Limited Liability Companies in Indonesia: Understanding PMA
Limited Liability Companies that partially or wholly owned and controlled by foreigners in Indonesia are called Penaman Modal Asing(PMA) and are governed by the Company Law No. 40 of 2007 (the “Company Law”)
PMA’s are required to obtain approval from the Capital Investment Co-coordinating Board (BKPM) before conducting business in Indonesia.
Minimum Requirements to Set Up a PMA Company
The general minimum requirement to set up a PMA company are as follows:
1 Resident Director
2 Shareholders
One Commissioner
Please note that If the PMA is fully-foreign owned, it’s owners are required to sell a share of at least 5% of the company to an Indonesian citizen or legal entity within 15 years of being incorporated and only PMAs initially set up as Joint Venture will be exempted from this requirement.
Please note that certain business fields require a foreign-owned company to establish a local partner and are allowed up to a certain percentage of ownership depending on the sector.
The specifics of this are covered in the Negative Investment List. However, there are some business activities that are closed for foreign ownership based on Negative Investment List, therefore should be established as Local Indonesian companies
Paid Up Capital
The minimum paid capitals stipulated by the BKPM and enshrined in the company law of Indonesia is US$250,000. Please note that the paid up capital varies depending on the business activity of the Company.
Additionally, the issued share capital must be deposited to the company bank account right after incorporation.
Incorporation Procedure
| No. | Procedure | Institution | Expected Duration |
|---|---|---|---|
| 1 | Approval of company name (should consist 3 words) | The Ministry of Law and Human Rights | 2 days |
| 2 | Review, Revision, and Approval of Principle License as their temporary license | BKPM | 14 days |
| 3 | Article of Association (AKTA) | Notary | 4 days |
| 4 | Legalized of Legal Entity (Deed of Establishment/ SK Kehakiman) | The Ministry of Law and Human Rights | 3 days |
| 5 | Certificate of Domicile | Landlord of the office building and Local Council | 3 days |
| 6 | Tax Payer Registration Number (NPWP) and letter of registered tax (SKT) | Tax Office | 3 days |
| 7 | Company Registration Certificate (TDP) | Provincial Government | 10 days |
Company Name Approval
The application for a company name is conducted through an online system, which can be accessed by a notary. The Ministry of Law and Human Rights can reject the name for a variety of reasons, including if it already exists or is similar to the name of another company.
Principle License (BKPM Approval)
The Indonesian Investment Coordinating Board (BKPM) is the central authorized body for receiving, reviewing and approving foreign investment applications as well as monitoring approved and running projects.
The investor should submit their application and an investment plan which describes their investment realizations above USD 1,000,000.
The investment plan will be reviewed and revised by BKPM. Once it has been approved, BKPM will issue the Principle License as a Temporary Investment Permit.
The Principle License will be valid for one year and can be extended for two years. Thereafter the company needs to apply for Business License within three years.
Article of Association (Akta Perusahaan)
After obtaining a Principle License from BKPM, the investor is allowed to establish a Foreign Owned Limited Liability Company (PT. PMA) by arranging for a Article of Association through a notary, which is valid as an Article of Association for the company.
Ratification of Legal Entity (SK Kehakiman)
The Article of Association shall be submitted to the Ministry of Law and Human Rights to be legalized.
Certificate of Domicile
The next step is to obtain a Certificate of Domicile from the landlord of the office building and from the Sub District (“Kelurahan”), which states the address of the company.
Tax Registration Number (NPWP)
The company shall obtain a Tax Payer Registration Number (NPWP) and a letter of registered tax (Surat Keterangan Terdaftar Pajak/SKT) at the Tax Office located at the same sub district.
NPWP is valid as company’s tax ID and beneficial for proposing bank loan, obtaining other necessary company’s documents as well as for company’s tax payment.
Company Registration Certificate (TDP)
To finalize PT PMA company registration, the company must arrange a Company Registration Certificate from Provincial Government to officially register the company in the region.
Final Thoughts
The PMA company registration process in Indonesia is very precise and can be demanding. At HC Consultancy our experts will assist you to navigate the local regulations and understand the culture of business in Indonesia, taking care of all your business needs.
