Trusted Partner to Establish a Foreign Company (PT PMA) in Indonesia

Are you a foreigner looking to start a business in Indonesia? Or are you an Indonesian business owner looking to collaborate with a foreign investor? PT PMA is the solution for you.

PT PMA stands for Perseroan Terbatas Penanaman Modal Asing, which means Foreign Investment Limited Liability Company. It is a type of company structure that allows foreign investors to own and operate businesses in Indonesia. PT PMA companies are also eligible for a number of benefits, including tax breaks and investment incentives.

Foreign-owned company establishment service companies have an essential role in the country's economy? Because the service company can be an intermediary for the flow of significant capital funds from abroad.

Capital is the most essential driving force in running a business. With capital, business actors or companies can develop their business, and the country's economy can increase.

Therefore, the Indonesian government opens the door wide for the entry of foreign investors, one of which is through the service provider for the establishment of foreign-owned companies. If you are curious about the flow and various regulations relating to foreign investment in Indonesia, let's see the following explanation.

Definition of Foreign-Owned Company (in Indonesia PT PMA)

For industry or business people, the term PMA must be familiar. But what exactly is meant by PMA? If explained, the definition of PMA itself is divided into two, namely:

1. In Terms

In terms of language, PMA in Indonesia stands for foreign investment. Investing several funds originating from abroad as business capital in a country is an activity.

2. Based on Law No. 25/2007

Article 1 point 3 states that PMA is an investment activity to run a business located in the territory of Indonesia. The capital invested by foreign investors can be entirely in the form of foreign capital but can also be a joint venture system.

For the sake of certainty in the eyes of the Law, the foreign capital business must be in the form of a PT or Limited Liability Company (LLC). So, a Foreign-owned company is a form of legal entity as a forum for foreign investors to conduct business activities.

Currently, there are several Foreign-owned companies in Indonesia, and they are engaged in various business lines. For example, Unilever, HM Sampoerna, whose shares were bought by Phillip Morris in 2005, L'Oreal, and many others.

A Brief History of Foreign Investment Companies

Foreign-owned investment in the country has a long history as it dates back to the colonial era. That is, approximately in the 17th and 18th centuries, Indonesia was still under the rule of the Dutch government.

After Indonesia's independence, the government managed all forms of foreign capital investment independently. In 1953, the government drafted a plan to make regulations for the PMA Law so that Law No.78/1958 on PMA was issued as the legal basis for establishing a foreign-owned company.

However, the regulation was revoked by issuing Law No.16/1965. The Law explained that the reason for the revocation was because FDI was considered to hamper the growth and livelihood of the people in Indonesia.

In its development, the foreign-owned company Law was re-implemented since President Soeharto held the leadership until now. An example of a foreign-owned company that invested for the first time in the country is the mining company LLC Freeport Sulphur Incorporated.

Capital Requirements for Foreign-owned company

As in other countries, the Indonesian government also has procedures and ways to establish a foreign-owned company. With the procedures for establishing a Foreign-owned company in Indonesia, all processes will run smoothly and get legality.

So, what are the procedures for establishing a foreign-owned company in Indonesia? First, establishing a Foreign-owned company in Indonesia is inseparable from the provisions regarding the amount of investment value and capital carried out by a Foreign-owned company.

These provisions are contained in the regulations issued by the Investment Coordinating Board. Namely, the BKPM Regulation number 4 in Article 12, paragraph 7, published in 2021, regarding everything related to foreign investment.

The content of the regulation contains the answer to the question of how much is the authorized capital for Foreign-owned companies. The provisions for the investment value of foreign investment companies are as follows:

• Foreign investment companies must have a paid-up investment value of at least ten billion rupiah.
• The capital value excludes the value of land and buildings that will serve as the place of business.

Stages of the Foreign Investment Process

The process or stages of establishing a Foreign-owned company in Indonesia are divided into 3 phases. For those of you who are afraid of being wrong or have limited time, you can utilize a company that provides foreign-owned company establishment services.

