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Setting Up a PT PMA in Indonesia: A Complete Guide for Foreign Investors
By: admin kusuma
Publish: February 28th, 2025
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Expanding your business to Indonesia? Setting up a PT PMA in Indonesia is the key to legally operating as a foreign investor. PT PMA (Penanaman Modal Asing) is a foreign-owned limited liability company that allows international businesses to enter Indonesia’s growing market. However, the process involves legal compliance, business licensing, tax registration, and investment approvals. In this guide, we will walk you through the essential steps to successfully establish a PT PMA in Indonesia while ensuring compliance with local regulations.
Definition and Importance of PT PMA
PT PMA (Penanaman Modal Asing) is a type of limited liability company in Indonesia that can be wholly or partially owned by foreign investors, structured for foreign investors to legally operate a business within the country. It provides foreign entities with the legal framework to conduct business in Indonesia, making it a popular choice for international companies looking to enter the market.
Importance of PT PMA
Market Access: PT PMA allows foreign investors to directly engage in Indonesia’s market, offering opportunities across various sectors.
Legal Entity: As a recognized legal entity, PT PMA provides operational legitimacy and legal protection under Indonesian laws.
Investment Flexibility: PT PMAs have flexibility in ownership structures and can operate in many industries, subject to regulations and restrictions as outlined in the Positive Investment List.
Corporate Structures, Shares, and Ownership of PT PMA
Corporate Structures
Single-tier Structure: Consisting of shareholders, director, and commissioner, this structure simplifies decision-making and governance.
Two-tier Structure: Involves both a Board of Directors (BOD) for daily management and a Board of Commissioners (BOC) for oversight and strategic guidance.
Shares and Ownership
Class of Shares: PT PMA can issue common and preferred shares, each with distinct rights and obligations for shareholders.
Foreign Ownership Limits: According to the Positive Investment List, certain sectors allow full foreign ownership, while others require local partners or have specific ownership caps.
Tips: Engage legal consultant for accurate foreign ownership guidance, ensuring compliance and efficiency.
Essential Documents for Establishing PT PMA
Deed of Establishment: Contains Articles of Association (AoA) and must be notarized by an Indonesian notary.
Investment Registration: Issued by the Investment Coordinating Board (BKPM), this is required for foreign entities to invest.
Business Identification Number (NIB): Issued through the OSS system, serving as the company’s primary business license.
Tax Identification Number (NPWP): Necessary for tax reporting and compliance.
Sector-Specific Licenses: Depending on the business type, additional permits may be required, such as industry-specific licenses, location permits, and environmental permits.
Step-by-Step Guide to Setting up a PT PMA in Indonesia
Step 1: Set Up a Local Office
PT PMA must have a registered office in Indonesia. Investors can opt for a physical or virtual office, depending on the business structure.
Step 2: Classification of Business Activity (KBLI)
Every business in Indonesia must classify its activities under the Indonesian Standard Industrial Classification (KBLI) codes, which determine licensing requirements.
Step 3: Obtain Necessary Licenses
Register the Company Name
Preparing Deed of Establishment
Obtain Business Identification Number (NIB)
Acquire Sector-Specific Licenses (depending on the industry)
Step 4: Open a Bank Account and Deposit Capital
Bank Account: Open a corporate bank account in Indonesia to deposit the required capital.
Minimum Capital Requirement: Generally, a PT PMA mush have a minimum investment of IDR 10 billion (around USD 700,000), with at least 25% of the capital paid up.
Step 5: Register with the Social Security System
Your employees must be registered with BPJS Ketenagakerjaan (social security)and BPJS Kesehatan (healthcare).
Step 6: Employing Foreign Employees
Foreign employees require Work Permits (KITAS) and Visa documents, and investors must ensure compliance with Indonesian labor laws, including quotas for local and foreign workers.
Legal, Accounting, and Tax Compliance for PT PMA
Legal Compliance: the company’s business activities must comply with the prevailing laws and regulations.
Annual Financial Reports: certain businesses must be audited and submitted to relevant Government authority.
Ensuring ongoing compliance is crucial for the long-term success of your PT PMA in Indonesia.
