Setting Up PT PMA in Indonesia

It is called a foreign-owned company if any foreign individual or entity holds share(s) in an Indonesian company. A foreign-owned company is often called PT PMA which stands for Perseroan Terbatas Penanaman Modal Asing or the limited liability of foreign investment.

Table of Contents

In this article, we will elaborate below:

Why should you register a company in Indonesia?
Requirements to register a foreign-owned company (PT PMA)
Steps and timeframe to register the foreign-owned company (PT PMA)
Options to do the business without establishing a PT PMA

WHY YOU SHOULD REGISTER A COMPANY IN INDONESIA

If the company has been established under Indonesian law, the company may operate its business and can do the activities as below:

To obtain a business license or import and export license
To be able to buy property such as land and building in the name of the company
Hire staff
Opening bank account
Doing the sales and marketing
As a sponsor to obtain a work permit and stay permit for the foreign employee(s)
To separate the liabilities of the business from the parent company
To register your products within the Indonesian jurisdiction
To submit a bidding proposal to your Indonesian customers or government

REQUIREMENTS TO REGISTER FOREIGN-OWNED COMPANY (PT PMA)

Prior to processing the company’s registration, you shall prepare the requirements.

First of all, you shall decide what is your business in Indonesia. Each business activity is supervised under a related government or ministry and therefore, the business license may be subject to the related government or ministry. After deciding on the business activities, you need to identify the requirements, restrictions (if any), company structure requirements (if any), and business licenses required, including compliances.

However, the general requirements for most the business activities are as below:

Minimum Paid Up Capital is IDR10,000,000,000 (ten billion Rupiah) or approximately equal to USD750,000 (seven hundred and fifty US dollars). The shareholders must sign a statement letter to be provided to the local notary and also to the Ministry of Law and Human Rights that the shareholders will inject the capital proportionally in accordance with the shareholding composition in the new-established PT PMA

The minimum capital for each foreign shareholder is IDR10,000,000 (ten million Rupiah).

Minimum of two shareholders. The shareholders can be an individual and/or corporations.

The composition of the Board of Directors and the Board of Commissioners. Minimum of 1 (one) Director and 1 (one) Commissioner. The director and commissioner can also hold shares in the company (acting as shareholders). However, the director and commissioner cannot be the same person.

Registered Office Address. The address shall be in the commercial area. Houses or apartments are prohibited to be used as registered office addresses. A serviced office or virtual office is allowed and can be an option for you. A serviced office is an office where you share units of office with the other tenant. Meanwhile, a virtual office is an office where you only use the address but the business is located somewhere else. We do provide a virtual office so that you can freely choose the area that suits your business.

Name of the Company. The name shall consist of 3 words. The words cannot contain words that have the meaning of Corporation, Company, Limited Liability, Incorporation, or any other name which has a similar meaning.

STEPS AND TIMEFRAME TO REGISTER THE FOREIGN-OWNED COMPANY (PT PMA)

The government recently creates a friendly-investor-environment including to provides ease of registration of the business. The steps to register the PT PMA are below:

Business Plan. Decide your business plan and explain the business to our team. Our legal team will advise and assist on the process, restrictions (if any), company structure requirements (if any), and business licenses required, including the compliances.
Requirements. Preparing the requirements as mentioned in the previous section i.e. name of the company, registered address, composition of the board of directors and commissioners and shareholders, etc.
Articles of Association. The shareholders are to sign and appear before the notary to sign the minutes of the Articles of Association. In the absence of the shareholders, they can give a proxy to us or to their team to appear before the notary. Further, obtaining the Ministry of Law and Human Rights approval on the Articles of Association.
Tax ID Number/ (Nomor Pokok Wajib Pajak – NPWP). Obtaining the NPWP from the tax office nearby to the registered office address. Starting from the date of obtaining the NPWP, you have an obligation to do monthly and yearly tax reporting.
Licenses. Currently, the licenses are divided into 3 (three) which are: (i) Business Registration Number/ (Nomor Induk Berusaha – NIB); (ii) Unverified or verified standard certificate; and (iii) Permit (Izin). Determining which license(s) shall be obtained by the company, will depend on the risk of the business.

No	Risk Category	License Required
1	Low Risk	NIB
2	Medium Risk	NIB and Standard Certificate
3	Medium-High Risk	NIB and Verified Standard Certificate
4	High Risk	NIB and Permit (Izin)

Other Licenses. Other licenses may be required for certain business classifications. For example, the Electronic System Certificate (PSE Certificate) issued by the Ministry of Telecommunication and Information is granted for a website that is used for e-commerce or marketplace transactions. Other than that, product registration to Food and Drug Agency (BPOM), if you sell a cosmetic or drugs.

The completion of incorporation is remarked when you have documents No. 3 – 5. After the completion of incorporation, you can start to open a bank account, hire staff, issue invoices, and do other operational activities. The timeframe to process the incorporation from steps 1 – 5 (NIB only) takes only 3 – 5 working days from the date you sign the minutes of the meeting before the notary.

Options to do the business without establishing a PT PMA

Other than establishing a PT PMA, there are other options for you to consider in order to operate your business in Indonesia as below:

Representative Office

A Representative Office does not require any minimum paid-up capital. If you do not want to invest so much and want to test the market first, a representative office may be an option. Although a representative office does not require any minimum paid-up capital nor established a legal entity in Indonesia, you still must comply with the tax reporting and cannot generate any revenue in Indonesia. Click more on the representative office

Local Company Service

The minimum paid-up capital to establish a PT PMA is quite high. But this requirement does not apply to Indonesian companies whose shares are held 100% by Indonesian. Therefore, if you still need a legal entity and do not want to inject the minimum paid-up capital of PT PMA, you can consider using a local company service.

The Employer of the Record

The employer of the record is a service where we, CPT Corporate, hire your talent or staff under our company but they will work on our behalf of you. The employer of the record is one of the options for you if you do not want to open an entity in Indonesia, but you need someone to take care of the business. We will provide you with the services with the payroll, transfer the employee salary, sign an employment contract, and advise you on the Indonesian employment law.