According to the Indonesian Company Law, foreign investors must establish a company in Indonesia in the form of a limited liability company (Perusahaan Terbatas, or PT) for the purpose of foreign investment. In Indonesia, a PT company that includes foreign shareholders is called a PMA company.
PMA companies must comply with the following minimum investment regulations:
1. The total investment must exceed 10 billion rupiah (about 800,000 US dollars), including equity and loans, but excluding land and buildings;
2. The paid-in capital must be equal to the subscribed capital and not less than 2.5 billion rupiah (about 188,000 US dollars);
According to the Indonesian Company Law, at least 25% of the registered capital must be issued and paid up when the company is established.
For example, for a foreign company, the registered capital is at least 10 billion rupiah, so it must be written in the company’s establishment contract that the registered capital is 10 billion rupiah. Therefore, according to the law, at least 25% of IDR 10 billion, or IDR 2.5 billion of issued capital, must be injected and deposited at the time of company establishment, and this amount is the minimum.
There are three different types of corporate entities in Indonesia:
1. Foreign-owned company (PT PMA)
A company in which foreigners have full corporate ownership under Indonesian law. For Indonesian law. The PTPMA foreign ownership limit is determined by the corporate sector and its business activities, which are usually included in the list of “Indonesian Negative Investment Table”.
2. Local company (LOCAL PT)
A company in which locals have full corporate ownership under Indonesian law. The only way for foreigners to participate in it is through asset protection of the nominee based on a special loan agreement.
3. Representative office
It is usually considered to be a branch of the parent company overseas and can choose to take the first step into the Indonesian market. The establishment of a corporate entity to carry out marketing activities for the enterprise or to prepare for the establishment of PTPMA for the enterprise includes market research. The office shall not directly sell or generate revenue turnover.
Investment Restrictions
Indonesia’s foreign investment regime is regulated by a negative investment list. The list lists industries that are fully or partially open to foreign direct investment, as well as industries that do not accept foreign investment or are subject to certain investment restrictions.
The Indonesian government has announced the latest negative investment list, removing restrictions on individual industries to encourage foreign investors to invest locally.
Currently, the negative investment list allows foreign investors to engage in e-commerce, cold storage, wholly-owned pharmaceuticals, movies and other industries, and special industries do not allow full foreign investment (such as medical devices).