For foreign investors entering Indonesia, establishing a Foreign-Owned Limited Liability Company (PT PMA) is the primary legal vehicle for conducting business. While Indonesia has continued to simplify its investment framework through the Online Single Submission Risk-Based Approach (OSS RBA), the incorporation process still requires careful planning and compliance with local regulations.
Here are five of the most common challenges investors encounter when setting up a PT PMA in Indonesia.
1. Overseas Founders Cannot Be Present During Incorporation
One of the most common obstacles occurs when company shareholders or directors are located outside Indonesia during the incorporation process.
Traditionally, the Deed of Establishment must be signed before an Indonesian notary. If a founder is unable to travel, a Power of Attorney (PoA) may be used. However, preparing a valid PoA can involve multiple administrative procedures, including document authentication in the country of origin.
Fortunately, Indonesia’s adoption of the Apostille Convention has significantly simplified this process. For documents issued in countries that are parties to the convention, diplomatic or consular legalization is no longer required. Instead, founders may obtain an Apostille certificate from the relevant authority in the country where the document was issued, allowing the document to be legally recognised in Indonesia.
2. Verifying Foreign Corporate and Personal Documents
Before a PT PMA can be established, all shareholder documentation must be verified.
For individual foreign shareholders, Indonesian notaries will verify the validity of passports before executing the company’s Deed of Establishment. Where a foreign legal entity acts as a shareholder, additional corporate documents, such as the company’s Certificate or Deed of Incorporation and any amendments, must be submitted.
These documents generally require notarisation or authentication in accordance with the applicable regulations before they can be accepted for the incorporation process in Indonesia.
3. Meeting Indonesia’s Foreign Investment Capital Requirements
Capital requirements continue to be one of the most significant considerations for foreign investors.
Unlike locally owned companies, a PT PMA is generally subject to a minimum investment value of IDR 10 billion per business classification (KBLI), unless otherwise provided under sector-specific regulations.
Investors should also distinguish between investment value and paid-up capital, as these are separate regulatory concepts. Understanding the applicable capital requirements early in the planning stage is essential for avoiding delays during the company establishment process.
4. Determining the Right Business Location
Choosing an appropriate business address is another important step when establishing a PT PMA.
While there is no blanket prohibition on using a virtual office, eligibility depends largely on the company’s business sector. Certain industries—particularly those requiring physical facilities, warehouses, laboratories, or operational premises—may not be permitted to operate using only a virtual office.
Under Indonesia’s current licensing framework, businesses must also comply with the Conformity of Spatial Utilisation Activities (KKPR) requirements through the OSS RBA system. This ensures that the proposed business location aligns with the Regional Spatial Plan (RDTR) before business licences can be processed.
As requirements vary between industries, investors should verify location eligibility before securing office space or submitting incorporation documents.
5. Obtaining Risk-Based Business Licences
Successfully establishing a PT PMA is only the beginning.
After incorporation, companies must obtain the appropriate Risk-Based Business Licences through the OSS RBA system according to the level of risk associated with their business activities.
Indonesia currently categorises business licences into four risk levels:
- Low Risk: Business Identification Number (NIB)
- Low-Medium Risk: NIB and Standard Certificate
- High-Medium Risk: NIB and a government-verified Standard Certificate
- High Risk: NIB and Business Licence (Izin)
The applicable licence depends on the company’s selected KBLI classification and operational activities. Choosing the correct business classification from the outset is therefore essential to ensure a smooth licensing process.
Essential Requirements to Establish a PT PMA
Before setting up a PT PMA (Foreign-Owned Limited Liability Company) in Indonesia, foreign investors should understand the key legal and regulatory requirements that apply to foreign investment.
1. Minimum Two Shareholders
A PT PMA must have at least two shareholders, which may consist of:
A common misconception is that a foreign investor must have an Indonesian Business Partner as a shareholder to establish a PMA. This is not always the case. Indonesian investment regulations generally allow a PT PMA to be 100% foreign-owned, provided the intended business sector is open to full foreign investment under the applicable regulations.
However, in sectors where foreign ownership is restricted or capped, an Indonesian Business Partner may be required to hold shares in the company to comply with the maximum foreign ownership limits. Investors should therefore review the applicable investment regulations before determining their shareholding structure.
2. Minimum Investment Requirement
In general, a PMA must have a minimum investment plan of IDR 10 billion (excluding land and buildings) for each business classification (KBLI), unless otherwise stipulated by sector-specific regulations. The company is also required to meet the applicable paid-up capital requirements under Indonesian investment regulations.
3. Registered Business Address
Every PT PMA must have a registered business address in Indonesia. Depending on the company’s business sector, this may be a physical office or, in certain cases, a virtual office. Some regulated industries require operational premises, warehouses, or other physical facilities, making a virtual office ineligible.
4. Appropriate KBLI Classification
Companies must select the correct KBLI (Klasifikasi Baku Lapangan Usaha Indonesia) code that accurately reflects their intended business activities.
The selected KBLI determines licensing requirements, foreign ownership eligibility, and the risk level of the business under Indonesia’s OSS Risk-Based Approach (OSS RBA).
5. Business Licensing Through OSS
Following incorporation, a PT PMA must obtain the necessary business licences through the OSS RBA system. Obtaining the appropriate licences is essential before commencing commercial operations in Indonesia.
Register Your PT PMA in Indonesia with LMI Consultancy
Establishing a PT PMA involves much more than company registration. From determining the correct business classification (KBLI) and meeting capital requirements to preparing shareholder documents and obtaining business licences through the OSS RBA system, each step requires careful planning and regulatory compliance.
At LMI Consultancy, our experienced corporate consultants provide end-to-end assistance for foreign investors looking to establish or expand their businesses in Indonesia. We assist with PT PMA incorporation, KBLI selection, deed preparation, OSS registration, NIB applications, business licensing, and ongoing corporate compliance, ensuring your investment journey is efficient and fully compliant with Indonesian regulations.
Whether you are entering the Indonesian market for the first time or expanding your existing operations, LMI Consultancy is here to help you build your business with confidence. Contact our team today to begin your PT PMA setup and receive tailored guidance every step of the way.
