When establishing a Foreign-Owned Company (PT PMA) in Indonesia, understanding the capital investment requirements is essential. In principle, a PT PMA is categorised as a large-scale enterprise and is therefore subject to a minimum investment value, unless otherwise specified under prevailing laws and regulations.
What is it, and How Does Capital Investment Work
According to Article 7(1) of Presidential Regulation No. 10 of 2021, foreign investment may only engage in large-scale business activities with an investment value exceeding IDR 10 billion (ten billion rupiah), excluding the value of land and buildings.
Furthermore, Article 12(2) of BKPM Regulation No. 2 of 2021 stipulates that the minimum total investment for a PT PMA must be greater than IDR 10 billion, excluding land and buildings, per business classification (KBLI 5-digit code) and project location.
In addition, the minimum paid-up and issued capital for a PT PMA is IDR 10 billion, unless otherwise determined by specific sectoral regulations.
Is Capital Investment the same as Paid-Up Capital?
No, they are related but not the same. Capital deposit refers to the actual amount of money contributed by shareholders to the company at the time of incorporation, while Capital investment refers to the total financial commitment made to operate and grow the business, and not just the money deposited as capital.
| Term | Description | Required Minimum (for PMA) | Reported To |
| Capital Deposit (Paid-Up Capital) | Shareholders’ initial paid funds to establish the company | IDR 10 billion | Notary & Ministry of Law and Human Rights |
| Capital Investment (Total Investment Value) | Total funds committed to business operations, including assets and working capital | > IDR 10 billion (excluding land/buildings) | BKPM / OSS System |
What Kind of Foreign-Owned Businesses in Indonesia Require Capital Investment?
The above investment threshold applies broadly to most industries, but there are specific exceptions for certain business activities:
- Wholesale trading: investment value exceeding IDR 10 billion (excluding land and buildings) applies to the first four digits of the KBLI code.
- Food and beverage services: the IDR 10 billion threshold (excluding land and buildings) applies per two-digit KBLI code per location.
- Construction services: investment value exceeding IDR 10 billion (excluding land and buildings) applies per four-digit KBLI code per project.
- Manufacturing: for industries producing different products under separate five-digit KBLI codes within a single production line, each must exceed IDR 10 billion (excluding land and buildings).
Property development:
- For integrated building or housing complexes, the investment must exceed IDR 10 billion, including land and buildings.
- For individual property units within a single development, the investment must exceed IDR 10 billion, excluding land and buildings.
An exception also exists for foreign investments in technology-based start-ups located within Special Economic Zones (SEZs), which may be permitted to invest equal to or below IDR 10 billion, excluding land and buildings, as stated in Article 7(2) of Presidential Regulation No. 10 of 2021.
In essence, the authorised capital of a PT PMA is determined by agreement among the founders. However, the minimum paid-up and issued capital must be at least IDR 10 billion, unless sector-specific regulations dictate otherwise.
It is crucial for investors to review the applicable regulations related to the KBLI classification of their intended business activities. Consulting directly with the Indonesia Investment Coordinating Board (BKPM) is also recommended to clarify any unwritten policies related to the capital requirements of a PT PMA.
Advantages and Disadvantages of Capital Investments
Advantages of Capital Investments
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Full Market Access and Ownership
Foreign investors with sufficient capital investment can establish a PT PMA, which allows up to 100% foreign ownership in many business sectors under the Positive Investment List. This provides full control over operations, decision-making, and profit distribution.
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Stronger Credibility and Legitimacy
A well-capitalised company projects stability and reliability in the eyes of clients, local partners, and authorities. It also simplifies processes like bank account opening, licensing, and vendor registration, as your business demonstrates compliance and financial capability.
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Eligibility for Broader Licenses and Activities
Higher capital investments open access to more regulated sectors such as manufacturing, construction, energy, and logistics, where smaller local entities might face restrictions. This flexibility supports long-term scalability and expansion within Indonesia.
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Easier Access to Visas and Work Permits
Companies meeting the required investment thresholds are more easily approved to sponsor foreign workers and expatriate directors, as the capital investment level aligns with government expectations for sustainable job creation.
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Foundation for Future Expansion
Once the initial investment is in place, it’s easier to apply for business diversification, branch openings, or additional investment incentives through the Indonesian Investment Coordinating Board (BKPM).
Disadvantages of Capital Investments
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High Entry Threshold
The minimum investment requirement of IDR 10 billion (excluding land and buildings) may be challenging for small or early-stage investors, particularly those testing the Indonesian market before full-scale entry.
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Longer Setup and Regulatory Procedures
Larger investments require stricter reporting and documentation, including proof of paid-up capital, project feasibility, and financial projections. This can prolong the company setup timeline without expert assistance.
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Currency and Financial Risk
Investing significant capital in Indonesian rupiah (IDR) exposes investors to currency fluctuations and foreign exchange risks, especially for businesses relying on imported goods or foreign-denominated revenue.
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Ongoing Compliance Requirements
Once capital investment is declared, the company must maintain compliance through regular reporting to BKPM and the Ministry of Law and Human Rights, along with tax filings and annual audits. Non-compliance can lead to penalties or suspension of business licences.
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Limited Flexibility for Small Ventures
For entrepreneurs seeking to operate modest service-based businesses, the capital requirement may exceed the practical financial needs, tying up funds unnecessarily.
Note: Working with experienced advisors from LMI Consultancy Indonesia Business Consultant helps ensure your investment meets all legal, financial, and operational standards, allowing you to focus on building a sustainable, profitable business in Indonesia without unnecessary risks.
Leverage Your Investment Opportunities in Indonesia with LMI Consultancy
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