Being the largest economy in the South East Asia and one of the emerging economies in the world, Indonesia had received popular attractions for foreign investors all around the world. In 2019, its overall score has increased by 1.6 points, with sharp increases in business freedom, investment freedom, and judicial effectiveness outpacing declines in monetary freedom and labor freedom. In this article, you would be able to gather sufficient information as to what are the companies in Indonesia that receive the most foreign investment.
Foreign Owned Company (PT PMA)
A foreign owned company is also known as Perseroan Terbatas Penananam Modal Asing (PT PMA) in Bahasa Indonesia. In Indonesia, a PT PMA company is considered to be a Limited Liability Company. Besides that, this type of company can either be 100% foreign-owned or it can also be established by through a joint venture with Indonesian partners subject to the Negative Investment List (Daftar Negatif Investasi (DNI)) as it will stipulate as to what business sectors would be open to foreign investments in Indonesia as well as the percentage of foreign ownership permitted upon that business sectors.
The following are the brief requirements on what is required to form a PT PMA company successfully in Indonesia:
- IDR 10 billion (USD 750,000.00)
Minimum Paid-up Capital
- IDR 2.5 billion (~USD175,000.00)
- Minimum 2 shareholders: Can be 1 foreigner or 2 foreigners
Negative Investment List
- This list is compiled by the Indonesia Investment Coordinating Board (BKPM). It stipulates which sectors are open for foreign business investment in Indonesia and the percentage of ownership permitted.
- Do note that it is compulsory to comply with every foreign investor who intends to open a PT PMA company in Indonesia.
Representative Office (KPPA)
A KPPA office in Indonesia is also known as Kantor Perwakilan Perusahaan Asing. A KPPA office in Indonesia allows you to create a market presence in Indonesia and similar to PT PMA, it is usually set up for management reasons. The roles of a KPPA office in Indonesia is limited to managing, coordinating, supervising, liaising, and representing the main company.
The following are the steps required to form a KPPA office successfully in Indonesia:
- Appoint a business representative;
- Collect all necessary documents such as:
- A letter of reference;
- A notarized letter of appointment;
- A resume and work permit of the company’s representative; and
- A notarized letter of intent.
Differences between Foreign Owned Company and Representative Office
|Foreign Owned Company||Representative Office|
|Allowed Activities||All business activities related to the sector it is engaged in and received approval for from BKPM||Only for market research & local representation|
|Minimum Capital||No requirement|
|Benefits||Operates as an independent limited liability company within the business classification|
No capital requirement,
Takes less time to establish
|Suitable For||Companies that want to engage in commercial activities in Indonesia||Companies that want to engage in market research, networking, etc. It is strictly forbidden to generate profit and revenue or engage in sales directly|
|Compliance||Monthly withholding tax report, quarterly/semi-annual investment report||Monthly withholding tax report, annual activity report to the BKPM|
|Disadvantages||Large capital requirement|
|Issuing Work Permits and Visas for Foreigners||All shareholders, directors and commissioners eligible for work permit, unlimited amount of business visa sponsorships, work permits can be issued to foreign experts||Work permit for the chief representative, unlimited business visa sponsorships, 3 Indonesians for every expat hired|
|Foreign Ownership Restriction||Foreign ownership varies between 0% – 100% depending on the Negative Investment List||No restriction|
|Estimated Costs||USD 3700||USD 1200|
|Time Taken to Establish||23 days||13 days|
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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