Company establishment in Indonesia by foreigners can be done through a specific limited liability company for foreign investors. Such company is known as a PT PMA. A PT PMA is subject to more stringent company establishment requirements as compared to local limited liability companies (known as PT). In the column of this week we discuss the requirement to invest more than 10 billion Indonesian rupiah (currently equivalent to approx. USD $750,000), the implementation thereof by foreign investors, and the consequences for not reaching the required investment amount.
Company Establishment Requirements Set by BKPM
BKPM (investment body) Regulation number 14 of 2015 regarding the Guidelines and Procedures for the Investment Principle Permit (BKPM Regulation), sets the requirements for foreign investors that intend to establish a PT PMA in Indonesia. The BKPM regulation sets the following company establishment requirements:
1. The total investment value of the PT PMA must be more than 10 billion Indonesian rupiah. For calculation of the total investment value, buildings or lands may not be included in the calculation.
2. The PT PMA must at least have an issued share capital in the amount of 2.5 billion Indonesian rupiah. When calculating the total investment value based on point 1, the issued share capital may be included into the calculation.
Investment Requirement for PT PMA
As stated above BKPM requires foreign investors to invest more than 10 billion Indonesian rupiah in Indonesia. BKPM will not issue a business license for the PT PMA before the PT PMA has invested more than 10 billion Indonesian rupiah.
Once established the PT PMA obtains his principle investment license, with which it is allowed to perform business activities in Indonesia. A principle permit is valid for a period of one until five years depending on the business field of the PT PMA. In case the PT PMA did not yet obtain a business permit before the expiration of the principle investment license, the principle investment license may be extended by BKPM. Such extension is subject to a prior examination of the investment activities of the PT PMA by BKPM. If the extension request is rejected by BKPM, the principle investment license will be revoked. As a consequence the PT PMA is no longer allowed to perform business activities in Indonesia.
Based on the foregoing it is essential that PT PMA companies take their investment in Indonesia serious to prevent revocation of the principle investment license.
This column is provided by PNB Law Firm Jakarta