Indonesia offers great opportunities to foreign investors due to the country’s large and young population, rising consumption, abundant natural resources, and cheap labour.
Therefore, each year foreign direct investment (FDI) realisation in Indonesia tends to grow. This section discusses the incorporation of a foreign investment limited liability company in Indonesia, known as Perseroan Terbatas Penanaman Modal Asing (abbreviated PT PMA). It is the legal entity through which a foreign investor can conduct commercial activities in Indonesia.
What Is Considered a Foreign-Owned Company In Indonesia?
In Indonesia, what is considered a foreign-owned company is primarily defined by its legal structure, specifically as a PT PMA, which translates to Foreign Investment Limited Liability Company.
A company is considered foreign-owned if it has any foreign ownership in its shares, even if it’s as little as 1% or if it’s a joint venture with local Indonesian partners. However, PT PMA is the specific legal entity for such investments.
In essence, if a business entity operating in Indonesia has any foreign capital invested in its shares, it generally falls under the classification of a Foreign-Owned Company (PT PMA) and is subject to the specific regulations governing such entities.
Definition of PT PMA
PT PMA, or Perseroan Terbatas Penanaman Modal Asing, translates to a Foreign Investment Limited Liability Company. It is the standard legal entity in Indonesia that allows foreign individuals or foreign legal entities (companies) to establish and operate a business in the country.
Essentially, if any portion of a company’s shares in Indonesia is owned by a foreign individual or entity, it is classified as a PT PMA, regardless of the percentage of foreign ownership. This structure provides foreign investors with legal recognition, credibility, and the ability to conduct commercial activities and generate profits within Indonesian territory, in full compliance with local laws and regulations.
Legal Foundation of PT PMA
The establishment and operation of PT PMA in Indonesia are primarily governed by the following key regulations and their subsequent amendments, which aim to create a more attractive and streamlined investment environment:
Law No. 25 of 2007 on Investment (Undang-Undang Nomor 25 Tahun 2007 tentang Penanaman Modal): This is the fundamental law that defines foreign investment (PMA) and sets out the general framework for all investment activities in Indonesia.
Law No. 40 of 2007 on Limited Liability Companies (Undang-Undang Nomor 40 Tahun 2007 tentang Perseroan Terbatas): This law governs the general structure and operations of all Limited Liability Companies (PT) in Indonesia, including PT PMA.
Government Regulation in Lieu of Law (Perppu) No. 2 of 2022 on Job Creation (Cipta Kerja Law), subsequently enacted as Law No. 6 of 2023: This comprehensive law has significantly reformed various aspects of business and investment, including simplifying licensing, reducing restrictions, and streamlining the process for PT PMA establishment.
Regulations by the Investment Coordinating Board (BKPM): As the primary authority for foreign investment, BKPM issues detailed regulations and guidelines (e.g., BKPM Regulation No. 4 of 2021 on Guidelines and Procedures for Risk-Based Business Licensing and Investment Facilities) that specify the requirements, procedures, and monitoring of PT PMA activities.
Minister of Law and Human Rights (Kemenkumham) Regulations: These regulations pertain to the legal entity status of companies, including naming conventions and ratification of establishment deeds.
Business Qualification
PT PMAs are generally categorized as large-scale businesses under Indonesian law, which comes with specific requirements.
Minimum Investment Value: For 2025, a PT PMA typically requires a minimum total investment value of IDR 10 billion (excluding land and buildings) for each 5-digit Indonesian Standard Industrial Classification (KBLI) code per project location. This high capital requirement aims to attract substantial foreign direct investment.
Minimum Paid-Up Capital: While the minimum total investment is IDR 10 billion, the minimum paid-up capital (which must be deposited after company establishment and bank account opening) is typically IDR 2.5 billion (25% of the authorized capital). However, a capital statement letter from shareholders pledging sufficient funds is often accepted during the initial establishment stage, with actual deposit to follow.
Risk-Based Business Licensing: Indonesia employs a risk-based approach to business licensing. Based on the KBLI code of your intended business activities, your company will be classified into different risk levels (Low, Medium-Low, Medium-High, or High).
Low Risk: Generally only requires a Business Identification Number (NIB).
Medium Risk: Requires an NIB and a standard certificate (can be self-declared or verified).
High Risk: Requires an NIB and a specific license issued by the relevant authority.
Negative Investment List (DNI / Daftar Negatif Investasi) / Positive Investment List (DPI / Daftar Prioritas Investasi): While the DNI has largely been replaced by the DPI under the Job Creation Law, certain business sectors may still have restrictions or specific requirements for foreign ownership. Investors must consult the latest regulations to ensure their chosen business field is open to foreign investment and what percentage of foreign ownership is permitted.
Organizational Structure: A PT PMA must have at least two shareholders (can be individuals or legal entities, foreign or local), a minimum of one Director, and one Commissioner. The Director must be domiciled in Indonesia.
PT PMA Registration – Who is it for and what are the benefits
PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a type of legal entity in Indonesia that allows foreign individuals or foreign companies to conduct commercial activities in the country. Company registration under PT PMA is essential for any foreign investor looking to establish a formal and legal business presence in Indonesia.
Who Is It For?
The establishment of PT PMA accommodates Foreign nationals or companies who want to invest and operate legally in Indonesia. It allows International entrepreneurs to open a branch, subsidiary, or start a new venture in the local market.
Benefits of Setting Up a PT PMA in Indonesia
- Full Legal Access to Operate: PT PMA allows you to legally conduct business, sign contracts, hire employees, and generate revenue in Indonesia.
- Ownership Flexibility: In many industries, foreign investors can own up to 100% of the company.
