How to Meet PT PMA Minimum Capital Requirements in Indonesia

The required minimum capital investment in Indonesia to set up a legal entity in Indonesia might seem straightforward, 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.

What is Paid-Up Capital in Indonesia

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 utilized for the initial and day-to-day company operations such as debts, payroll, and other expenses.

Minimum Capital Investment Requirements for a PT PMA

The Investment Coordinating Board in Indonesia (BKPM) specifies the minimum capital requirements for a PT PMA to be IDR 10 billion, depending on the industry foreigners invest in.

This minimum capital amount is just a rough plan and will be invested per the company’s proposed investment plan over three years.

In general, the minimum capital is required for all industries to sustain the local and small-medium companies while encouraging foreign direct investments (FDI) in Indonesia in large-scale companies.

Currently, the paid-up capital for setting up a PT PMA in Indonesia is also IDR 10 billion – but there can be some exceptions.

For industries that are more capital intensive, for instance, financial and banking services, natural resources extraction, manufacturing, etc., a higher minimum capital is also expected. Therefore, it shall be listed in the investment plan according to foreign investment regulations in Indonesia.

Importantly, since OSS implementation, there is no longer a temporary and permanent business license except for several business licenses still issued by BKPM, like energy resources, property, and the financial sector.

What are the Factors Affecting Foreign Direct Investment (FDI)?

FDI can boost a country’s economic development by creating jobs, transferring technology, and increasing business competitiveness. Factors affecting FDI include politics, economics, and culture, both internally and externally. 

Political stability, security, legal certainty, growth, inflation, interest rates, education levels, labor, culture, global economic conditions, and government policies can all impact FDI in Indonesia.

1. Political and Security Stability

Political and security stability is an important factor that can affect FDI. Foreign investors will be more interested in investing their capital in a country with good political and security stability.

2. Legal Certainty

Legal certainty is an important factor that can affect FDI. Foreign investors will be more interested in investing their capital in a country with good legal certainty.

3. Economic Growth

High economic growth is a factor that can attract foreign investors. Foreign investors will be more interested in investing their capital in a country with high economic growth.

4. Inflation Rate

A low inflation rate is a factor that can attract foreign investors. Foreign investors will be more interested in investing their capital in a country with a low inflation rate.

5. Interest Rate

A low-interest rate is a factor that can attract foreign investors. Foreign investors will be more interested in investing their capital in a country with a low interest rate.

6. Education Level

A high education level is a factor that can attract foreign investors. Foreign investors will be more interested in investing their capital in a highly educated country.

7. Skilled Labor

Skilled labor is a factor that can attract foreign investors. Foreign investors will be more interested in investing their capital in a country with skilled labor.

8. Open Culture

An open culture is a factor that can attract foreign investors. Foreign investors will be more interested in investing their capital in a country with an open culture.

What is the Legal Basis for Foreign Direct Investment in Indonesia?

Law Number 25 of 2007 on Investment is the legal basis for FDI in Indonesia. This law regulates various matters related to FDI, including:

• The definition of FDI
• Types of FDI
• FDI procedures
• Investor rights and obligations
• Government policies related to FDI

Law Number 25 of 2007 on Investment has undergone several changes, namely:

• Government Regulation Number 60 of 2007 on the Implementation of Law Number 25 of 2007 on Investment
• Government Regulation Number 91 of 2015 on the Second Amendment to Government Regulation Number 60 of 2007 on the Implementation of Law Number 25 of 2007 on Investment
• Government Regulation Number 24 of 2022 on the Third Amendment to Government Regulation Number 60 of 2007 on the Implementation of Law Number 25 of 2007 on Investment

The Indonesian government is continuously working to improve the investment climate in Indonesia, including FDI. This is done in various ways, including:

• Improving political and security stability
• Strengthening legal certainty
• Increasing economic growth
• Reducing inflation
• Reducing interest rates
• Improving the quality of education and labor
• Creating an open culture

These efforts are expected to attract more foreign investors to invest in Indonesia.

Capital to Start a Local Company PT

As for local companies, called PT, the number of capital investments influences the company’s size and if a company can employ foreign workers.

According to the latest changes laid out in  Job Creation Law, the classification of Local PT in Indonesia based on paid-up capital is as follows:

• A micro-enterprise: less than IDR 1 billion
• A small enterprise: IDR 1 – 5 billion
• A medium enterprise: IDR 5 – 10 billion
• A large enterprise: more than IDR 10 billion

Due to the high capital investment requirements, only large and medium-sized enterprises allow foreign employment.

Forms of Injection of Minimum Paid-Up Capital

The minimum paid-up capital can be injected as cash into the company’s bank account or other assets. If the paid-up capital is put in with help instead of cash, the value of these assets is 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 asset payment must also be recorded in the Deed of Establishment (DOE), and the deadline for submission of the capital statement letter is 60 (sixty) days after the DOE signing. After that, the completion can be done online.

Interested in Setting up a Company in Indonesia?

The legal representatives from InCorp Indonesia specialize in corporate law and thus will walk you through the formation process of your company in Indonesia and the minimum capital investment.

Contact us now for invaluable market insights and assistance, especially for the areas where our offices are located: Jakarta, Bali, and Semarang.