WNA) to conduct business activities in Indonesia. Foreigners can only conduct business and generate income through PT PMA as stated in Law No. 25/2007 on Investment (New Investment Law).
A PT PMA can be operated by a foreign individual, a foreign company or a foreign government agency.
The PT PMA is often confused with the PT, which stands for Perseroan Terbatas. The difference is as follows: A PT can only be established and owned by an Indonesian company or individual. Conversely, a PT PMA can be wholly owned by foreign individuals.
Shareholders: Director and Commissioner
A PT PMA can be 100% foreign-owned or partially foreign-owned, meaning the company could be, but doesn’t have to be, established with an Indonesian citizen.
How to establish a PT PMA is specified in Law No. 40/2007 (Company Law). Each PT PMA should have at least two shareholders: the director and the commissioner.
One of the shareholders must be a foreigner. The other shareholder(s) may also be a foreigner as an Indonesian citizen.
The director of PT PMA must be a resident of Indonesia. A tax number (NPWP) and a work permit visa (KITAS) must be obtained if the director is a foreigner.
How to start a PT PMA in Indonesia?
It is possible to set up a PT PMA with the BKPM (Indonesia Investment Coordinating Board). However, this can be a very challenging process for foreigners. Not only is it time and energy consuming, it’s also easy to make a small mistake with significant consequences.
To obtain a PT PMA, most foreigners use the services of a local agency. This can take up to ten weeks depending on the agency and location. It costs between IDR 15 million ($945) and IDR 30 million ($1,890) to set up a PT PMA in Jakarta. Establishing a PT PMA in Jakarta is cheaper than other regions, mainly due to thriving foreign trade. In Bali, agents charge between IDR 25 million ($1,575) and IDR 35 million ($2,205) to establish a PMA.
Acquire an Existing PT PMA as Another Option
It is also possible to obtain an existing PT PMA or a PT (Perseroan Terbatas). The PT is a company that can only be owned by an Indonesian citizen. Therefore, the PT should be converted into a PT PMA after acquisition. Although it may be difficult to find a PT PMA for sale, acquiring an existing PT PMA or PT is cheaper and takes less time.
Steps to Take for PMA Establishment in Indonesia
Foreigners can establish a PT PMA in Indonesia in just few steps:
- PT PMA Company Name Approval: The company name should meet the requirements and be unique.
- Certificate of Incorporation: The Certificate of Incorporation should contain the Articles of Incorporation and must be notarized. It will take approximately two days for this step to be fully processed.
- Approval of the legal entity: The Ministry of Law and Human Rights must approve the legal entity status after the notary has submitted the incorporation deed, which takes about ten days.
- Registration of Tax ID (NPWP) and Taxable Entrepreneur Confirmation (PKP): The tax office will issue the NPWP and PKP, which are required to open a bank account, meet tax obligations and apply for business licenses. This step takes approximately three days.
- Domicile Letter: To indicate the location of the business, a Domicile Letter is required from the local district government. It will take approximately three days for this step to be fully processed.
- Certificate of Company Registration (TDP): Proof of incorporation of the company is provided by this certificate. Obtaining the TDP will take approximately 14 days.
- Obtaining the NIB: After registering, the company will receive the NIB, Business License, and Location Permit.
- Applying for other licenses: Depending on the company’s activities, it is now possible to apply for different licenses.
PT PMA Establishes Requirements in Indonesia
Before establishing a PT PMA in Indonesia, foreigners should meet the following requirements.
- Shareholders: Two shareholders are minimum requirements. The shareholders may be natural persons or legal entities and must fulfill the roles of the Director and the Commissioner.
- Legal documents: An individual can only incorporate a company and become a shareholder if he or she has a valid passport. A company registration document will be required if a legal entity is to become a shareholder of the PT PMA.
- Minimum investment: IDR 10 billion ($630,000) minimum investment in the PT PMA. The paid-up capital is set at 25% of the minimum required investment, which is IDR 2.5 billion ($157,500), according to Perka BPKM No.4 Year 2021. The paid-up capital must be transferred to an Indonesian bank account for foreign investors. In some industries, shareholders are allowed to sign a Capital Statement Letter in which they promise to invest the money without ever having to transfer it. This means that you don’t actually need to invest any money when PT PMA is registered.
- Company Address: You can use your residential address as a company address as long as it’s in Indonesia. You can also rent a virtual office address, which is mainly provided by the notary or agency you use for the incorporation of the PT PMA.
Permits Needed to start a PT PMA
Investor KITAS: This permit can be obtained by a director, commissioner or shareholder with at least IDR 1 billion ($63,000) in shares.
Working KITAS: The company can be a sponsor for foreign employees who are working for the company. The position must be in line with the business of the company.
Conclusion
In conclusion, establishing a PT PMA (Perseroan Terbatas Penanaman Modal Asing) in Indonesia offers significant opportunities for foreign investors to engage in commercial activities in a rapidly growing market. This foreign-owned limited company allows foreigners to conduct various business activities in Indonesia, including managing rental properties, operating restaurants or hotels, among others. With the ability to be wholly owned by foreigners, PT PMA provides advantages such as operational flexibility, the ability to hire local staff, and the acquisition of real estate.
Navigating the establishment process can be challenging, involving various legal requirements and documentation. Foreign investors often opt to utilize local agencies for assistance, which can streamline the process but may incur additional costs. Alternatively, acquiring an existing PT PMA or PT can be a viable option, offering a quicker and potentially less expensive route to market entry.
Before initiating the establishment process, it’s crucial for foreign investors to meet specific requirements, including minimum investment thresholds, legal documentation, and obtaining the necessary visas for key personnel. Overall, despite the complexities involved, establishing a PT PMA in Indonesia presents a promising opportunity for foreign investors seeking to tap into the country’s burgeoning market and economic growth.
So if you’re interested to invest in Bali’s property, Contact us and we’ll arrange a schedule for further discussion.
