Introduction to Foreign Investment Companies (PT PMA) in Indonesia

Your guide to foreign investment companies in Indonesia.

Foreign investment in Indonesia is becoming more alluring for many entrepreneurs. Case in point, there were over 21,000 realized foreign investment projects worth over US$29 billion throughout 2018. Below, we’ll discuss how foreign ownership in Indonesia works, the legal benefits, and what you need to establish a foreign company.

What is a PT PMA?

Foreign Limited Liability Companies are a popular option for foreign companies who want to explore Indonesian investment opportunities. In Bahasa, this type of company is known as PT Penanaman Modal Asing or PT PMA.

Basically, a PT PMA is a limited liability company (LLC) with any number of shares owned by a foreign group or individual. On that note, every foreign company in Indonesia needs at least two shareholders which can be any combination of:

  • Foreign individuals,
  • Foreign groups,
  • Indonesian citizens, or
  • Indonesian groups.

However, Indonesian law still considers a company as a PT PMA no matter if it’s fully or partly foreign-owned.

What are the rules of a PT PMA?

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. In other words, if you don’t register as a PT PMA, you won’t be allowed to generate any profits.

Second, you should be aware of Indonesia’s Negative Investment List. The list shows you which Indonesia investment opportunities are unavailable or restricted for foreign investors. If an industry is on the list, then you might not be able to fully or partly own a company with that industry in Indonesia.

What would I gain by establishing a PT PMA?

To seek profits in Indonesia, a foreign company must register as a PT PMA. Specifically, the benefits include the ability to:

  • Do business in Indonesia as a legitimate entity with equal rights as domestic companies.
  • Apply for business licenses and permits for industries that need them such as construction, manufacturing, and consultancy.
  • Participate in business tenders in Indonesia.
  • Ensure a transparent and legal foreign ownership structure for financial backers and investors.
  • Sponsor foreign executives and employees in Indonesia for business visas and work permits.

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.

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