The business environment of any country is greatly affected by the type of companies which exist in the country. Every business entity will have its own impact on and contributions to the country’s economy. Such is the case in Indonesia, where prospective business owners can start any company of any sort as long as they have fulfilled all necessary criteria and regulations. Two of the most important and well-known business entities in Indonesia are the Perseroan Terbatas (PT) and Penanaman Modal Asing (PMA). Companies which are either PTs or PMAs can be found all over the country. People from all walks of life either own or work in such a company. Thus, they form much of the backbone of Indonesia’s economy and contribute to the country’s corporate success.
Of course, it should go without saying that as these are different business entities, there are certain characteristics of PTs and PMAs which are shared, as well as others which highlight the differences between the two. Both also have their advantages and disadvantages, so prospective business owners must have knowledge about everything related to these business entities before starting one.
If you are interested in starting a business of any sort in Indonesia, do not hesitate to contact us at Paul Hype Page & Co. Our incorporation specialists will see to it that the entire process of incorporation is completed smoothly and properly. We will even make contact with certain government bodies on your behalf if such is necessary.
PT Companies in Indonesia
PT is an acronym for the term “Perseroan Terbatas”. This term has no English equivalent, but it does have a Dutch one: “naamloze vennootschap”. Such companies only exist in the Netherlands, Belgium, and former Dutch colonies, of which Indonesia is one. A PT is a business entity which is formed according to and operates under the commercial laws of Indonesia.
PTs in Indonesia are Indonesian companies which receive investments from abroad. There are six separate types of PT which exist in Indonesia; these six are the domestic, individual, closed, general public, open, and foreign PT. Although there are many different types of PT in the country, the most common of them are those which offer their shares to the public. The PTs which do so are open and general public PTs.
Characteristics of Each PT Type
Although both open and general public PTs offer their shares to the public, they nevertheless differ in one important way. General public PTs may have their shares listed on a stock exchange; such is not the case with open PTs.
Closed and individual PTs both impose certain restrictions on the ownership of shares. Closed PTs only offer private shares; such shares are only allowed to be purchased by certain individuals or groups. Closed PTs are primarily companies which are owned and operated by a family. Individual PTs are even more restrictive with regard to share ownership. Just one person may issue shares of an individual PT; this same person is also the only one who is allowed to own the individual PT’s shares. This person will usually be either the company’s owner or leading director. This person will therefore have complete authority within the individual PT.
Domestic PTs must have a physical presence within Indonesia and also offer their goods and services there. Domestic PTs are required to be compliant with all of the business laws which govern companies in Indonesia. Foreign PTs are those which have been incorporated abroad. For this reason, foreign PTs are to adhere to the laws of the country in which they have been incorporated. However, when a foreign PT commences business activity in Indonesia, it will also have to follow all of Indonesia’s corporate regulations and laws.
Further Information on PTs
Those who choose to invest in a PT will only be liable for the amount of money that they used in their initial investment. A PT’s Articles of Association will provide further details on this matter, as well as information regarding the ownership of shares in the company.
Indonesia’s business laws also specify which businesses are allowed to be run as PTs. Each region of Indonesia is to set its own criteria for the governing of PTs and all matters to which they are connected. Therefore, laws and regulations which govern the operations of PTs will vary; which ones are to be followed by the PT in question depend on which region’s authorities to which the PT is to answer. Every PT in the country will also have different requirements with regard to licenses. Licensing requirements will be dependent on the type of business activities conducted by the PT.
It may be the case that you currently require a business license of some sort for business operations in Indonesia. If such is the case, we at Paul Hype Page & Co would like to be the first to assist you. We will work with you to make sure that you obtain whichever license you may need in order to run your business. We guarantee that the license you will receive will have been received in a manner consistent with the relevant laws and regulations of Indonesia.
PMA Companies in Indonesia
PMA is an acronym for the term “Penanaman Modal Asing”. The PMA is a business entity which is unique to Indonesia; no other country has it or an equivalent to it. A PMA is a company in Indonesia which either has partial or complete ownership by foreigners. A PMA is not the representative office of a foreign company. This is because a PMA is allowed to receive a license for the conducting of complete business activities. Conversely, representative offices are only allowed to conduct research and address issues related to local customer care.
PMAs do not differ from any other company based in Indonesia in one important way: they are endowed with the same rights and liabilities. There are to be a minimum of two company owners. These owners may either be individuals, legal entities, or a combination thereof. Every PMA is required to have a minimum of one director and one commissioner. PMAs are open to investment; locals and foreigners alike can and do invest in Indonesia’s PMAs. Investors may also conduct business activities through the use of a PMA. PMAs may employ either locals or foreigners; however, a PMA which has plans to hire foreigners must receive a permit to do so before hiring any foreigners.
Indonesian Business Sectors and PMAs
Most business sectors in Indonesia are open to PMAs and the contributions which they would bring. Thus, a PMA can be established in any of these sectors. An existing Indonesian-owned company may also have its status changed to that of a PMA. However, this openness does not apply to every business sector in Indonesia.
Business sectors in Indonesia can be divided into three categories based on how open they are to the entry of PMAs. Business sectors are divided into open sectors, open sectors with conditions, and closed sectors.
Open sectors are business sectors which allow companies completely owned by foreigners to exist and conduct business operations in Indonesia. Those who plan to start a PMA within such a sector are not subject to any prerequisites before starting one. Among the types of businesses in Indonesia which are placed under this classification include bars, gyms, restaurants, sports fields, and swimming pools.
Open sectors with conditions are sectors which allow foreign-owned companies and foreign investment in such companies, but only if certain criteria are fulfilled. The companies in this sector have varying amounts of foreign capital. However, most of these companies’ foreign capital will range from 49% to 70%. This is the largest of Indonesia’s three categories of business sectors. Some of the businesses which are part of this category include energy companies, mining companies, companies involved in the hospitality industry, and sports facilities which are not classified as open-sector businesses.
Closed sectors are sectors which disallow the involvement of any private businesses. The Indonesian government has complete authority over deciding which businesses are to be categorized as closed-sector businesses. Such businesses may not be started by foreigners; only Indonesian citizens may do so. Among the businesses in this category are certain companies related to travel, including some tour guide agencies. The Negative Investment List specifies which business sectors are classified under each category.
Apart from the Negative Investment List, there are also several other regulations which govern PMAs in Indonesia. Among the most important of these are Law Number 25 of 2007 and the Head of Investment Coordinating Board Regulation Number 14 of 2015. These regulations define a PMA in Indonesia, mention the licenses which may be required by one, and state the fact that a PMA in Indonesia requires paid-up capital of 10 billion rupiah before it can be set up; of this 10 billion rupiah, 25% of it must be paid to the Indonesian government prior to registration.
The importance of PTs and PMAs to the Indonesian economy and business landscape cannot be overstated. The revenue which they generate and the employment opportunities which they provide are truly invaluable to the country. Regardless of whether one plans to own a PT or PMA or merely work in one, the impacts of these two business entities are obvious to all who work in Indonesia.
Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.
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Our Firm Goal is to assist Foreigner and Foreign Companies to set up business in Asean.
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