Using foreign-owned company establishment services will quickly resolve all matters as they should because the implementation team is a reliable person who is experienced and professional. So here are the stages for the establishment of Foreign-owned company:

1. Preparation Stage

The first stage is preparation, in which the prospective business owner or business must prepare the requirements for establishing foreign-owned company. Later, all these requirements must be submitted to the local Investment Coordinating Board as a submission process.

Remember also to include a plan for foreign investment, including the type of business and the amount of investment capital.

Although it seems trivial, many files must be prepared at this stage. The reality is that many business actors end up using the services of a Foreign-owned company establishment because they want certainty in their steps.

How long the process of establishing a foreign-owned company depends also on the smoothness of this initial stage. But of course, by using the services of establishing a Foreign-owned company, the cost of installing a foreign-owned company will arise.

Of course, how much it costs for foreign-owned companies will differ between one service provider and another. So, if you are interested in using foreign-owned company establishment services, please discuss the price of Foreign-owned company establishment in advance.

2. Construction Stage

The next stage is the construction stage, or some call it the realization stage. This stage is after the application submission obtains an approval permit so business actors can immediately begin preparations for the company's establishment.

One of the things that must be prepared is the making of a Foreign-owned company deed of establishment. This is a reasonably tricky stage, so it would be better if you use the services of a foreign-owned company establishment that is an expert in its field.

3. Production Stage

The final stage of establishing a Foreign-owned company is the production implementation stage. This stage of the Foreign-owned company establishment process can occur when all methods reach 85%.

Of course, the time duration of the Foreign-owned company company establishment procedure in Indonesia will differ from one company to another.

Therefore, if you finally decide to use foreign-owned company establishment services, be careful in choosing a Foreign-owned company establishment service provider. Selecting an inexperienced and unprofessional Foreign-owned company establishment service will obstruct all the processes.

How to Establish a Foreign-owned Company in Indonesia

To establish a Foreign-owned company, business actors must fulfill the requirements for establishing a PT PMA in Indonesia. The process itself is the same as installing an LLC in general. For the convenience of the process, you can leave the handling to the Foreign-owned company establishment service.

Later, the foreign capital LLC establishment service will carry out all procedures based on the provisions of the latest foreign investment regulations. Here's how to establish a Foreign-owned company, namely:

1. Fulfill the Requirements

The requirements that you or the foreign-owned company establishment service must fulfill (if using it) are:

1. Deed of establishment of LLC as a legal document of the company establishment.
2. LLC authorization is based on a decree issued by the Ministry of Law and Human Rights.
3. NPWP of the company concerned.
4. NIB and licenses follow the business sector and have been submitted through the OSS system.
5. The location of the company's activities follows the Spatial Planning of the local area.
6. The investment capital deposited follows the provisions.
7. Complete various licenses related to the company's business sector at the authorized agency.

2. Apply for Licensing

After all the requirements stipulated in the latest foreign-owned company Law are complete, Foreign-owned company establishment services or business actors can submit applications. The Foreign-owned company establishment service .online carries out the submission.

That is by using a licensing service for business that is integrated electronically (OSS system).

3. Complete the Requested Documents

The next stage is to ensure the completeness of all documents so that the licensing process can run smoothly. As a guideline for checking by Foreign-owned company establishment services, the required documents can be grouped as follows:

a. Legality of the Legal Entity

For this aspect, the records required are:

• Deed of establishment of the company and its amendments, if any. Remember that establishing a Foreign-owned company must have obtained authorization or approval from the relevant agency.
• NPWP is owned by the company that has confirmed its taxpayer status based on the provisions of the applicable laws and regulations.
• Identity as a business actor (NIB) issued by the government through the OSS (Online Single System) system.

b. Legality of Business Location & Environment

Namely, official documents relating to where the foreign capital business will be established. The papers in question include the deed of sale and purchase of land and buildings or the certificate of rights to the ground (can be in the form of HGB or HGU).

