Basic Requirements for Foreign Direct Investment (FDI) in Indonesia

• admin
• June 27, 2023
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As the fourth most populous country in the world with young work force and large and growing domestic market, Indonesia has become one of the leading economies in the world and a hub for Foreign Direct Investment (FDI). Most of the industries and other business activities in Indonesia are open for foreign investment except those listed in Negative Investment List or DNI (Presidential Regulation No. 44 Year 2016).

The Foreign Direct Investment Company (PMA – Penanaman Modal Asing) can be legally established a Limited Liability Company or Limited (PT – Perseroan Terbatas). The first and foremost step to establish a foreign direct investment company (PMA) in Indonesia is to decide the business sector to invest in accordance with Indonesian Business Sector Classification (Klasifikasi Buku Lapangan Usaha Indonesia/KBLI). Business Sector is then to be checked in accordance with the Negative Investment List or DNI (Presidential Regulation No. 44 Year 2016) for investment restrictions. If the business sector is not regulated in Negative Investment List and there are no other restrictions from related ministries that means the business sector is open for Foreign Direct Investment with a maximum foreign ownership of 100%.

Basic Requirement to Establish a Foreign Direct Investment Company (PMA)

1. Company Location/Office

Company can be established in any part of Indonesia. However, there are restrictions for some business sectors in certain regions, Industrial Law No. 3 Year 2014 and Government Regulation No. 142 Year 2015 has mandated that any industrial activities shall be located in industrial estates. An office is to be rented before the company registration starts.

2. Company Management

The Foreign Direct Investment Company (PMA – Penanaman Modal Asing) will be legally established as a Limited Liability Company or Limited (PT – Perseroan Terbatas). A Limited Liability Company or Limited (PT – Perseroan Terbatas) in Indonesia requires minimum 2 (two) shareholders. Those can be individual or corporate shareholders or combination of both. The company also requires minimum 1 (one) Director and 1 (one) Commissioner. More that one Directors and Commissioners are allowed as well. The Directors and Commissioners of the company can be foreigners or Indonesian citizens or combination of both. However, having an Indonesian Director will make the registration process much easier.

3. Company Capital

The minimum registration capital requirement for a Foreign Direct Investment Company (PMA – Penanaman Modal Asing) is Ten Billion Rupiah (IDR 10,000,000,000) or more and the paid up or issued capital is 2.5 Billion Rupiah (IDR 2,500,000,000) or more. Each shareholder must own at least 10 Million (IDR 10,000,000) worth of shares in the company.

 

Foreign Direct Investment Company (PMA) Establishment Procedure (Steps Involved)

1. Company Name Registration with Ministry of Law and Human Rights (Kementerian Hukum dan Hak Asasi Manusia Republik Indonesia)
2. Company Article of Association & Deed of Establishment
3. Tax Identification Number (NPWP) Registration with local Tax Office
4. OSS (Online Single Submission) User Registration
5. Company Registration Number (NIB – Nomor Induk Berusaha) and Business License (Izin Usaha) from OSS (Online Single Submission) System.