Foreign Investment in Indonesia (PT PMA): An Introduction

A comprehensive guide to foreign investment companies in Indonesia.

Foreign investment in Indonesia is becoming increasingly alluring for many companies. Case in point, there were over 21,000 realized foreign investment projects worth over US$29 billion throughout 2018.

There are several ways a foreign company can explore Indonesian investment opportunities. However, a popular option is through a Foreign Limited Liability Company or – in Bahasa – PT Penanaman Modal Asing (PT PMA). Below, we’ll discuss all the basics of how foreign ownership in Indonesia works, the legal benefits, and what you need to establish one.

What is a PT PMA?

A PT PMA is a limited liability company (LLC) with any number of shares owned by a foreign party. Moreover, every foreign company in Indonesia needs at least two shareholders which can be foreign individuals, foreign entities, Indonesian citizens, or Indonesian entities.

Whether the company has 100% foreign ownership or is only partly foreign-owned, it’s still classified as a PT PMA as long as it’s a form of foreign investment in Indonesia.

Are there any rules I should know first?

At this point, there are two main things that you need to consider about foreign investment in Indonesia.

First, all profit-seeking businesses with foreign ownership in Indonesia have to register as a PT PMA and meet all the requirements. Below, we’ll elaborate on the legal benefits that you’re going to get.

The second important thing to be aware of is Indonesia’s Negative Investment List. The list spells out which Indonesia investment opportunities are unavailable or restricted for foreign investment. If an industry is in the list, then the Indonesian government prohibits or only allows a certain maximum percentage of foreign ownership in that particular field.

What would I gain by establishing a PT PMA?

To conduct any profit-seeking activity in Indonesia, a foreign company in Indonesia must register as a PT PMA. The specific benefits include the ability to:

  • Conduct business in Indonesia as a legitimate entity with equal rights as domestic LLCs in Indonesia.
  • Apply for business licenses and permits for select industries, such as construction, manufacturing, and consultancy.
  • Participate in all business tenders in Indonesia.
  • Ensure a transparent and legal foreign ownership structure for financial backers and investors.
  • Provide direct sponsorship for Business Visas and Work Permits in Indonesia for foreign executives and employees.

Where should I set up a foreign company in Indonesia?

You’re going to need an official business location. Just so you know, the Indonesian Investment Coordinating Board or Badan Koordinasi Penanaman Modal (BKPM) handles applications for foreign companies in Indonesia at their headquarters in Jakarta.

However, a PT PMA can work wherever it wants in the country. Some companies have offices in Jakarta only for administrative purposes, even though they perform most of their operations elsewhere.

In Jakarta, companies have to obtain a domicile letter from a building licensed to operate as an office. You can work from wherever you want, but keep in mind that companies can’t register residences as an official business address.

Physical offices might not be a suitable investment for new companies, which is why many of them use coworking desks or official address services in registered offices. If at some point you start considering a physical office, you can still retain your official address.

Whether you’re looking for a coworking desk or a physical office space, Greenhouse Cowork is a great place to start.

So, what do I need to register a foreign company in Indonesia?

Now you have a general idea of what to prepare if you want to set up foreign investment in Indonesia. What are the next steps?

We advise that you connect with professional consultants who can help guide and manage everything for you. Greenhouse has experience in handling all processes related to PT PMA registration, including preparing all the paperwork. We’re happy to help you start incorporating your business in Indonesia.

Check out more about Greenhouse Connect.