Company Establishment in Indonesia: Why and How

By Admin Solusi Hukum |

If you’re familiar with the terms of LLC (Limited Liability Company) or Ltd. (limited), in Indonesia there are different types of companies that you may establish as foreign investors. It’s being called PT PMA (Perseroan Terbatas Penanaman Modal Asing, read as Foreign Investment Limited Liability Company).

As foreign investors, some people may be worried about the process of establishing a company in Indonesia being difficult and long. However, this is the right moment for foreign investors to develop their business in Indonesia. Citing an official statement from the Ministry of Investment Indonesia (usually called: BKPM, Indonesia Investment Coordinating Board), increasing PMA (Foreign Investment) is one of the things Major Projects in 2020-2024.

Hence to strive and increase the goals, Indonesia’s government is making it easier for foreign investors to run their business in Indonesia. Indonesia also has other goals to improve the Ease of Doing Business, namely ease of business management for foreign investors in 2024. Before running a business in Indonesia, foreign investors must fulfill a series of legal requirements, which as establishing a Foreign Investment Limited Liability Company (PT PMA).

The ratification of the establishment of a foreign investment business entity in the form of a limited liability company is carried out in accordance with the provisions of the laws and regulations.

Pasal 25 UU Nomor 6 Tahun 2023 tentang Cipta Kerja, read: Article 25 of Law Number 6 of 2023 about Job Creation

If foreign investors refuse to fulfill all of the legal requirements of PT PMA and don’t follow the applicable laws and regulations, they have a greater risk of being deported, don’t have legal protection for the investment capital they have deposited in Indonesia, and the worse scenario is not being able to run their business due to a lack of legal permits to run a company in Indonesia.

If you are a foreign citizen or a foreign company that is already operating abroad, then you need to establish a PT PMA so that your business can run smoothly in Indonesia. This article may help you to guide your way to Company Establishment in Indonesia: Why and How.

What is PT PMA (Foreign Investment Limited Liability Company)?

PT PMA (Foreign Investment Limited Liability Company) takes the basic rules from Law No. 40 of 2007 about Limited Liability Companies (read: Undang-Undang No. 40 Tahun 2007 tentang Perseroan Terbatas), therefore you must have at least 2 shareholders consisting of individuals or legal entities to establish a company in Indonesia.

Those who can establish a PT PMA are:

  1. Foreign Citizen
  2. Foreign legal entity or private limited company that already have a deed of establishment from their country
  3. Indonesian Citizen
  4. National private legal entity in Indonesia

PT PMA must have a deed of establishment from a Notary, a Decree Ratifying the Establishment from the Ministry of Law and Human Rights Indonesia for its establishment, obtain a company Taxpayer Identification Number (usually called NPWP, Nomor Pokok Wajib Pajak in Indonesia), and maintain a Business Identification Number (usually called NIB, Nomor Induk Berusaha in Indonesia) in OSS (Online Single Submission).

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Important Terms and Procedures for Company Establishment in Indonesia

  1. Determine the name of PT PMA.
    It must consist of at least 3 words, and 1 word must consist of at least 3 letters. It is prohibited to choose a name company that contains violations of decency or is against the laws and regulations in Indonesia.

    Right Example:

    Wrong Example:
    > PT TASTY CEREAL (wrong, because only use 2 words)
    > PT GAMBLING TIGER PRO (wrong, because Article 1 of Law 7/1974, was changed to Article 303 bis of the Criminal Code: Pasal 303 bis KUHP, stating that all criminal gambling acts are considered crimes in Indonesia).
    > PT AB CD ED (wrong, because all of the words didn’t consist of 3 letters that form a word)
  2. Determining the Founder and the Board of Directors, Board of Commissioners and Shareholders (if any).
    As explained before in this article, the Founder and the Board of Directors, Board of Commissioners and Shareholders can come from individuals or legal entities originating from Indonesia or abroad.
  3. Determining PT PMA capital.
    The capital in question is determined by authorized capital, issued capital, and paid-up capital.
    PT PMA needs to know that PT PMA must have a total investment capital of more than IDR 10,000,000,000 (ten billion Rupiah), approximately: $645,970.88 US Dollars or 585,848.04 Euros or 4,595,214.66 Chinese Yuan Renminbi (note: according to exchange rate in 2 January 2024).
    Also, if you’re considering applying for a visa or temporary residence permit in Indonesia as a foreign investor, you have to follow the Regulation of The Minister of Law and Human Rights Republic of Indonesia Number 22 of 2023 about Visa and Stay Permit.
  4. The total investment capital does not include the value of land and buildings for each business sector determined by PMA. This is following the rules in Article 12 of the BKPM (Investment Coordinating Board) Regulations (read: Pasal 12 Peraturan BKPM). These capital arrangements also affect the business field that PMA will choose.
  5. Determining the PT PMA business field.
    PMA can be 100% owned by foreign capital. However, this requires paying attention to the regulations regarding the Negative Investment List (read: Daftar Negatif Investasi, DNI). These rules are issued by BKPM and can change at any time.
    Then following Article 12 of the BKPM (Investment Coordinating Board) Regulations, PMA is automatically a large-scale business, so you must pay attention to fulfilling certain requirements for the PT PMA business sector according to the Indonesian Standard Industrial Classification (read: Klasifikasi Baku Lapangan Usaha Indonesia, KBLI) especially Approval of the Suitability of Space Utilization Activities (read: Persetujuan Kesesuaian Kegiatan Pemanfaatan Ruang, PKKPR).

How Much PT PMA Establishment Costs

The costs company establishment in Indonesia required to set up a PT PMA are quite varied, several services provide prices of up to IDR 15,000,000-IDR 20,000,000 to obtain the legality of a PT PMA, approximately up to $1,000-$1,500 US Dollars or 879.08755 Euros.

But don’t let yourself get caught up in the price. Always pay close attention to the terms and conditions of each service. For example, for the cost of processing a complete package at Online Legal Solutions with costs starting from IDR 13,500,000 (approximately $870.8894 US Dollars or 795.24502 Euros or 6,212.9882 Chinese Yuan Renminbi), you can get:

  • Name Checking for availability in the Ministry of Law and Human Rights
  • Legal drafting minutes of the Establishment Act
  • Easier way to sign: may choose digital signature or direct signature
  • Deed of Establishment from Certified Notary in Indonesia
  • Decree Approving Establishment from the Ministry of Law and Human Rights
  • Registration of PT PMA Taxpayer Identification Number (NPWP).
  • Account Registration of Online Single Submission (OSS)

We already helped 228++ with the legality Company Establishment in Indonesia in 2023. Therefore, it’s your chance to establish PT PMA in Indonesia fast and precisely, and also get your free consultation forever as long as your company is running.


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