All about minimum capital requirements in Indonesia.
There are varying amounts of minimum capital requirements for different types of companies in Indonesia. These requirements are regulated by the Indonesian Investment Coordinating Board or BKPM, and applies to any business entity seeking to generate revenue.
Below, we’ll explain exactly how much money you’ll need to build a foreign company in Indonesia.
What’s the difference between paid-up capital and investment value?
First, you’ll need to understand the concepts of paid-up capital and minimum investment value.
Paid-up capital is the actual money you need to start your business. Minimum investment value is how you plan to invest in Indonesia for the next three years.
Paid-up capital is the actual amount of funds and/or assets that you’ll need to set up your business in Indonesia. You’re going to use this as the capital to start your business activities.
The investment value is the total approximate capital that you plan to invest in Indonesia for three years. This can be salaries, inventories, or equipment, but there are certain exceptions such as land.
What’s the minimum investment value for foreign companies?
If a foreign entity wants to operate legally as a foreign investment company or PT PMA, they need to submit a minimum investment value of IDR 10 billion. This equals about USD 700.000 according to current exchange rates.
Also, companies need to report 25 percent of the minimum investment value – at least IDR 2,5 billion or about USD 170.000 – as paid-up capital. More capital-intensive fields like banking, mining, and manufacturing might have to submit a bigger amount.
Why is there a minimum capital requirement in Indonesia?
There are at least two main reasons.
First, the government wants to reserve the small to medium segment of the economy for local businesses. The higher minimum investment for foreign companies helps direct foreign capital into large-scale businesses.
Second, a minimum paid-up capital and investment value helps businesses make sure that they have the resources and long-term plan necessary to operate in Indonesia.
When do I need the paid-up capital?
You’ll need to inject your paid-up capital into your company’s bank account as soon as you’re done with the business incorporation process.
However, you can’t set up a bank account until you finish the business incorporation process. In the meantime, your shareholders will need to sign a capital statement letter and confirm that they have the funds ready to go.
Does the paid-up capital have to be in cash?
Yes, because your paid-up capital is the money in your bank account. If you want to submit assets other than liquid money, you can do that in your investment plan. You’ll probably need third-party consultants to determine the market value of those assets in cash.
What are the alternatives?
A PT PMA-type company needs to submit at least ±USD 170.000 of paid-up capital and plan to invest at least ±USD 10 billion in total. No exceptions.
If a foreign entity wants to set up in Indonesia but isn’t sure about investing that much money, they can try alternate company forms like a representative office.
However, these alternate company forms have their own benefits and drawbacks that you’ll need to be aware of. When designing your investment plan, you should connect with experienced consultants to discuss the best options for your business.
Greenhouse empowers you to book business incorporation services and connect with market entry consultants in your target markets.
We’ll connect you with experienced consultants on the ground who can help answer your questions about doing business in Indonesia.