Foreign Investment of Limited Liability Company (PT PMA)

In Indonesia, investment is regulated in Law No. 25/2007 concerning Investment. In article 5 paragraph (2) of the investment law, it is stated that it is Mandatory for investment in Indonesia established in the form of limited liability companies (PT), unless the law stipulates others. (Foreign Investment of Limited Liability Company Hereinafter referred to as PT PMA)

I. WHAT IS PT PMA?

Article 1 of the Investment Law states:

“Investment is the activity of investing in doing business in the territory of the Republic of Indonesia carried out by foreign investors. Either using fully foreign capital, or joint venture with domestic investors.”

If there is any element of capital from foreigners, the company must be in the form of Limited Liability Company of Foreign Investment / PT PMA. Therefore, PT PMA is a limited liability company established under Indonesian law by using foreign capital.

II. PROCEDURE IN ESTABLISHING & REGISTER PT PMA

Several Things to be Prepared Before Establishing PT PMA

Before investors decide to register PT PMA in Indonesia, they must examine business activities by referring to the Negative Investment List (DNI) that sets foreign ownership limits for certain business classifications. This list (DNI) was issued by the Capital Investment Coordinating Board (BKPM).

1.Check the Negative investment List (DNI) applied in Indonesia.

Currently, there are business sectors that are closed to foreigners, open under certain conditions, and open without any conditions. If the type of business is in the list of closed business fields based on DNI, permission will not be granted.

1. PT PMA recognized in Indonesia must have a minimum initial capital of around Rp 10 billion. Of this amount, 25% must be paid as Paid-in Capital.
2. Determine the domicile of the company. PT PMA can only be established if there is a physical building or office.

2. Make sure the company has completed the administrative requirements of establishing Limited Liability     Company (LLC/PT) in general such as:

1. Deed of Establishment of LLC / PT
2. Decree of the Minister of Law and Human Rights regarding the legalization of LLC/PT
3. Corporate Tax ID Number/NPWP

3. Requirements: To be able to establish PT PMA, the company must meet the investment and capital value requirements to obtain an Investment Licensing

1. has net worth of more than Rp10 billion excluding land and buildings of business premises, based on the latest financial statements or having annual sales results of more than Rp50 billion based on the latest financial statements;
2. has total investment value more than Rp10 billion, excluding land and buildings;
3. has the same issued capital value as paid up capital, at least Rp 2.5 billion.
4. Regarding the percentage of share ownership calculated based on the nominal value of shares, and for each shareholder, the shareholding of at least Rp 10 million.

4. Have Business Identification Number (NIB) and other business permits that can be submitted with the Online Single Submission (OSS) system or Capital Investment Coordinating Board (BKPM) in accordance with the company’s business sector.

NIB/Business Identification Number is the identity of the business actor issued by the OSS Institution after the business actor has registered. NIB at the same time applies as: Certificate of Company Registration, Import Identification Number (API), and Customs Access.

REGISTRATION OF PT PMA :

1. BY OSS (Online Single Submission)
2. By BKPM (Capital Investment Coordinating Board)

Presidential Regulation No. 24 of 2018 concerning Integrated Business Licensing Services: the business licensing sector that can be submitted through the OSS system, including:

1. Business Licensing in the Electricity Sector
2. Business Licensing in the Agriculture Sector
3. Business Licensing in the Environment and Forestry Sector
4. Business Licensing in the Public Works and Public Housing Sector
5. Business Licensing for the Maritime and Fisheries Sector
6. and others.

read also: Learning about Corporate Law : What is Mergers and Acquisitions? And Why Do Companies Perform Mergers and Acquistions?

For licenses that are not regulated in Presidential Regulation No. 24 of 2018 concerning the Electronically Integrated Business Licensing System, applications for business licenses can be submitted through the Central PTSP at BKPM : Use the application form in accordance with the format in Attachment I of Perka BKPM 6/2018 or related ministerial regulations / non-ministerial government agencies. (as regulated in Perka BKPM 6/2018.)

LICENSING PROCEDURE BY ONLINE SINGLE SUBMISSION (OSS)

1. Make a User-ID
2. Log in to the OSS system by using the User-ID
3. Fill in data to obtain a Business Identification Number (NIB)
4. For new businesses, carry out processes to obtain basic licenses, business licenses, and / or commercial or operational licenses, with their commitments.

LICENSING PROCEDURE BY CAPITAL INVESTMENT COORDINATING BOARD (BKPM)

1. Apply Temporary Permission
2. Register the Investment to the Capital Investment Coordinating Board (BKPM)
3. Application of Principle Permission
4. Application for Business License
5. The Process after Obtaining Business License
6. Submitting the Reports on the Investmens Activities (Laporan Kegiatan Penanaman Modal/LKPM).

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