The required amount of minimum capital to set up a legal entity in Indonesia might seem like a straightforward issue, but this is often not the case.
It might be simple for locals to set up a local-owned company (PT), but it becomes more complicated for foreigners to set up a foreign-owned company (PT PMA).
The issue of minimum capital is also closely related to the type of business license, which may complicate the matter a little more.
Paid-up capital in Indonesia means the actual amount of funds injected into a company by shareholders. These funds are then exchanged for shares and issued for shareholders in the company.
These paid-up capitals will then be utilised for the initial and day-to-day company operations such as debts, payroll, and other expenses.
The Investment Coordinating Board in Indonesia (BKPM) specifies the minimum capital requirements for a PT PMA to be IDR 10 billion or the equivalent of US$710,000, depending on the industry foreigners invest in.
In fact, this amount of minimum capital is just a rough plan and will be invested in accordance with the investment plan proposed by the company – over a period of 3 years.
In general, the minimum capital is required for all industry to sustain the local and small-medium companies while encouraging foreign investments in large scale companies.
Currently, the paid-up capital for setting up a PT PMA in Indonesia is 25% of the minimum capital requirement – which is at least IDR 2.5 billion IDR or the equivalent of US$178,000. However, there are some exceptions.
For industries that are more capital intensive, for instances, financial and banking services, natural resources extraction, manufacturing, etc., higher minimum capitals are also expected and shall be listed in the investment plan.
Importantly, since OSS implementation, there is no longer a temporary and permanent business licence except for several business licences that are still issued by BKPM like energy resources, property and financial sector.
As for local companies, called PT, the amount of capital investment influences the size of the company as well as if a company can employ foreign workers. Currently, companies are divided into four categories:
In general, only medium-sized and large enterprises can pursue a foreign employee as the minimum required capital investment is above IDR 1.1 billion.
The minimum paid-up capital can be injected in the form of cash into the company’s bank account or in other assets. If the paid-up capital is put in with assets instead of cash, the value of these assets are determined based on the current market prices.
However, the value of buildings and land is excluded from the capital unless it is a company’s primary business activity in the field.
The details of the payment in assets must also be recorded in the Deed of Establishment (DOE), and the deadline for submission of capital statement letter is 60 (sixty) days after the DOE signing. The completion can be done online.
The legal representatives from Cekindo specialise in corporate law and thus will walk you through the formation process of your company in Indonesia and the minimum capital investment.
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