To establish a Foreign Investment Company, there is a requirement of minimum investment value as explained in the Indonesia Investment Coordinating Board (BKPM) Regulation. Read more to learn about the minimum investment value of a Foreign Investment Company in Indonesia.
An establishment of a Limited Liability Company (“PT”) in Indonesia is conducted through capital injection into the PT together by its founders, whereas each of the founders will later acquire the share in proportion with their capital injection. This is applicable either for a PT established by Indonesian local legal entity or Indonesian Citizen, or a PT established by and/or together with legal entity and/or foreign citizen (WNA) or well known as “PT PMA”.
Specifically for an establishment of PT PMA, before it is being effectively established and validated as a legal entity, its founders must file an application for approval from the Indonesian Investment Coordinating Board (“BKPM”) for a capital injection and the desired shares ownership. Such approvals will be issued in a form of “Principle Licenses”. After a Principle License for the PT PMA is being issued, the establishment of it as PT and preparation of any commercial activities may begin.
INVESTMENT VALUE AS A REQUIREMENTS IN ACQUIRING A PRINCIPLE LICENSE
One of the requirement in acquiring a Principle License is to fulfill a minimum limit of Investment Value applied to a PT PMA. Investment Value is the whole capital expenses plan for the business activities, which shall be consisting of 2 (two) components:
- Fixed Capital; and
- Working Capital
Fixed Capital is a fixed asset owned by the company, which is including land, building, machineries, lease value of more than 1 year, purchase of company’s operational vehicles and other office inventories.
Working Capital is all costs for 1 turnover (3 months) spent by the company to perform its operational activities including purchase of raw materials, payment of salary to its employee, and payment to electricity bill, telephone bills and any other expenses in support of the company’s activities that are routinely spent.
MINIMUM INVESTMENT VALUE FOR PT PMA
The government, through the Regulation of the Head of BKPM Number 14 of 2015 as amended by Regulation of the Head of BKPM Number 6 of 2016 concerning Guidelines and Procedures for Investment Principle License, stipulating that the amount of investment value and capital structure in the foreign investment in Indonesia are:
- Total Investment Value is greater than IDR10,000,000,000.00 (ten billion Rupiah), excluding land and buildings for:
- For Industrial Sector, for every subgroup of the same business based on KBLI in 1 (one) project site in one (1) Regency/City; or
- For Outside the Industrial Sector, for every subgroup of the same business based on KBLI within one (1) Regency/City.
- The total value of investment is allowed to be less than IDR10,000,000,000.00 (ten billion Rupiah), for the expansion project one (1) line of business within one (1) business group based on KBLI at the same location, provided that the accumulated investment value of the entire project at the site has reached more than IDR10,000,000,000.00 (ten billion Rupiah) excluding land and buildings.
- The investment value is allowed to be less than IDR10,000,000,000.00 (ten billion Rupiah), for the expansion of one (1) or more lines of business within one (1) sub-class of business based on KBLI, which does not get the facilities or receiving facilities outside the industrial sector, at 1 (one) location within 1 (one) regency/city provided that the accumulated value of investment for all business sectors is greater than IDR10,000,000,000.00 (ten billion Rupiah) excluding land and buildings.
THE REQUIREMENT OF INVESTMENT VALUE IN APPLYING FOR PERMANENT BUSINESS LICENSE
A Permanent Business License (“IUT”) is a license granted as an operational license issued by the BKPM for a PT PMA or a Domestic Investment Company (PMDN) as a requirement in conducting commercial business activities in the field of Trade of Goods and Services or in an Industry or Services. To apply for an IUT which valid during the company’s operations, the company must fulfill the requirements of BKPM, which is having a net worth of IDR10,000,000,000.- (ten billion rupiah) excluding land and buildings and business places; or having yearly sales of more than IDR50,000,000,000.- (fifty billion rupiah) evidenced by financial statements.
As mentioned above, Article 13 paragraph (3) of the Regulations of the Head of BKPM Number 14 of 2015 as amended by the Regulations of the Head of BKPM Number 16 of 2016 is opening a chances for another regulation in determining a requirements in the investment value and capital structure for PT PMA, therefore it is possible that the amount of Investment Value may be greater than if another set of Regulations determined it and this shall be based on the field of business classified under the prevailing Negative Investment List and KBLI.
HOW CAN SMART LEGAL CONSULTING HELP YOU?
SMART Legal Consulting has extensive experience in assisting Investors to incorporate by Establishing PMA Companies, and continue their compliance in Indonesia in regards to the investment requirements set by BKPM. We can provide assistance to Investors to compile the required documents for investment license applications. If you need immediate assistance, please contact the SMART Help Desk at: