Minimum capital requirement for setting up PT PMA

Minimum capital requirement in Indonesia

Foreign owned companies, called PT PMAs, are required to have a minimum capital of at least Rp. 10 billion (~$US750,000 with current exchange rates). This is Indonesia’s government way to protect local small businesses from foreign competition and limit the foreign investments only to large scale companies.

In the past the enforcement of the law used to be weak and therefore thousands of companies, especially in service sectors, were set up with capital only showed on paper. In 2015 Investment Coordinating Board (BKPM) has decided to tackle the issue and effectively ending the practice of setting up foreign companies with less capital.

The following article is about how the capital needs to be invested and reported.

Investment plan vs paid up capital

Illustration

Investment plan and paid up capital are two different things. Investment plan, as its name refers, is a plan of how much and in which ways company will use the investment capital.

Minimum capital requirement to start a PT PMA is for ALL industries 10 billion Indonesian Rupiah. BKPM converts that based on exchange rate to USD (~ US$ 750,000).

In case you need to make changes to the capital later, here’s our article about company restructuring.

If your investment plan will be substantially smaller than this, then an alternative is to have a Nominee Company that allows you to operate in Indonesia without complying with foreign owned company regulations.

In some cases the capital should be higher than minimum

In private conversations BKPM officials always suggest that if your industry is manufacturing or other capital intensive business field, your investment plan should be higher. But, as long as your investment plan is at least for that amount, it is very unlikely for BKPM to refuse your investment application.

10 billion IDR investment plan should not be confused with the minimal capital requirement for running business in certain industries, such as banks where the liquidity of the company is necessary to protect the consumers.

Do you need to pay up your investment plan?

You do not need to transfer 10 billion to some bank account in order to receive investment approval. For different industries the process of paying capital is going to be different (we will update this article as the changes are going to be rolled out). For consulting companies and most other service sector companies, here’s the process of registering a consulting company in 2015.

In case your company applies for more than one business classification, you need to multiply the investment plan with as many industries as you apply for. Therefore we always advise our clients to be very clear about their actual business activities in Indonesia.

Company registration with Indosight

Paid up capital

Ministry of Human Rights & Justice requires at least 25% of the investment plan to be a paid up capital, therefore not less than Rp. 2.500.000.000 (~USD 250,000) There are two ways how to meet this requirement:

  1. Transfer the funds to an Indonesian company’s bank account
  2. By signing a Capital Statement Letter (sign by all shareholders) which clearly stated that the funds are available as paid up capital in the PT PMA [update September 2015: this method might disappear soon]

Capital statement letter, according to the Ministry Of Justice & Human Rights there is a following letter issued that states the requirements for proving the paid up capital (in Bahasa Indonesia):

 In rough translation the key sentence is the following:

Funds[…] have been deposited in cash by the company and will be deposited to company’s account after the issuance of ratification from Ministry Of Law And Human Rights

Law enforcement of minimum capital

 

As we mentioned in the beginning of this article, the enforcement of the minimum capital wasn’t in place until 2015. Now it is changing quickly and foreign investors should expect to be paying up the capital as required by the law.

It is also crucial to keep your company’s compliance well in order to avoid problems with various governmental institutions. Foreign investors are under more strict surveillance and complying to local laws, regulations and customs is the only way to be in the business here in the long run.

If you have any additional questions or comments, feel free to leave them to the comments section or contact us directly.

Indosight

Market entry services in Indonesia

Indosight provides legal and payroll services to companies entering and expanding in Indonesia. Get in touch with our consultants regarding our company registration, payroll, compliance or visa services.


The information provided will remain confidential to Indosight and will only be used to schedule and prepare for the meeting.

27 thoughts on “Minimum capital requirement for setting up PT PMA

  1. Fendy

    Hi, i am lawyer from Malaysia.I found your blog really helpful.Could you give me the rules/law/order specifically laid the requirement of minimum paid up for PMA in Indonesia? Thanks in advance.

    • Lauri

      Hi Fendy,

      the investment law states that the government must protect local small and medium sized enterprises, which essentially means PMAs can only be large companies. This is enforced by BKPM, which has a right to reject any investment plan that they find too small.

      There is no law or regulation regarding that, but BKPM is following the rule that investment plan must be minimum 10 billion IDR, 25% of it as paid up capital. The latter requirement comes from the company law and needs to be presented to Ministry Of Law And Human Rights as a statement letter from notary.

      I hope that answers your question.

      Lauri

  2. Sia

    Hi Lauri, We are interested to start a Boarding House business in Bali. Is it possible if we do not have enough funds that meet the minimum capital requirement? What should we do in order to start up our business?

    • Lauri

      Dear Sia,

      First of all, for investment plan you can write anything related to your business activities regardless whether you actually have money for it now or not. It is important to show that your business is PLANNED as a big business in order to get investment approval.

