The Ultimate Guide to PT PMA: How to Establish a Foreign-Owned Company in Indonesia

Indonesia, as Southeast Asia’s largest economy, is an attractive destination for foreign investors. Establishing a PT PMA (Penanaman Modal Asing), or Foreign-Owned Company, is the preferred structure for foreign investment in Indonesia. This comprehensive guide will walk you through the process of setting up a PT PMA, ensuring you understand all the necessary steps and requirements.

What is a PT PMA?

A PT PMA is a limited liability company that allows foreign investors to establish and operate a business in Indonesia. It offers the benefits of limited liability, legal protection, and the ability to repatriate profits. However, setting up a PT PMA involves complying with specific regulations and meeting certain criteria.

Benefits of a PT PMA

Foreign Ownership: Allows partial or full foreign ownership, depending on the industry.
Legal Protection: Provides limited liability to shareholders.
Market Access: Enables access to the Indonesian market and potential government incentives.
Profit Repatriation: Facilitates the repatriation of profits and capital.

Key Requirements for Establishing a PT PMA

Minimum Capital Requirement

The minimum capital requirement for a PT PMA is typically USD 700,000 (IDR 10 billion), with at least 25% paid-up capital. However, the exact amount may vary depending on the industry.

Business Activity Classification (KBLI)

Determine the appropriate KBLI (Indonesian Standard Industrial Classification) code for your business activities. This classification is crucial for obtaining necessary licenses and permits.

Shareholders and Directors

Shareholders: A PT PMA requires at least two shareholders, which can be individuals or corporate entities.
Directors and Commissioners: A minimum of one director and one commissioner is required. The director manages daily operations, while the commissioner oversees and advises the director.

Step-by-Step Process to Establish a PT PMA

Step 1: Reserve a Company Name

Reserve a unique company name through the Ministry of Law and Human Rights. The name must be distinctive and not already in use by another entity.

Step 2: Draft the Deed of Establishment

Prepare the Deed of Establishment, which includes the company’s Articles of Association. This document outlines the company’s purpose, structure, and operational guidelines. The deed must be notarized by a public notary in Indonesia.

Step 3: Obtain Approval from the Ministry of Law and Human Rights

Submit the Deed of Establishment to the Ministry of Law and Human Rights for approval. Once approved, your company will be officially recognized as a legal entity.

Step 4: Register with the Online Single Submission (OSS) System

Register your company through the OSS system to obtain a Business Identification Number (NIB). The NIB acts as a single license for most business activities and serves as the company’s tax identification number (NPWP) and social security registration number (BPJS).

Step 5: Obtain Sectoral Licenses and Permits

Depending on your business activities, you may need to apply for additional sectoral licenses and permits from relevant authorities. This could include trade licenses, industry-specific permits, or environmental approvals.

Step 6: Open a Bank Account

Open a corporate bank account in Indonesia to deposit the required paid-up capital. This account will also be used for the company’s financial transactions.

Step 7: Capital Injection and Shareholder Agreement

Inject the paid-up capital into the corporate bank account. Draft and sign a shareholder agreement to outline the rights and responsibilities of each shareholder.

Step 8: Apply for Work Permits and KITAS for Foreign Employees

If you plan to employ foreign workers, you must obtain work permits and KITAS (Temporary Stay Permits) for them. This involves submitting an application to the Indonesian Ministry of Manpower and the Immigration Office.

Post-Establishment Compliance

Corporate Governance

Ensure compliance with corporate governance practices, including holding regular shareholders’ meetings, maintaining accurate financial records, and filing annual reports.

Tax Compliance

Adhere to Indonesian tax regulations by filing monthly and annual tax returns. Consider hiring a professional tax consultant to manage your tax obligations efficiently.

Employment Regulations

Comply with Indonesian labor laws, including minimum wage requirements, employee benefits, and termination procedures. This helps in maintaining a productive and harmonious workplace.

Environmental and Social Responsibility

For certain industries, adhering to environmental and social responsibility standards is crucial. Ensure compliance with local regulations to avoid legal issues and enhance your corporate reputation.

Establishing a PT PMA in Indonesia is a strategic move for foreign investors looking to tap into the country’s dynamic market. By understanding the legal requirements and following the necessary steps, you can establish a strong foundation for your business. Engaging professional legal and business consultants can further streamline the process, ensuring compliance and maximizing your chances of success in the Indonesian market.