In the dynamic business landscape of Indonesia, different types of legal entities are available for foreign companies looking to establish their presence. Three commonly used options are PMA, PT, and Representative Office. Before deciding on an investment plan in Indonesia, gaining clarity on these legal structures will help you make informed decisions and set the right course for your business endeavours in Indonesia.
This article provides a comprehensive overview of PMA, PT, and the Representative Office, shedding light on their characteristics and benefits.
Types of Business in Indonesia Available for Foreigners
Indonesia offers various types of companies to accommodate foreign investment to establish their presence in the country. These company structures cater to different business needs, levels of ownership, and investment objectives. Here are some of the types of companies available for worldwide investors in Indonesia:
PT PMA (Perseroan Terbatas Penanaman Modal Asing): This is the most common form of company for foreign investors. PT PMA allows for 100% foreign ownership and is suitable for businesses involved in trading, manufacturing, or services sectors.
Representative Office: A representative office is a non-trading entity that serves as a liaison office for foreign companies. It is not allowed to generate revenue in Indonesia but can engage in market research, promotion, and other non-commercial activities.
Limited Liability Company: PT is a local Indonesian company structure that can also accommodate foreign ownership. While the ownership restrictions may apply, PT can be an option for foreign investors looking for a partnership with local investors or when foreign ownership requirements are not met for PT PMA.
Each type of business has its own set of regulations, requirements, and benefits. It is essential for foreign investors to carefully consider their investment objectives, desired level of ownership, and the nature of their business activities in order to choose the most appropriate company structure.
Restrictions For a Foreign Company
Indonesian regulation outlines the amount of foreign capital accepted by a certain business, depending on its sector. Establishments may tolerate up to 100% corporate purchasing by overseas entities, while some may allow a maximum of a mere 10%. Details of these different regulations can be identified in DNI (Negative Investment List).
What is PT PMA in Indonesia?
PT PMA stands for Perseroan Terbatas Penanaman Modal Asing, which translates to Limited Liability Company for Foreign Investment in English. It refers to a specific type of company structure in Indonesia that allows for foreign ownership and investment. PT PMA is regulated under the Indonesian Investment Coordinating Board (BKPM) and is commonly chosen by international investors looking to establish their presence and conduct business in Indonesia.
Incorporation of a PMA
One of the key features of PT PMA is that it allows for 100% foreign ownership, subject to certain restrictions outlined in the Negative Investment List (DNI). The DNI specifies sectors and industries where foreign ownership limitations apply. PT PMA is suitable for various business activities such as manufacturing, trading, services, and other sectors, providing flexibility and opportunities for foreign investors.
Establishing a PT PMA involves fulfilling specific requirements and going through a formal registration process. These requirements include having a minimum capital investment, appointing shareholders and directors, preparing necessary documents, obtaining relevant licenses and permits, and adhering to Indonesian company laws and regulations.
What benefits of a PMA (Foreign-Owned) Company?
Set up a PT PMA will grant you the following benefits:
- The possibility of establishing a foreign direct investment business in Indonesia;
- Possibility to have a local bank account;
- Possibility to get an Investor Visa (KITAS);
- It is possible to obtain local medical insurance.
What is PT?
PT stands for Perseroan Terbatas, which refers to the term for a limited liability company. This is the most common type of company structure used by local investors. It is governed by Company Law and allows for separate legal entity status, limited liability for shareholders, and ease of ownership transfer. PT companies can be owned by both local and foreign individuals or entities, depending on the specific requirements and restrictions outlined in the Indonesian Investment Law.
This type of legal entity can engage in a wide range of business affairs, including trading, manufacturing, services, and more. The registration and establishment process of a PT involves fulfilling certain legal requirements, obtaining necessary licenses and permits, and adhering to the country’s business regulations.
What benefits of PT Establishment?
If you want a business that has wider business access such as following the project, then setting up PT is the right choice. Most public and private projects rather see a PT as more trustworthy. Moreover, a PT is legally authorized by Kemenkumham (Ministry of Law and Human Rights). This makes this business form safer in law.
What is the difference between PMA and PT?
Generally, both companies project similar activities and structures. However, PT is specifically addressed to a full local investment business entity, meanwhile, PMA caters for full or partial foreign ownership. PT PMA offers more flexibility for foreign investors seeking to establish a company in Indonesia and engage in various business activities.
What is a Representative Office or KPPA?
A representative office or KPPA (Kantor Perwakilan Perusahaan Asing) is an entity set up by a company located outside of Indonesia (parent company) to take care of its business in Indonesia. The main prerequisite for opening an RO in Indonesia is that you must already have an existing legal entity abroad.
Types of Representative Offices in Indonesia
Through Regulation No. 13/2017 regarding Guidelines and Procedures for Licensing and Investment Facilities, BKPM regulates the type of representative offices in Indonesia. These are:
- General Representative Office of a Foreign Company (KPPA)
- Foreign Trading Company (KP3A)
- Foreign Construction Service Company (BUJKA)
- Foreign Oil and Gas Company (KPPA MIGAS)
Benefits of setting up Representative Office
Foreign-owned companies are required to have at least IDR 10 billion minimum paid-up capital, while representative offices do not have any capital.
Just like any other foreign-owned limited liability company, setting up an RO can also grant the possibility to open a bank account.
A representative office is allowed to do sales directly in Indonesia. The difference is that you need to charge your clients under the name of your parent company.
Either PT PMA or a representative office can apply for a KITAS for its foreign executives.
Ready to set up your business in Indonesia?
As the best provider of Legal Services in Indonesia, Let’sMoveIndonesia offers professional PT PMA registration assistance for foreigners who need to establish a PT or RO in Jakarta and Bali. With our expertise and knowledge of Indonesian company law and foreign direct investment regulations, we provide a seamless and efficient process for setting up a business entity.
Check out our PT PMA Registration Page to learn more about registering your PT PMA with LetsMoveIndonesia or speak to our consultants now through our FREE Consultation!
Want to know more? Then check out our useful guides below by clicking the links:
Company Establishment in Indonesia – Your questions answered
Registering a Trademark in Indonesia – How to protect your business
Business Establishment – The Process and Requirements
How to Establish a PT PMA in Indonesia: 5 Tips to Own A Foreign-owned Company At Ease
