Clarifying Capital Requirements for PT PMAs

The Indonesian Ministry of Investment, represented by the Indonesia Investment Coordinating Board (BKPM), enacted BKPM Regulation No. 4 of 2021 on Licensing Guidelines and Procedures, which became effective on June 2, 2021. This regulation introduced a revised minimum paid-up capital requirement for Foreign Direct Investment Companies (PT PMA), stipulating that it must exceed IDR 10 billion per five-digit Indonesia Standard Industrial Classification (KBLI) business field and per project location, with certain exemptions applicable.
The Indonesian Ministry of Investment, represented by the Indonesia Investment Coordinating Board (BKPM), enacted BKPM Regulation No. 4 of 2021 on Licensing Guidelines and Procedures, which became effective on June 2, 2021. This regulation introduced a revised minimum paid-up capital requirement for Foreign Direct Investment Companies (PT PMA), stipulating that it must exceed IDR 10 billion per five-digit Indonesia Standard Industrial Classification (KBLI) business field and per project location, with certain exemptions applicable.

Clarifying Capital Requirements for PT PMAs

The Indonesian Ministry of Investment, represented by the Indonesia Investment Coordinating Board (BKPM), enacted BKPM Regulation No. 4 of 2021 on Licensing Guidelines and Procedures, which became effective on June 2, 2021. This regulation introduced a revised minimum paid-up capital requirement for Foreign Direct Investment Companies (PT PMA), stipulating that it must exceed IDR 10 billion per five-digit Indonesia Standard Industrial Classification (KBLI) business field and per project location, with certain exemptions applicable.

 

For foreign investors who had established PT PMAs with less than IDR 10 billion in paid-up capital prior to the implementation of BKPM Regulation 4/2021, there arises a pertinent question: Are these existing PT PMAs mandated to adjust their capital to meet the new regulatory standards? In essence, must these entities increase their paid-up capital to a minimum of IDR 10 billion to ensure their continued legal operation within Indonesia?

 

Despite the issuance of BKPM Regulation 4/2021, there remains ambiguity regarding the retroactive application of the increased capital requirement to existing PT PMAs. Similar regulatory predecessors, such as BKPM Regulation 5/2013, did not expressly address the retroactive application of capital requirements. However, it is worth noting that BKPM Regulation 5/2013, in practice, was not retroactively applied to applications approved before its enactment.

 

Analyzing the Transitional Provisions outlined in BKPM Regulation 4/2021, it is inferred that the IDR 10 billion paid-up capital requirement is applicable to:

 

PT PMAs established subsequent to the enforcement of BKPM Regulation 4/2021.

Existing PT PMAs with paid-up capital falling below IDR 10 billion, under the following circumstances:

  • Entities yet to secure a Business Identification Number (NIB) and Business Licenses.
  • PT PMAs possessing an NIB but awaiting Business License issuance.
  • Entities holding both NIB and Business Licenses, which are not yet effective.
  • PT PMAs intending to amend their KBLI classification.

 

Furthermore, Article 99 of BKPM Regulation 4/2021 dictates that businesses, including PT PMAs, necessitating new licenses post the regulation’s enactment, must adhere to its provisions. Hence, existing PT PMAs seeking to obtain fresh business licenses are obliged to increase their paid-up capital to at least IDR 10 billion, provided their capital falls short of the stipulated minimum.

 

In essence, while BKPM Regulation 4/2021 introduces revised capital requirements for PT PMAs, its retrospective application to existing entities remains inconclusive. However, in light of the Transitional Provisions and regulatory implications outlined, PT PMAs are urged to assess their compliance status and take requisite actions to ensure adherence to prevailing regulations.



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