Simple Steps to Establish PT PMA in Indonesia

In the continuous attempt to increase the national economic growth, the practice of investments has been proven beneficial to the public welfare. In general, investments are categorised into 2 (two) types, namely domestic investment and foreign investment. The importance of foreign investment is marked by its immense potential to improve sustainable economic development by maintaining a competitive economic system. Based on the Law of the Republic of Indonesia No. 25 of 2007 concerning Investments (the “Investment Law”), foreign investments must be in the form of a limited liability company under Indonesian law, and domiciled within the territory of the state of the Republic of Indonesia. It is imperative that establishment of a foreign investment company (Perusahaan Terbatas Penanaman Modal Asing “PT PMA”) is conducted in accordance with the applicable law. Consequently, this article shall provide you a better understanding regarding the aforementioned issue.

Considering their legal status as a limited liability company, PT PMA are subject to the Law of the Republic of Indonesia No. 40 of 2007 concerning Limited Liability Company (the “Company Law”). Art. 7 of the Company Law stipulates that a company shall be established by 2 (two) or more persons – be it a natural person and/or a legal person/entity – based on a notarial deed (Deed of Establishment or the “DOE”), obliging each founder to subscribe to the company’s shares upon the establishment of the company. The DOE must at least comprise following details:

a. article of association;
b. full name, place and date of birth, occupation, residence and citizenship of the individual founder(s); or the full name, place of domicile, and address as well as the number and date of the Decree of the Minister on the validation of the legal entity status of the founder(s) of the company;
c. full name, place and date of birth, occupation, residence, and citizenship of members of the Board of Director and the Board of Commissioners who were appointed for the first time; and
d. names of parties who have subscribed to a portion of shares, details of total shares, and the par value of issued and paid-up shares.

Prior to the drafting of the articles of association, founders of the PT PMA must first consult the Presidential Decree No. 44 of 2016 concerning List of Business Fields Closed and Business Fields Open with Conditions to Investment (the “DNI List”). The DNI List serves as a basis for available business fields for PT PMA. In order to gain clarification of the specific business fields contained therein, PT PMA are able to regard their line of business based on Indonesia Standard Industrial Classification published by Badan Pusat Statistik (the “KBLI 2017”). KBLI 2017 elaborates each business field recorded by Badan Pusat Statistik and thus provides certainty in discerning business fields mentioned in the DNI List. Should there not be any conflict between PT PMA’s line of business and the status of the business field stipulated by the DNI List, founders of the PT PMA are able to proceed in establishing the company.

In addition to the general requirement stipulated by the Company Law, establishment of PT PMA is subject to other regulations issued by the Investment Coordinating Board (“BKPM”). According to the Regulation of the Investment Coordinating Board No. 6 of 2018 concerning Guidelines and Procedure of License and Investment Facilities (“PBKPM 6/2018”), PT PMA must possess (i) net worth of the minimum of than IDR 10 billion excluding land and building; (ii) total investment value of the minimum of IDR 10 billion excluding land and building; and (iii) paid up capital of the minimum of IDR 2.5 billion. Furthermore, the nominal value of the shares for each shareholder is required to be in the minimum of IDR 10 million.

Should the requirements for the establishment of PT PMA have been met, PT PMA shall obtain a legal entity status by issuance of Decree of Ministry of Law and Human Rights regarding the ratification of PT PMA’s legal entity. However, at this stage, PT PMA have yet to be able to conduct its line of business because they have yet to obtain the required licenses. Pursuant to the Government Regulation No. 24 of 2018 concerning Integrated Electronic Business License Services, PT PMA are able to obtain business license through the Online Single Submission (“OSS”) system. The output of registration through OSS system shall be a Business License Number (Nomor Izin Berusaha or “NIB”), which serves as (i) Certificate of Company Registration (Tanda Daftar Perusahaan or TDP); (ii) Importer Identification Number (Angka Pengenal Impor or API) if PT PMA intend to import goods; and (iii) Customs Access (Akses Kepabeanan) if PT PMA intend to export and/or import goods. Subsequently, PT PMA are able to obtain other registration documents through the OSS system, including:

a. Taxpayer Registration Number (Nomor Pokok Wajib Pajak or NPWP);
b. Employment Social Insurance (BPJS Ketenagakerjaan) and Health Social Insurance (BPJS Kesehatan);
c. Approval Letter of Foreign Employee Utilisation Plan (Surat Pengesahan Rencana Penggunaan Tenaga Kerja Asing or RPTKA);
d. Fiscal incentives such as tax allowances or tax holidays (if applicable); and
e. Business License (e.g. Surat Izin Usaha Perdagangan or SIUP).

Finally, after concluding the abovementioned requirements, PT PMA are able to conduct their line of business in Indonesia.

Author: Yohana Veronica Tanjung

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