17 February 2020 (closed)
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When establishing a foreign investment limited liability company in Indonesia, there are several pitfalls foreign investors should be aware of. In the column of this week we discuss the most common pitfalls of foreign investors when establishing a limited liability company (PT PMA) in Indonesia. The pitfalls include the impact on investment when moving the business to another business location and the impact on investment when adding a business field / business activity to the PT PMA.
Pitfall 1: Move Business Location to Another Business Location in Indonesia
Based on article 13(3)(a) of BKPM Regulation 14 of 2015 on Guidelines and Procedures on the Investment Principle Permit (BKPM Regulation), a PT PMA is required to invest more than 10 billion rupiah in Indonesia in order to obtain their permanent business license. BKPM allows a PT PMA a certain period (usually between one to three years, depending on the type of business) to invest this 10 billion rupiah in Indonesia. Investors require to submit the development of investment to BKPM once every three months, until they receive their business license.
When changing the business location of a PT PMA to a different location (e.g. from Jakarta to Yogyakarta), this can have a severe impact on above-mentioned investment requirement. We will explain it through an example:
- PT A established their PT PMA on 1 January 2015 and invested until 1 July 2015 already 7 billion rupiah in Indonesia.
- PT A decided to move their business location from Jakarta to Yogyakarta on 1 July 2015, and applied for the change of the business location in their Investment Principle Permit.
Consequence for PT A:
Because of the change of business location, the previous investment of 7 billion rupiah are nullified by BKPM, and the PT PMA will need start calculating its investments in Indonesia from zero again.
Above consequence is based on the same article 13(3)(a) of the BKPM Regulation, which states that the minimum investment amount applies to an investment within a city or district. Thus, if companies change their business location to another city or district, the required investment amount starts again from zero.
Pitfall 2: Adding or Registering Multiple Business Fields for a PT PMA
As mentioned above, the minimum investment capital for a PT PMA is 10 billion rupiah. However in case a PT PMA wishes to be active in more than one business fields, the minimum investment amount will be higher. For each new business field an additional investment of 10 billion rupiah is required. A company can have maximum five business fields, so in case a PT PMA has registered five business fields, it requires to invest 50 billion rupiah in Indonesia.
This column is provided by PNB Law Firm Jakarta
Thanks for interesting article!