Establishing a Foreign Owned Corporation (PMA) in Indonesia: Regulatory Framework and Investment Procedures

Establishing a Foreign Owned Corporation (PMA) in Indonesia entails navigating through a set of regulations, primarily governed by BKPM Regulation No. 4/2021. This regulation defines Foreign Investors as individuals, companies, or governmental bodies from outside Indonesia seeking to invest within its territory. Foreign Investment, or FDI, encompasses initiating or expanding business operations in Indonesia, often through the establishment of a Limited Liability Company (PT) registered under Indonesian law.

To initiate the process of establishing a PT PMA, prospective investors must compile a range of essential documents. These include details such as the proposed company name, registered address, email contact, and phone number. Additionally, information about the company’s leadership structure, including the composition of directors and commissioners, is required. For foreign directors, copies of passports and residency permits (KITAS) are necessary, along with residential addresses, email addresses, and contact numbers. Indonesian directors must provide copies of their ID cards, tax identification numbers (NPWP), and similar contact details.

Shareholder information is also critical, including documentation related to the company’s articles of association, licensing details (such as NPWP and NIB), and identification documents of directors and commissioners. Furthermore, the company’s purpose and objectives, aligned with the latest Indonesian Standard Industrial Classification (KBLI), and details regarding the authorized and paid-up capital must be provided.

Once these documents are assembled, the process moves forward with the preparation of the Deed of Establishment. This legal document, outlining the founding of the company, typically takes around two working days to finalize after the draft has been signed by the founders. Subsequently, the final Deed of Incorporation is issued, usually within two days. However, before obtaining the Ratification Decree, a payment must be made to the State Revenue (PNBP).

PMA companies are subject to minimum investment and capital requirements. For instance, the total investment must exceed IDR 10 billion, excluding land and buildings, with certain exceptions for specific business activities. Additionally, PMA companies are obligated to divest shares to Indonesian citizens or businesses, as outlined in Article 14 of BKPM Regulation No. 4/2021.

To incentivize investment, the Central Government offers various fiscal and non-fiscal facilities. Fiscal facilities include exemptions or reductions in import duties and corporate income taxes for eligible investments. Non-fiscal facilities involve recommendations for immigration status transfers, such as from a visit stay permit to a limited stay permit or permanent residence permit.

In essence, establishing a PMA in Indonesia entails adherence to legal requirements, securing necessary licenses, and fulfilling investment obligations. However, potential benefits, including governmental support and incentives, can provide significant advantages to investors willing to engage in Indonesia’s business landscape.