All About PT PMA and How the Establishment Process Works

Setting up a company in Indonesia can be a challenge, especially for those of you from abroad.
One type of company often chosen by foreign investors is PT Penanaman Modal Asing (PMA). PT PMA offers various benefits to investors, but the process of establishing it also requires special attention.
In this article, you will find important information about PT PMA and how it is set up.
Before starting, it is important that you understand what a PT PMA is and why many investors choose this type of company.

Definition of PT PMA

PT PMA is a corporate form that allows foreign investors to own shares in companies operating in Indonesia.
In other words, PT PMA provides an opportunity for foreign investors to do business in Indonesia legally and safely.
Foreign investment in Indonesia, known as Penanaman Modal Asing (PMA), is an investment activity by foreign parties to conduct business in the territory of Indonesia.
The implementation of PMA can be done in two ways, namely fully foreign capital or in collaboration with domestic capital.

Legal Foundation of PT PMA

The rules for the establishment of PT PMA in Indonesia refer to the provisions in the Limited Liability Company Law as amended, deleted, and or new provisions are contained by the Government Regulation in Lieu of Law (Perppu) on Job Creation.
All regulations regarding PMA have also been regulated in Law Number 25 Year 2007 on Capital Investment.

Difference between PT PMA and PT Biasa

1. Business Qualification

PMA Limited Liability Companies are business entities categorized as large businesses, unless there are other provisions regulated by laws and regulations.
What is meant by large business qualifications is PMA companies:

• Net worth of more than Rp10 billion excluding property assets, and building of business premises based on latest financial statements.
• Has annual revenue exceeding IDR50 billion based on the latest financial statements.

2. Investment Value and Capitalization

Foreign Investment Companies (PMA) have the obligation to fulfill the provisions, as well as conditions relating to investment value and capitalization to obtain investment.

• A minimum total investment value of IDR10 billion, excluding land and buildings, for each line of business according to the 5-digit Indonesian Standard Industrial Classification (KBLI) per project location.
  Exceptions may be granted with applicable provisions.
• The value of paid-up capital must be at least Rp2.5 billion, and must be equal to the value of issued capital.
• The percentage of share ownership is calculated based on the nominal value of the shares, with a minimum nominal value of Rp10 million for each shareholder.

Terms of Establishment of PT PMA

Given its status as a company with foreign capital, the establishment of a PT PMA is subject to regulations set by the Investment Coordinating Board (BKPM).
Some of the requirements to establish a PT PMA in Indonesia include the following:

1. Administrative Requirements

1. Foreign Investment Companies (PT PMA) are required by Indonesian law to establish a business entity in the form of a Limited Liability Company (PT) and have its head office in Indonesia.

This aims to ensure legal certainty and protect the rights of foreign investors, as well as to facilitate supervision and control of PT PMA’s business activities.

2. Have a Business Identification Number (NIB) issued by BKPM.
3. Have a business license from the Minister of Law and Human Rights or a designated official.
4. Have clear legality such as deed of establishment, company registration certificate (TDP), trade business license (SIUP), and other permits required according to the type of business being run.

2. Capital Requirements

1. In accordance with Article 7 paragraph (1) of PR 10/2021, Foreign Investors can only carry out business activities in large businesses.
   Therefore, the minimum investment value is 10 billion.
2. Has a total investment value greater than IDR10 billion, excluding land and buildings per 5-digit Indonesian Standard Industrial Classification (KBLI) business field per project location unless otherwise specified.
3. The value of issued capital is the same as paid-up capital, at least Rp2.5 billion.

3. Shareholding Requirements

1. The percentage of share ownership will be calculated based on the nominal value of the shares.
2. The nominal value of shares for each shareholder is at least Rp10 million.
3. The foreign capital must have a license from BKPM, for dividends obtained by shareholders, paid following applicable legislation.

PT PMA Establishment Procedure

There are several stages in the Foreign Investment Limited Liability Company establishment procedure, including the following:

1. Setting up Capital

The first stage in the PMA establishment process is to prepare business capital.
Business capital in the establishment of PMA as stipulated in the BKPM Regulation is more than 10 billion excluding land and buildings per business field per standard classification of Indonesian 5-digit field per project location.