In addition, prepare a lease agreement for group companies or affiliates and documents for Environmental Management.

c. Power of attorney

Suppose the licensing application is not carried out by the Head of the Company, for example, through Foreign-owned company establishment services or Foreign-owned company services. In that case, there must be a power of attorney. As evidence, the management process is represented by the Foreign-owned company establishment service.

4. Wait for the Verification Process

Once everything is complete, the process will immediately enter the verification phase, where all submitted documents will undergo scrutiny. This process will take about a week.

Later, if files need to be corrected in the process, the documents will be returned to be refined by the applicant. However, a notification will appear two days after submission if the application is deemed inappropriate and rejected.

Tips for a Successful Foreign-owned company Permit Application

A foreign-owned company establishment permit is likely to succeed if you pay attention to the following conditions:

1. Business Sector

Ensure the company's business sector to be established is in accordance with the provisions set by the government through relevant agencies. The business sector also escapes the Negative Investment List and other sectoral-related clauses.

2. Ownership Composition

The business sector of the investment must follow the following maximum ownership composition rules:

a. Open Business Sector

In the open business field, the ownership composition of the shares of the foreign capital business may be held 100% by the foreign party—for example, the culinary industry.

b. Closed Line of Business

Based on Presidential Regulation No. 44 of 2016, in Appendix 1, there is a list of businesses that are prohibited from being managed by foreigners.

c. Line of Business Open with Conditions

In the same regulation, but in Appendix II and III, a list of business types can be used as Foreign-owned companies. However, some specific requirements govern it.

3. Office Location

Remember to consider this issue. You have to ensure that the foreign investment business that is being applied for has one. That is an actual physical office location, not just a virtual one.

4. Established Using Indonesian Law

Of course, because this is a foreign capital investment business in Indonesia, its establishment will use the relevant favorable laws that apply. To ensure that the foreign capital business fulfills its legal aspects, you can use the services of a foreign-owned company establishment.

5. Citizenship Status & Organizational Structure

Based on the provisions of the government of the Republic of Indonesia, the status of foreign capital business founders must be Indonesian citizens or Indonesian Legal Entities.

However, of course, the rule has some exceptions, which you can discuss with the Foreign-owned company establishment service provider. In addition, the foreign capital company to be established must also have a clear organizational structure.

This is based on the regulations on Limited Liability Companies, which state that in the establishment of an LLC, there must be a minimum of Directors, Commissioners, and two Shareholders.

So how, now you know the benefits of using Foreign-owned company establishment services. This description is helpful.

Frequently Asking Questions

1. What is the budget to set up a PT PMA In Indonesia? To make foreign investments in the territory of Indonesia, investors must meet the minimum capital requirements. The prescribed amount of capital to be deposited is ten billion rupiah.

2. What fields of business can foreign investment enter? Some fields that can involve foreign investors are the natural tourism sector and the procurement of fixed and mobile telecommunications networks. In addition, networks for providing communication content, internet interconnection, and other multimedia services, etc.

3. What is the purpose of establishing a PT PMA? To conduct business ventures within the territory of a country to obtain profits jointly with local parties in the country.

4. What are the benefits of foreign investment? The most important benefit is to create a source of revenue for the country where the foreign investment is made. That is through the application of tax fees. Another benefit is the transfer of knowledge to the local population and the creation of new jobs.

5. Who is allowed to invest in the country? Individuals who are native Indonesian citizens or Indonesian-owned business entities in the form of legal entities.

6. Name the types of foreign investment. Some types of FDI developed in the country are Joint Ventures, Contracts of Work, Investment Credit, and Joint Enterprise.

7. What is the negative side of foreign investment for Indonesia? In terms of socio-culture, it is the emergence of a new culture for the community or residents around the location. If related to the business industry, reducing productive land, excessive exploration of natural resources that cause environmental damage, and many others.