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.
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.
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 industries 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 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., 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 license except for several business licenses that are still issued by BKPM like energy resources, property, and the financial sector.
Capital to Start a Local Company PT
As for local companies, called PT, the number of capital investments influences the size of the company as well as 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 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
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.
Forms of Injection of Minimum Paid-Up Capital
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 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 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.
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