As stipulated in Article 5 paragraph (2) of Law Number 25 Year 2007 concerning Investment (“Law No. 25/2007”), any business conducted by foreigner in Indonesia shall be in the form of company established under the law of Indonesia. Furthermore, the form of company is classified as “FDI Company” or “PT PMA” (stands for limited liability Company with foreign direct investment). A company becomes a PT PMA as long as any of the shares are owned by foreigners.
As mentioned earlier that before a foreign investor decides to register a PT PMA in Indonesia, he has to investigate his exact business activities based on DNI Negative list, which notes foreign ownership limits in certain business classifications. It is classified under Head of Statistical Board Regulation Number 19 Year 2017 concerning amendment of Head of Statistical Board Regulation Number 95 Year 2015 concerning Standard Business Classification Field/Klasifikasi Baku Lapangan Usaha Indonesia (“KBLI”) (“SB Reg. No. 19/2017”) which categorized under certain classification number.
There are List of Business Field which is Closed for Investment and Opened with Requirement, which specifically stipulated in the Investment Law and Negative Investment List. The list outlines the business fields that are: (i) closed, (ii) conditionally open for investment. The business fields are open for investment subject to certain conditions, including foreign ownership limitations. Which are (i) shall be in a form of 100% local, (ii) partnership between foreign and local investor with certain limitation of shares percentage. Some other requirement also depends on the sector which requires certain licensing from the ministry of the concerning sectors.
Furthermore, hereby the general information regarding establish on the FDI company:
Foreign investors must invest at least IDR 10.000.000.000,- (ten billion Rupiah) outside of land and buildings. From IDR 10.000.000.000,- (ten billion Rupiah) of the company’s authorized capital, IDR 2.500.000.000,- (two and half billion Rupiah) must be subscribed and paid up.
As for illustration:
Authorized Capital : IDR 10 billion
Paid up and Subscribed Capital : IDR 2,5 billion (25% from the Authorized Capital).
The paid-up capital is usually deposited at the opening of Company’s Bank Account. Neither the BKPM nor Notary requires companies to provide the evidence. The purpose of applying Minister’s approval towards the Deed of Establishment, the Notary requires for the shareholders to provide statement letter that the paid-up capital has been subscribed.
Furthermore, after the company has been established, the FDI Company is required to submit an Investment Activity Report and montly tax reports, even if the company does not have any activities and owes no taxes.
Furthermore, below is the Organ of FDI Company as Limited Liability Company or known also as PT PMA:
Furthermore, there are also advantages of establishment the FDI Company/PT PMA in Indonesia, as follows:
However, a FDI Company or PT PMA in Indonesia also has disadvantages, such as:
Other Business Licenses
FDI Company or PT PMA is required to obtain business license in order to perform its business activities:
Note: The above business licenses shall be obtained after incorporation of FDI Company or PT PMA.
Simbolon and Partners Law firm is as one of Leading Indonesian Corporate Legal Services and IPR consulting in Indonesia. Simbolon and Partners Lawfirm have extensive experience in corporate and commercial law, investment law, intellectual property law and versatile legal matter. We assist foreign investors in establishing their business in Indonesia through various forms of investment pursuant to the prevailing laws and regulations in Indonesia for example to establish Foreign Direct Investment Company and Representative Office. We also assist Clients regarding the Compliance and Corporate Legal Services. Our knowledge, experience, and connections will help you to protect your business and avoid any legal troubles and business interruption.