- Visa and Stay Permits: Founders, directors, and foreign staff can obtain KITAS (work and stay permits).
- Profit Repatriation: PT PMA allows for the repatriation of profits, dividends, and capital legally overseas.
- Access to Indonesia’s Market: With 270+ million people, Indonesia is Southeast Asia’s largest economy, offering vast growth potential.
- Business Credibility: Being a registered PT PMA increases trust from customers, partners, and local institutions.
The Main Requirements for PT PMA in Indonesia
Capital Requirements
The minimum investment plan for a PT PMA is IDR 10 billion (approx. USD 650,000) per business line (KBLI code).
Out of this, the minimum paid-up capital must be at least IDR 2.5 billion (approx. USD 160,000).
The capital must be reflected in the company’s bank account and can be used for operational and capital expenditures once the company is established.
Capital structure must be stated in the Deed of Establishment and verified during licensing.
Note: Sectors in the Positive Investment List may have different capital thresholds or ownership restrictions depending on industry classification.
Shareholding Requirements
A PT PMA must have at least 2 shareholders, which can be:
- Foreign individuals
- Foreign entities (companies)
- A mix of foreign and Indonesian shareholders
Any percentage of foreign ownership (1% or more) qualifies the company as a PT PMA.
Foreign ownership restrictions may apply depending on the business sector as outlined in the Positive Investment List (Perpres No. 10/2021).
Shareholding structure must be clear and disclosed during the incorporation process.
Step-by-Step Process to Set Up a PT PMA
- Initial Preparations:
- Gather necessary documents: This includes passports, visas, and other personal documents for directors and commissioners.
- Select a company name: The name should be unique and approved by the Ministry of Law and Human Rights.
Choose a business field: This is crucial as it determines the required licenses and regulations.
- Deed of Establishment:
- Preparation of the Article of Association (AKTA): This is usually prepared by a notary.
- Legalization of the Deed of Establishment: This step is done by the Ministry of Law and Human Rights.
- Obtaining Necessary Licenses and Permits:
- Principle License and Business License from BKPM: This may take a few days.
- Domicile Letter from the local district authority: This is usually a quick process.
- Taxpayer Identification Number (NPWP) and Business Identification Number (NIB): The NIB is obtained through the OSS (Online Single Submission) system.
- Final Steps:
- Opening a corporate bank account: This may require a director to visit Indonesia.
Timeline for Setting Up a PT PMA
- Approval of company name: 2 days.
- Article of Association (AKTA): 4 days.
- Legalized of Legal Entity: 3 days.
- Certificate of Domicile: 3 days.
- Principle License and Business License from BKPM: 7 days.
- Legalization of the legal entity status: 10 days.
- Total Time for PT PMA Establishment: 3-10 weeks.
Opening a Bank Account for Your PT PMA
After your PT PMA is legally established and you’ve obtained essential documents like the NIB and NPWP, you can open a corporate bank account with an Indonesian bank. This account is required for injecting paid-up capital, handling operational transactions, and paying taxes. Most banks will request your Deed of Establishment, NIB, NPWP, and company director/shareholder IDs.
Documents Required For Company Creation
To register a PT PMA in Indonesia, you’ll need:
- Shareholders’ identification (passport/foreign company documents)
- Directors’ and commissioners’ data
- Business activity description (KBLI codes)
- Office address (physical or virtual)
- Deed of Establishment via a notary
- Articles of Association
- Capital statement
These documents will be used for registration through the OSS (Online Single Submission) system.
What You’ll Receive at the End of the Process
Business Registration
Upon completing registration, you’ll receive:
- Deed of Establishment approved by the Ministry of Law and Human Rights
- NIB (Nomor Induk Berusaha) – Business Identification Number
- NPWP (Nomor Pokok Wajib Pajak) – Corporate Tax ID
- Sectoral licenses (if applicable)
- Company domicile letter (if required)
These documents collectively grant you the right to operate legally in Indonesia.
Licenses
Your PT PMA may require additional licenses depending on the sector, such as:
- Izin Usaha Industri (Industrial Business License)
- SIUP (Business License)
- Tourism, Education, or Financial Permits
These can be processed through the OSS system, and compliance depends on your registered KBLI codes.
Access to own property in Indonesia
While a PT PMA cannot own Hak Milik (freehold land), it may acquire:
- Hak Guna Bangunan (HGB) – Right to build
- Hak Pakai – Right to use
This allows your company to legally lease or hold property under long-term arrangements (usually up to 80 years with extensions).
Temporary Stay Permit That Can Be Made Under PT PMA
PT PMA can sponsor foreign employees and directors to obtain:
- KITAS (Limited Stay Permit) for work and stay
- Work Permit (IMTA)
- Dependent KITAS for family members
This is facilitated after your company is registered and holds the necessary licenses.
Common Questions
What is the initial capital investment shareholders must comply with?
Foreign-owned companies are expected to declare a minimum investment of IDR 10 billion, including paid-up capital of at least IDR 2.5 billion. This reflects Indonesia’s commitment to attracting high-quality foreign investment.
Does Indonesia have a Negative Investment List?
Since Presidential Regulation No. 10/2021, the Negative Investment List has been replaced with the Positive Investment List, which opens more sectors to foreign investors. Some sectors are still partially or fully restricted and may require local partnerships.
Can ownership in the foreign investment company be represented?
Yes. Ownership in a PT PMA can be represented through:
- Nominee arrangements (though not officially recognized under Indonesian law)
- Power of attorney or corporate shareholding structures
It’s recommended to consult legal advisors for proper structuring to ensure compliance and mitigate risks.