2. Defining PMA Founders

The next step is to determine the founders of the PMA.
Based on the regulations of the PT PMA Law, it consists of a director, a commissioner and two shareholders in the PMA legal entity.

3. Completing Documents

In the PMA establishment process, the things that need to be made are the deed of establishment, the authorization letter from the Ministry of Law and Human Rights and the Company NPWP.

4. Have a Joint Identification Number (NIB)

Next, you need to take care of the Joint Identification Number (NIB) which is done through the online single submission (OSS) system.
This NIB is also valid as a Company Registration Certificate, Import Identification Number (API), and customs access when businesses conduct export and import activities.

5. Determining the location of a business must be in accordance with the Regional Spatial Planning

According to the latest regulation, the establishment of PT PMA must pay attention to the location, whether it is in accordance with the regional spatial planning or not.
However, in the event that the PMA is located in a Special Economic Zone, the provisions on business fields that are open with conditions do not apply, except for business fields for MSMEs and cooperatives and business fields closed to investment.

6. Complete Special Permits

The FDI establishment must complete the required special licenses with the relevant investment ministry depending on the type of business of the FDI.

7. Have a Principle License

In the case of PMA establishment, it must have a principle license, investment license, investment registration or a valid license.
Applications for other licenses must include NIB as a requirement.

8. Making the Deed of Establishment

After you have obtained the Principle License, the next step is to make a Deed of Establishment of PT PMA to a Notary.

9. Arrange for a Certificate of Company Domicile

SKDP or Company Domicile Certificate is needed as proof that the place where the company operates is a legal place.
You can arrange this SKDP through the village office where the company is located.

10. Preparation of Company NPWP

You need to know, the process of making an NPWP for a company business takes about 7 working days.
In addition to the NPWP, the company also needs to apply for a Taxable Entrepreneur (PKP) letter.

11. Establishment of Company Account

The bank account will be set up under the company’s name, and shareholders will deposit their share capital in cash into the company’s treasury.

12. Submission of Company Authorization to the Ministry of Law and Human Rights RI

After the completion of the deed of establishment and opening of the company account, the notary processes the application for legalization of the business entity to the Directorate General of Public Law Administration (Ditjen AHU).
The Ministry of Law and Human Rights (Kemenkumham) of the Republic of Indonesia then issues a Decree on the Legal Entity Ratification of Foreign Investment Limited Liability Company (PT PMA).

13. Supplement to the Official Gazette

Official information regarding the legalization of PT PMA will be submitted a maximum of 14 days after the Decree from the Ministry of Law and Human Rights of the Republic of Indonesia is issued.
Furthermore, the PT PMA will receive a Supplement to the State Gazette that has been published through the notary.

14. Company Registration Certificate (TDP)

The Company’s business can apply for a Company Registration Certificate or TDP after the authorization from the Ministry of Law and Human Rights of the Republic of Indonesia is issued.

15. Take care of the required licenses

The licenses required by a company vary depending on the type of business being run.
In general, the licenses required include location permits, foreign worker permits, representative office permits, and others.

16. Permanent Business License (IUT)

PT PMA cannot use the Principle License forever.
After 1 year of establishment, the PT PMA must apply for a Permanent Business License (IUT).
Permanent Business License (IUT) is a license granted to a PT PMA that already has a Principle License to start activities, as well as production. The establishment of a PT PMA has a major influence on Indonesia’s economic growth and opens up opportunities for foreign investment.
The establishment procedure involves a series of stages that must be followed carefully, from document preparation to license processing.
For foreign investors looking to start a business in Indonesia, understanding the intricacies of establishing a PT PMA is a crucial first step.
This process may seem complicated, but with careful preparation and a good understanding, the establishment of a PT PMA can be done more efficiently.
To get further assistance, it is advisable for you to consult a professional service such as Kontrak Hukum.
With Kontrak Hukum, you can move forward with confidence.
Contact Kontrak Hukum today and let us help you realize your business dreams in Indonesia!