Step-by-step to Set Up a Business in Indonesia

With its huge market potential, Indonesia gets more and more attention of foreign investors to set up a business in the country. Apart from the benefits, Indonesia Law No. 40/2007 rules that foreign investors can conduct commercial activities in Indonesia by setting up a legal entity called a foreign investment company or PT PMA (Perseroan Terbatas Penanaman Modal Asing). This entity can be owned 100% or partially by foreign investors. The problem is, it takes a lot of time and efforts, if you do not know what to deal with and how to do it. Here we write the step-by-step to set up a PT PMA specifically.

1. Basic Information

There are some basic information you need to know before you decide that you need to make PT PMA. Firstly, not all sectors are open for foreign investment. If a sector is closed to foreign investment, certain percentage of partial ownership should still be owned by an Indonesian, which, in this case, can be your partner. To find out about this, you can refer to this Negative Investment List, which is compiled and revised regularly.

Secondly, you might not necessarily need a PT PMA. If you are just going to do market research, networking, etc, which do not involve commercial transactions, you can establish a representative office instead of PT PMA. This can be particularly useful if you are not sure whether the business sector you are going to open in Indonesia have positive market potential.

2. Reach out the BKPM

If you have decided to have PT PMA, the first step to do is heading to BKPM (the Indonesia Investment Coordinating Board), which is the Indonesian government for investment service agency. However to make sure all permits are arranged properly and smoothly, many of foreign investors are considering to hire a local company or agency specialized in company establishment matter, rather than arranging the permits by himself.

3. Prepare the Cost

Although it depends of each sectors, but the general cost using an agency to set up PT PMA is around US $3,000 and can take up to 10 weeks. If time is your constraint, you can consider to buy an existing PT PMA, or even buy an existing PT (Perseroan Terbatas) then convert it into PT PMA after acquisition. PT is just like PT PMA, but local-owned one.

Besides the cost for the license, investors should also comply with minimum capital requirements for foreign investments, which is IDR 10 billion or USD equivalent value, at the moment. Paid up capital is generally set at 25%, which is IDR 2.5 billion, or higher.

4. Prepare the Documents

To establish PT PMA in Indonesia, you might generally require following documents (with estimated time):

• Principle License & Business License from BKPM (7 days)
• Deed of Establishment (containing the Articles of Association) legalized by a Public Notary (1-2 days)
• Legalization of the legal entity status of the PT PMA by the Ministry of Law and Human Rights (10 days)
• Domicile Letter from the local district authority (3 days)
• Tax Identification Number (NPWP) and taxable entrepreneur confirmation (PKP) from the tax office (3 days)
• Company Registration Certificate (TDP) from the agency for integrated licensing services (BPPT) (14 days)
• Manpower Report and Company Welfare Report from the sub-department of the Ministry of Manpower (7 days)

Please note that additional licenses and/or documents might be required for specific sectors. Accordingly, legal advice should be sought before engaging in any investment activity.

Besides above documents, the shareholders should also present the deed of establishment which needs to be legalized by a public notary.

After you understand the steps should be taken to set up a PT PMA, it will be easier to put these factors into consideration on the investment plan. Should you require more information, feel free to contact us with any questions.