FOREIGN INVESTMENT COMPANY (PMA)

A Foreign-Owned Limited Liability Company (PT PMA) in Indonesia is a legal entity that allows foreign investors to establish a business in Indonesia. The term PT PMA stands for “Perseroan Terbatas Penanaman Modal Asing,” which translates to Foreign Investment Limited Liability Company. This type of company is designed specifically for foreign nationals who wish to operate businesses in Indonesia, whether in manufacturing, services, or other industries.

Key Characteristics of PT PMA:

1. Foreign Ownership:

   • A PT PMA allows foreign investors to hold shares in the company. Depending on the business sector, foreign ownership can range from 100% to a smaller percentage.
   • Certain sectors may have restrictions on the level of foreign ownership, and these are governed by the Negative Investment List (Daftar Negatif Investasi or DNI), which outlines which sectors allow full foreign ownership and which require a local partner.

2. Legal Structure:

   • It is a Limited Liability Company (Perseroan Terbatas or PT), meaning that the shareholders’ liability is limited to their investment in the company, offering protection for personal assets.
   • A PT PMA has the ability to open bank accounts, hire employees, sign contracts, and own assets in its own name, much like a domestic company.

3. Minimum Capital Requirement:

   • Minimum paid-up capital: The required minimum capital for a PT PMA is IDR 10 billion (approximately USD 660,000), which must be paid in full at the time of registration. However, the actual capital requirement may vary depending on the business sector.
   • Local assets: The company must also have a registered local office and meet other regulatory requirements.

4. Business Activities:

   • A PT PMA can engage in a wide variety of business activities, depending on the Negative Investment List.
   • In sectors that allow full foreign ownership, the PT PMA can operate independently without the need for a local partner. However, in certain sectors, foreign ownership may be capped (e.g., 49% foreign, 51% local) in line with the regulations.

5. Taxation and Reporting:

   • A PT PMA is subject to Indonesian corporate income tax (typically 22% as of recent regulations) and must comply with Indonesia’s financial reporting standards.
   • The company must also maintain proper accounting records, submit annual reports, and comply with Indonesia’s labor laws.

6. Employees:

   • A PT PMA can employ both Indonesian and foreign workers. Foreign workers must obtain a limited stay permit (KITAS), and the company must comply with local labor laws regarding salaries, working conditions, and benefits.

7. Regulatory Approval:

   • Setting up a PT PMA requires approval from the Investment Coordinating Board (BKPM) in Indonesia.
   • The company registration process involves several steps, including securing an investment license, obtaining the necessary business licenses, and registering with the local tax office and social security office.

8. Tax Incentives:

   • The Indonesian government offers certain tax incentives for foreign investors, particularly in sectors that align with national development goals (such as manufacturing, high technology, and research & development).

Steps to Set Up a PT PMA:

1. Submit a business plan and secure approval from the BKPM.
2. Register the company with the Ministry of Law and Human Rights.
3. Obtain business licenses and other permits as required for the specific industry.
4. Open a bank account and deposit the required minimum capital.
5. Register for taxes with the Indonesian tax office.

Advantages of PT PMA:

• Full control over the business in sectors that allow it.
• Limited liability, which protects personal assets from company debts.
• Ability to enter into contracts and operate under the same legal framework as local companies.
• Access to the Indonesian market, one of the largest and fastest-growing in Southeast Asia.

Challenges:

• High minimum capital requirement compared to some other countries.
• Complex regulatory environment, with numerous permits, licenses, and legal requirements to navigate.
• Sector restrictions in certain industries that limit foreign ownership.

A PT PMA is the most common legal structure for foreign investors who want to do business in Indonesia and is suitable for businesses across many sectors. It offers a structured, formalized way to operate in the country while ensuring compliance with local laws and regulations.

Requirements :