When is a PMA Company / PT PMA (Perseroan Terbatas Penanaman Modal Asing) established?
A PT PMA is established when there is a Foreign Shareholder in the company, which includes a Foreign Individual (Warga Negara Asing or WNA), Foreign Companies or other Foreign Entities, or other PT PMA’s. A PT PMA can also be established when there is a status conversion of Local PT (Perseroan Terbatas) previously owned by 100% Indonesian shareholders, which in its growth got bought by Foreign Shareholders.
The other notable thing about PT PMA is that it is the only way foreign investors can invest directly in Indonesia, as company shareholders in the PT PMA. PT PMA itself means Foreign Direct Investment Limited Liability Company, so it is different from other indirect form of foreign investments, such as opening up a Representative Office (Kantor Perwakilan Perusahaan Asing or KPPA) and conducting financing arrangements with Local PT.
Here are the 5 (five) things you need to know about setting up a PT PMA:
- Determine the Business Activities of PT PMA from Beginning
The first thing you have to determine before establishing a PT PMA is the Business Activity of the PT PMA you are going to set up. This is due to the prevailing Investment Negative List (Daftar Negatif Investasi or DNI) regulated in Presidential Regulation No. 39 of 2014.
The DNI regulates all Business Activities allowed to do by PT PMA, and the limitations on the composition of Foreign Shareholders for PT PMA operating in certain business activities. There are some business activities which are restricted to be operated by PT PMA, such as Retail, e- Commerce, Real Estate Agents, and Land Transportation. On the other hand, some business activities can be operated by PT PMA with limited foreign shareholding composition, such as Construction, Travel Services, and Distributor. There are some business activities that can be operated by PT PMA which is fully owned by 100% foreign shareholders, which are Consultations, Web Portal, and Trading, especially Import and Export.
- Prepare Investment Plan to obtain Principle License
Prior to establishing a PT PMA, the company founders are required to apply for Principle License or Izin Prinsip at BKPM (Badan Koordinasi Penanaman Modal or Indonesia Investment Coordinating Board), for which one of the requirements is the Investment Plan of the investors which will be realised by the established PT PMA. The business activities determined for the PT PMA will affect the Investment Plan submitted to BKPM before establishing a PT PMA.
To obtain Principle License, a PT PMA must submit (1) one Investment Plan in the amount of above IDR 10,000,000,000 (ten billion Rupiah) for each Business Activity applied. Therefore, the more business activities a PT PMA will do, the bigger the amount of Investment Plan that must be submitted to BKPM. Investment Plan must be realised by PT PMA in the period of 1-5 years, in which the period will be determined by BKPM pursuant to the business activity operated by the PT PMA.
- Arrange Capital Structure and Shareholder Composition
Different from local PT, PT PMA is required to state a minimum Authorized Capital of IDR 10,000,000,000 (ten billion Rupiah), and 25% of that Auhorized Capital must be deposited as Paid-Up capital, which is in the amount of IDR 2,500,000,000 (two billion five hundred million rupiah). After the Paid-Up capital is stored, PT PMA is allowed to use the Paid-Up capital to conduct its Business Activities.
After determining the Capital Structuree, the company founders of PT PMA must also arrange the Shareholder Composition, which includes how much shares each shareholder will hold from the Paid-Up Capital, and how much each share of the PT PMA will value.
- Appoint Director and Commissioner of PT PMA
The Company Law or Law No. 40 of 2007 on Limited Liability Company applies to PT PMA, in which PT PMA must have Company Organs composed of GMS (General Meeting of Shareholders), Director and Commissioner. GMS consists of the PT PMA shareholders and their authorized representatives.
All companies, including PT PMA, must have at least 1 (one) Director and 1 (one) Commissioner. Directors and Commissioners can be Indonesian nationals (WNI) or Foreign nationals (WNA). However, you must know that foreigners appointed as Director must reside in Indonesia and are required to secure Expatriate Work Permit or IMTA (Izin Memperkerjakan Tenaga Kerja Asing) and Limited Stay Permit or KITAS (Kartu Izin Tinggal Sementara) before they can represent PT PMA in entering a transaction or conducting other actions with other parties.
- Apply for Principle License at BKPM
After preparing for matters as described in No. 1 to No. 4, the company founders can proceed to apply for Principle License needed to establish PT PMA at BKPM. After the Principle License is issued, then the PT PMA founders can continue the establishment similar to setting up a local PT, which is to sign the Deed of Establishment at the Public Notary, secure the Ministerial Decree of Approval, and secure other required licenses such as the Domicile Letter, the Certificate of Registration, etc.
Required documents to apply for Principle License at BKPM includes:
- Identity of the PT PMA founders / Shareholders;
- Investment Plan of PT PMA including the operational area;
- Business Plan / Flowchart describing PT PMA business activities,
- Technical recommendation from the authorized institutions, if needed; and
- Other required documents.
Principle License functions as the approval for foreign investment in the form of Direct Investment as shareholder in PT PMA, whether in PT PMA that is just going to be established, or PT PMA which is established due to the change of status from a local PT. Principle License has a validity period of 1-5 years, pursuant to the Business Activities conducted by PT PMA.
Principle License is not the substitute or replacement of SIUP or other Business License. After the validity period of Principle License ends, PT PMA is requred to realise their Investment Plan and apply for Permanent Business License or Izin Usaha Tetap (IUT) to BKPM. If the Investment Plan has been realised before the Principle License expires, then the PT PMA is entitled to secure IUT.
After the founders of PT PMA secures the Principle License, then the founders can proceed with the establishment like setting up a Local PT, such as signing the Deed of Establishment in the Public Notary, securing the Ministerial Decree of Approval, and securing other required licenses, such as Domicile Letter (SKDP), Taxpayer ID (NPWP), Certificate of Company Registration (TDP), and others.
HOW CAN SMART LEGAL CONSULTING HELP YOU?
SMART Legal Consulting is an Indonesian Corporate Legal Services firm. We assist investors in establishing their business in Indonesia through various forms of investment, including setting up Perseroan Terbatas (PT), both local PT and PT PMA. Our knowledge, experience, and connections makes us the law firm to be your legal partner in Jakarta, managing your investments in Indonesia.
If you have any questions about PT PMA or require further consultation and assistance, you can arrange a meeting with SMART Legal Consulting at: