Setting up a company in Indonesia involves more than registering a business entity. Foreign investors must consider the appropriate corporate structure, foreign ownership rules, investment requirements, licensing, employment regulations and ongoing compliance.
For investors considering an Indonesian business presence, the PT PMA company, Penanaman Modal Asing, or foreign-owned limited liability company, is generally the principal structure for conducting commercial activities. A representative office may also be suitable for businesses that require a limited local presence without conducting full commercial operations.
Below are answers to some of the most common questions about company incorporation in Indonesia.
What Type of Business Presence Do Foreign Investors Need in Indonesia?
Foreign investors generally have two main options:
1. Establish a PMA Company
A PMA is an Indonesian limited liability company established for foreign investment. It has separate legal entity status and can conduct commercial activities permitted under Indonesian regulations.
For foreign investors intending to sell goods, provide services or conduct other commercial activities in Indonesia, a PMA company is generally the appropriate structure.
2. Establish a Representative Office
A representative office (RO) is established by a foreign company to maintain a presence in Indonesia without operating as a fully commercial Indonesian company.
Its permitted activities are generally more limited and may include:
- Market research and feasibility studies
- Liaison activities
- Representing the foreign parent company
- Connecting the overseas head office with Indonesian businesses and stakeholders
The appropriate structure depends on the investor’s intended activities and business objectives.
Can Foreign Investors Own 100% of a PMA Company?
Potentially, yes. Indonesia’s foreign investment framework determines whether a particular business activity is open to foreign ownership and whether specific restrictions or requirements apply.
Business activities that are open to full foreign ownership may allow investors to establish a 100% foreign-owned PMA company. However, certain sectors may remain subject to ownership limitations, special licensing requirements or other conditions.
Investors should therefore review the relevant KBLI business classification before incorporating a company.
How Many Shareholders Does a PMA Company Need?
Under the Indonesian Company Law framework, a limited liability company generally requires at least two shareholders.
The shareholders may be:
- Individuals
- Corporate entities
- A combination of individuals and corporate entities
Where a business is fully open to foreign investment, the second shareholder may be an affiliated entity or another suitable investor, subject to the applicable corporate and investment requirements.
How Long Does It Take to Establish a PMA Company in Indonesia?
The incorporation timeline depends on the business structure, KBLI classification, licensing requirements and completeness of the documentation.
Based on the supplied source, establishing a PMA and preparing it for commercial operations may generally take two to six months.
A company must also obtain the relevant business licences before commencing activities that require such approvals.
For certain activities, the company may be able to begin operations relatively soon after incorporation and completion of the required licensing process.
What Is the Minimum Investment for a PMA Company in Indonesia?
Based on the investment requirements stated in the supplied source, the requirements include:
- Total investment of more than IDR 10 billion, excluding land and buildings
- Paid-up capital of at least IDR 2.5 billion
- Minimum share participation of IDR 10 million per shareholder
The total investment may comprise both equity and debt, subject to applicable requirements.
Certain industries may also require a higher investment threshold or additional commitments. Investors should therefore assess the requirements applicable to their specific KBLI and business sector before incorporation.
Can Investors Choose the Holding Jurisdiction of Their PMA?
Yes, the investor’s existing international corporate structure can be relevant when determining the appropriate holding jurisdiction.
Indonesia has entered into various International Investment Agreements with other countries. Depending on the applicable agreement and investment structure, investors may benefit from provisions relating to investment protection and other investment rights.
This should be assessed alongside tax, corporate structuring and investment considerations.
Can Shareholders Hold Shares with Preferential Rights?
Yes.
Indonesian Company Law recognises different classifications of shares, which may provide certain preferential rights.
Depending on the company’s Articles of Association, these may include rights relating to:
- Appointment of Directors or Commissioners
- Priority dividend payments
- Priority rights over liquidation proceeds
- Other shareholder rights permitted under Indonesian law
The structure should be carefully documented during incorporation.
