Economic globalization is the root that make every country connected. As the consequences, this has positively increase investment activities between countries including in Indonesia commonly known as Foreign Investment or Penanaman Modal Asing (PMA).
Foreign Direct Investment or PMA is and investment activities conducted by the investor to do business in Indonesia. PMA is carried out by establishing a legal entity in the form of Limited Liability Company (PT PMA) through many investment structure namely wholly owned foreign subsidiaries or joint ventures with other foreign investor(s) or with domestic investor(s).
In general, there are 2 (two) ways in the establishment of PT PMA. The first one is to newly establish a PT PMA, and the second is by acquiring equity shares in and further change the status of local limited liability companies to become PT PMA.
The followings are things that you need to do for the preparation of establishing a PT PMA:
- Do research
Initial research on the business activities and feasibility studies is essential prior to initiating the investment plan. Investors need to understand the business and market conditions including investment policy applied in the target countries including in Indonesia. As a foreign investor, you will need to know investment policy including potential restriction or limitation of foreign investment as well as regulatory requirements applied to the specific industry. In Indonesia, a regulation known as Negative List of Investment (Daftar Negatif Investasi/DNI) is applied for certain line of business which currently regulated under the Presidential Regulation No. 44 of 2016 regarding List of Business Activities Closed for Investment and Line of Business Open with certain requirements.
DNI is divided into 3 (three) categories, namely:
- Closed Business Field / Bidang Usaha yang Tertutup.There are about 20 (twenty) business fields which are closed for investment under this section, including but not limited to the cultivation of marijuana, catching forbidden fish species, betting/gambling business, production of trading of explosive, and utilization coral for building materials or pond or aquarium decoration.
- Open Business Field with Requirements. This section provide foreign investment on business fields under certain requirements including but not limited to the business fields which requires partnership with Small and Medium Scale Business (Usaha Kecil Menengah/UKM) and Cooperation, business fields which requires partnership with local business, and business which is available in certain location and required to obtain specific licenses.
- Open Business Field. Under this section the business can be entered without specific restrictions for foreign investment.
- Prepare the Requirements.
There are several requirements that you must prepare for the establishment of the PT PMA, such as:
- Preparing the data for the establishment of PT PMA, such as: Name of the PT PMA, domicile and project location of the PT PMA, purpose and objectives of Line of Business of the PT PMA, as well as the capital structure.
- Name of the PT PMA consist of three phrase or words, and avoid the use of foreign words.
- Domicile and location of PT PMA is the address of legal domicile of the PT PMA. The address can be specified, must also described detail of the city that the PT PMA is located.
- The purpose and objectives of the PT PMA which set out line of business and activities which become the objective of the establishment of the PT PMA. This data must also be filled along with the line of business of the PT PMA. Please ensure that the purpose and objectives described in line with the Indonesian Standard Business Classification (KBLI) in order comply with the requirement and avoid unnecessary problem during the application process. You may check the KBLI under the Regulation of the Head of the Central Statistics Agency No. 19 or 2017.
In respect to the capital structure of PT PMA, the arrangement will depend on agreement between the founders of the PT PMA. Total investment value for one line of business will depend on the type of the industry and the size of the investment however the Investment regulation set out the minimum investment that must be made for each 1 (one) line of business in a minimum of 10 (ten) Billion Rupiah, with the minimum paid up capital which must be placed and deposited into the PT PMA account of at least 25% of the total investment value or equal to 2,5 (two point five) Billion Rupiah.
Author: Safira Ayudia / Andry Yudistira
Now you can set up your PMA soon! Still confused? Or don’t have time to take care of it? We can help you. Please contact our Hotline at: 0821-1234-1235 or email bpl@smartlegal.id.