Investment Dynamics in Indonesia
Foreign Direct Investment (FDI) Environment
Indonesia actively encourages foreign investment through various incentives and reforms designed to improve the ease of doing business. Key drivers include a young, dynamic workforce, increasing consumer spending, and government initiatives in infrastructure and digital transformation.
Investment Incentives
Tax Incentives: Tax holidays, reductions, and investment allowances for certain industries and regions.
Special Economic Zones (SEZs): Offer additional benefits such as reduced tax rates, expedited licensing, and other incentives.
Regulatory Landscape and Applicable Laws
Key Regulatory Bodies
Ministry of Law and Human Rights: Responsible for company registrations and legal entity recognition.
Important Things to Consider When Setting Up a PT PMA
Business Sector Restrictions: Review the Positive Investment List to understand the limits on foreign ownership and required partnerships.
Compliance with Labor Laws: Ensure that you meet labor laws, especially concerning hiring local employees and expatriates.
Cultural and Market Knowledge: Understanding local business practices and consumer behaviour is crucial for success.
Best Sectors and Industries to Invest in Indonesia
High-Potential Sectors
Manufacturing and Export-oriented Industries: Particularly in electronics, automotive, and consumer goods, driven by Indonesia’s competitive labor market.
Digital Economy: Rapid growth in e-commerce, fintech, and digital services, fueled by a young, tech-savvy population.
Renewable Energy: Increasing demand for sustainable energy solutions offers opportunities in solar, wind, and geothermal power.
Emerging Opportunities
Healthcare: Rising demand for healthcare services and products, spurred by a growing middle class.
Tourism and Hospitality: Indonesia’s diverse attractions continue to drive growth in the tourism sector, creating opportunities in hospitality and infrastructure.
Future Outlook for Foreign Investment in Indonesia
Indonesia’s investment outlook remains positive, supported by ongoing economic reforms and a commitment to improving the investment climate. Key trends include:
Continued Economic Growth: Indonesian remains a major investment destination.
Digital Transformation: Continued growth in the digital economy presents vast opportunities for tech-driven investments.
Sustainable Investments: Emphasis on green and sustainable projects aligns with global trends towards environmental responsibility.
Regulatory Reforms: Ongoing efforts to simplify business regulations and enhance transparency are expected to further attract foreign capital.
Recommendations for Foreign Investors
Conduct Market Research before entering the Indonesian market.
Setting up a PT PMA in Indonesia opens doors to a thriving market but requires legal, tax, and regulatory compliance. By following the proper steps and seeking professional legal guidance, foreign investors can successfully enter Indonesia’s growing market. By partnering with our law firm, you can ensure a smooth and efficient business setup.
Expertise in Indonesian Corporate Law: We have deep knowledge of Indonesian business regulations, ensuring that your PT PMA is set up in full compliance with local laws.
End-to-End Services: From document preparation and regulatory filings to obtaining licenses and handling tax registrations, we offer comprehensive legal support throughout the entire incorporation process.
Strong Regulatory Relationships: We have established strong connections with key regulatory bodies, including BKPM and the Ministry of Law and Human Rights, enabling us to expedite the incorporation process and minimize bureaucratic delays.
Tailored Legal Solutions: We offer customized services to meet your business needs.
Proven Success: With years of experience helping foreign investors set up PT PMAs in Indonesia, our firm has a proven track record of success across various industries.
Start Your PT PMA with Confidence
Setting up a PT PMA is a big step, and we’re here to make it smooth and successful. With Kusuma & Partners Law Firm, you’re not just getting a consultant—you’re gaining a dedicated partner committed to your business growth. Ready to expand into Indonesia? Fill out the form below, and let’s build your success together.
“DISCLAIMER: This content is for general informational purposes only and should not be treated as legal advice. For professional advice, please consult us.”
Yes, foreigners can be shareholders and directors in PT PMA, though restrictions apply in certain sectors.
Not necessarily, but in some sectors, foreign investors must partner with a local entity or individual, depending on the industry’s regulations.
Yes, but it depends on the business sector. Some sectors require local ownership under the Positive Investment List (Daftar Investasi Prioritas) issued by the Indonesian government.
PT PMA cannot own freehold land but can obtain Hak Guna Bangunan (HGB), which grants long-term usage rights.
On average, it takes 3 to 6 weeks to complete the process, depending on business type and regulatory approvals.