Do Shareholders Have Limited Liability?
Yes.
A PMA company is a separate legal entity, meaning shareholders generally have liability limited to their investment in the company.
However, limited liability protection may not apply in certain circumstances where the legal requirements for separate corporate status are not properly maintained or where applicable legal provisions create personal liability.
Can a PMA Company Employ Foreign Workers?
Yes. A PMA company may employ foreign nationals, subject to Indonesia’s immigration and manpower regulations.
Foreign employees generally require the appropriate work authorisation and stay permit, depending on their position and employment arrangement.
Employers must also comply with applicable foreign manpower requirements, including requirements relating to the foreign worker’s position, qualifications and knowledge transfer.
Not every position can be occupied by a foreign national, and certain roles may be restricted under Indonesian regulations.
What Rights Do Shareholders Have in a PMA Company?
Shareholders are the owners of the company in proportion to their shareholding.
Their rights may include participating in and voting at the General Meeting of Shareholders (GMS) on matters concerning the company.
The extent of voting rights and other shareholder rights depends on the company’s share structure, Articles of Association and applicable Indonesian Company Law.
What Is the Management Structure of a PMA Company?
Indonesia follows a two-tier corporate governance structure consisting of:
Board of Directors
The Directors are responsible for managing the company’s day-to-day operations and representing the company in its dealings with third parties.
Board of Commissioners
The Commissioners have a supervisory role and provide advice to the Board of Directors.
This distinction between management and supervision is an important part of the governance structure of an Indonesian limited liability company.
Does a PMA Company Need Audited Financial Statements?
Certain companies are required to have their financial statements audited.
The supplied source identifies categories including:
- Publicly listed companies
- Companies collecting funds from the public, such as banks and insurers
- Companies issuing debt instruments
- Companies meeting specified asset thresholds
- Certain entities whose lenders require audited accounts
- Certain foreign entities conducting business in Indonesia
- Certain state-owned enterprises
Whether an individual PMA company requires an audit depends on its activities, structure and applicable financial reporting requirements.
Can a PMA Company Keep Its Books in USD?
Indonesian companies generally maintain accounting records in Rupiah and Indonesian language for tax purposes.
However, certain taxpayers may be permitted to maintain bookkeeping in USD and English, subject to the applicable approval or notification requirements.
Based on the supplied source, the relevant application or notification must be submitted within the prescribed timeframe before the beginning of the fiscal year.
Companies considering USD bookkeeping should therefore assess their eligibility and requirements before adopting the accounting method.
Can Company Documents Be Prepared in English?
The supplied source states that accounting books, records and financial statements should generally be prepared in Indonesian.
The use of another language may be permitted in certain circumstances following approval from the Ministry of Finance.
For broader corporate documents, investors should also distinguish between documents that may be prepared bilingually and those that must comply with Indonesian-language requirements.
What Should Foreign Investors Consider Before Incorporating a PMA?
Company incorporation should begin with the business model rather than the registration form.
Before establishing a PMA, investors should review:
- Business activity and KBLI
Confirm that the intended activities are correctly classified and open to foreign investment. - Foreign ownership
Check whether the sector permits 100% foreign ownership or contains specific restrictions. - Investment structure
Determine the appropriate capital and investment structure. - Business licences
Identify the permits and technical approvals required for the intended activities. - Company governance
Establish the appropriate shareholder, Director and Commissioner structure. - Employment requirements
Assess whether foreign employees will be required and what immigration and manpower approvals apply. - Tax and accounting
Establish an appropriate bookkeeping, tax and reporting framework from the outset.
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Establishing a company in Indonesia requires coordination between company incorporation, business licensing, immigration, tax and regulatory compliance.
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Our team can help assess your proposed business activity, ownership structure, licensing requirements and immigration needs before you establish your Indonesian business.
Planning to establish a PMA in Indonesia? Speak with Lets Move Indonesia to understand your options and prepare your business structure with greater confidence.
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