How to Meet PT PMA Minimum Capital Requirements in Indonesia

How to Meet PT PMA Minimum Capital Requirements in Indonesia

  • InCorp Editorial Team
  • 19 August 2024
  • 8 minute reading time

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 further.

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 to shareholders. These paid-up capitals will then be utilized for the initial and day-to-day company operations such as debts, payroll, and other expenses.

What is Minimum Capital Investment Requirements for a PT PMA

The Investment Coordinating Board in Indonesia (BKPM) specifies that the minimum capital requirement for a PT PMA is IDR 10 billion, depending on the industry foreigners invest in. This minimum capital amount is just a rough estimate. According to the company’s proposed investment plan, it will be invested over three years.

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

A higher minimum capital is also expected for more capital-intensive industries, such as financial and banking services, natural resources extraction, manufacturing, etc. Therefore, these industries shall be listed in the investment plan according to foreign investment regulations in Indonesia.

Importantly, since OSS implementation, temporary and permanent business licenses have not been issued except for several still issued by BKPM, such as those for energy resources, property, and the financial sector.

Minimum Capital Investment Requirements: The Exception

There are exceptions, such as for PMA companies in trading. Additionally, all PMA Companies must have a minimum issued and paid-up capital of at least IDR 10 billion (or its equivalent in USD).

This requirement generally applies across sectors unless otherwise specified by relevant laws and regulations, such as those governing the banking sector, which may require a higher capital threshold.

Generally, to operate a single business in one location, classified under the Indonesia Industrial Standard Classification (Klasifikasi Baku Lapangan Usaha Indonesia), the minimum investment must exceed IDR 10 billion (excluding land and building costs).

What Type of Presence do Investors Need to Set Up a Business in Indonesia?

Investors looking to engage in business in Indonesia through foreign direct investment typically have two options:

  • Establish a local subsidiary as a limited liability company, a PT PMA company (Perusahaan Penanaman Modal Asing), specifically for foreign investment purposes.
  • Set up a representative office (RO). According to Law No. 25 of 2007 on Investment (the “Indonesian Investment Law”), foreign investors intending to engage directly in commercial or business activities, such as providing services or selling goods in Indonesia, must establish a PMA company. 

A PMA company is a fully registered legal entity that can engage in various business activities as Indonesian regulations allow. Alternatively, investors can establish an RO, a licensed office set up by a foreign company in Indonesia. 

An RO’s activities are limited. They typically involve market research and acting as liaisons to connect its overseas headquarters with contacts in Indonesia. ROs are generally restricted from engaging in direct business activities, such as signing contracts, issuing invoices, or receiving payments.

How to Invest in Indonesia

Foreign investors seeking investment opportunities in Indonesia can consider the following phases of investment: 

How to Invest in Indonesia

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.

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.

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 Indonesia.

Capital to Start a Local Company PT

For local companies called PT, the number of capital investments influences the company’s size and whether it 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.

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Interested in Setting up a Company in Indonesia?

InCorp Indonesia has over a decade of experience in market entry, specializing in assisting businesses in establishing their presence in Indonesia. Our team of experts ensures a seamless company registration and licensing process, guiding you to set up your operations in the country successfully.

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 InCorp now, and we will help you with a seamless company incorporation in Indonesia. Fill out the form below to discuss your matter with our experts.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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Frequent Asked Questions

It depends on the type of company you decide to establish.
  • In a local (PT) company, a foreigner cannot become a commissioner. It is possible to have a foreign director, but there has to be at least one local Director in PT.
  • In a foreign-owned (PT PMA) company, a foreigner can be a director or a commissioner.

Foreign citizens can expand to Indonesia and establish a foreign-owned company (PT PMA). Depending on the business line you want to pursue, there are regulations for foreigners to follow when setting up a company in Indonesia. One of the most important is the so-called Positive Investment List, which is updated frequently and with other Indonesian regulations.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.