Investing in Indonesia: Foreign Ownership

Company Registration in Indonesia

oleh: Assyifa Umaiya Umar

Establishing a company is the first step to expanding business operations into Indonesia. There are many options business owners can opt for, but the most common types are a Foreign-Owned Company (PT PMA) or Representative Office. Each has its benefits, and one may be better suited for you based on your business expansion objectives.

To establish a foreign direct investment company in Indonesia you must:

First decide what business sector you are going to invest based on Klasifikasi Baku Lapangan Usaha Indonesia “KBLI” (Indonesian Classification for Business Sector).
Then, you must check whether the business sector is open with requirements or closed for foreign direct investment based on the Presidential Regulation No. 44 Year 2016 about “DNI” (Negative Investment List). If the business sector which you are interested in is not regulated, and no other restrictions from related technical ministries, then it means the business sector is open for foreign direct investment with a maximum foreign ownership of 100%. The legal entity of the FDI Company should be a Limited Liability Company or Ltd. Perseroan Terbatas or PT.

To make it easy, this summarised highly profitable sectors that can be explored by foreign investors, along with their foreign ownership allowance:

Business sectors allowing 100% foreign ownership à e-commerce businesses (min. investment: IDR 100 billion), bars, cafes, restaurants, hospital services, hospital management and consultancy, raw materials manufacturing for pharmaceuticals, and distribution affiliated with production, among others.
Business sectors allowing max. 67% foreign ownership à medical equipment testing institutions, internet service providers, call centers, airport activity services, and distribution and warehousing, among others.
Business sectors allowing max. 49% foreign ownership à e-commerce business (investment below IDR 100 billion), land transportation, passenger land transportation, and medical equipment supplier, among others.

WAYS TO INVEST IN INDONESIA

	Foreign-Owned Company (PT PMA)	Local Company (PT)	Representative Office (RO)
A. NATURE	Allows profit-generating business activities Allows up to 100% foreign ownership Ideal for business sectors not restricted to foreign investment negative list	Allows profit-generating business activities Allows only local ownership Corporate service arrangement as a viable option	Allows non profit-generating business activities Ideal for market research before actual operations and generating revenues
B. STRUCTURE	Min. 2 Shareholders (corporate/individual) Min. 1 Director (can be a local or a foreigner with a work permit) Min. 1 Commissioner (can be a foreign citizen with a work permit) At least one director needs to have the local tax card (NPWP) but does not have to be an Indonesian citizen	Min. 2 Shareholders (corporate/individual, all Indonesian) Min. 1 Local Director Min. 1 Commissioner (Indonesian)	No Shareholder or director is required One chief of representative office is sufficient
C. CAPITALISATION	Min. paid-up capital IDR 10 billion	Minimum paid-up capital for Local PT as follows: A micro-enterprise: less than IDR 1 billion A small enterprise: IDR 1-5 billion A medium enterprise: IDR 5-10 billion A large enterprise: more than IDR 10 billion	No capital requirement
D. BENEFITS	Can sponsor work and stay permits for foreign employees Full foreign ownership, thus full control of business	Lower incorporation cost Compared to PT PMA More open business sectors Offers an instant operation with turnkey solution	Low incorporation cos as no capital is required Allows employment of chief and assistant chief of representative office