      Secondly, your notary will be able to issue statement letter saying that once the company is registered, you will transfer the minimum paid up capital. This is all you need for getting your company registered, the actual payment will not be followed up by the government.

      An alternative is to register the company as local business, in case you have reliable local partner. Then you can have the business as a small enterprise and the capital requirement is much smaller.

      Note that in any case foreigner can only own up to 51% of guesthouse.

      Lauri

      • Elaine Liew

        Do you mean that the foreigner can hold up to 51% of a PT company?

        • Indosight

          Dear Elaine,

          Foreign ownership is regulated by the Negative Investment List and depends on the business classification. If your business activities are in the negative list, foreign ownership is restricted or prohibited, if not, it can be owned 100% by foreign shareholders.

  3. Daniel

    Hi,
    i want to set up a local business. Is there also a minimum capital required?
    And if yes, how much of it must be paid up?
    Thank you very much.

    Daniel

    • Indosight

      Hi Daniel,

      By local company you mean company with only Indonesian shareholders or company registered in Indonesia?

      There is no law regarding PT PMA minimum capital but a common practice. BKPM expects investment applications to have a PLAN for at least 10 billion IDR (approx. 1.2 million USD).

      At least 25% but not less than 300,000 USD should be paid up capital. In reality it means you need a letter from notary saying that those funds will be transferred once your company is registered and you are able to open a local bank account. So in reality no paid up funds are needed.

      Lauri

  4. David

    Hi Daniel ,
    Can you pls advise me what are those business closed to PMA? Can a PMA form Joint Venture with local CV company to build Hotels?
    Thank you
    David

  5. James

    Dear Lauri

    What does it mean by “100% domestic capital”?

    Thanks

    • Indosight

      Indonesian corporate law distinguishes shareholders holding Indonesian passport and others. There are business fields that can only be owned by local shareholders.

      Even 1% foreign shareholders would mean the company is not local but foreign direct investment company.

  6. Samuel

    Dear Lauri,
    Thanks for this interesting article. About paid-up capital, must it be only in cash or (in the case of the creation of a manufacturing company) can we also register fixed assets (as machines and other equipment to be bought or already bought) as part of the paid-up capital, and then, deduce the value of the fixed asset from the USD 300,000 to have the remaining amount to be paid by cash?
    Thanks a lot!

    • Indosight

      Dear Samuel,

      Yes, machinery and equipment can be used as paid up capital. Buildings and other factory facilities cannot.

      Lauri

  7. ks choi

    Thanks for your article that is helpful. I stay in Bandung. I am planning to open a restaurant. My notary told that I have to invest total mininum of 1.2milion US
    D within 2 years. Otherwise I can not get permanent permit. Is it true?

    Ks choi

  8. Mohammad

    Dear Sir/Madam
    I’m going to establish a PMA company in Jakarta Pusat.
    I’ve found a notary to register it for me.
    the notary says that there is no need to pay even USD300.000 and it’s formalities.
    he says that when company is registered and you are supposed to open a banking account, you can deposit a small amount of money less than USD 300.000 .
    you’ll not have any problem with government unless you have any fraud cases or corruption.

    are they correct or they are cheating.

    • Indosight

      Dear Mohammad,

      It is true that government won’t check whether you actually transfer the 300,000 USD or not. However, later you will be applying for permanent business license and depending your industry they might check the realization of investment plan.

      Good luck,

      Lauri

  9. jia

    hi, can i know what kind of business does have limited foreign ownership? can foreigner have 100% for ie. restaurant. Also how can i look for empty space to rent? i cant find any information online.

    • Indosight

      Hi Jia,

      Any business not in the negative investment list can be owned 100% by foreigner. Restaurant business is in the negative investment list, depending on the type of restaurant foreigner can own up to 49 or 51%.

      As for office space, it’s best to hire property agent as Jakarta commercial property occupancy rates are extremely high (above 90% in the main business areas) so it is very hard to find office on your own.

  10. Tienus

    In what extent does it matter in which sector your planning to set up a business? For example the ICT sector (programmers/engineers) ? It is open for foreign investment according to the Negative investment list. So, if you open a department in Indonesia, are you free to set up a PT or PMA with foreign capital without the obligation of meeting the capital requirements?

    • Lauri

      Hi Tienus,

      There are two options – (1) if you open a limited liability company then regardless of your classification you still need to meet the minmum capital requirements. (2) Alternatively you can open a representative office which can act as a department of your overseas business. In such case you don’t need to meet the minimum capital requirements but you are also not allowed to earn revenue in Indonesia.

      More about different legal entity formats can be found here.

  11. Vipin Kumar

    Dear

    I want to commence business in Indonesia through a Nominee Company.
    I want to know capital structure that would of the company with minimum capital investment.
    The organisational structure in the form of management(i want to control the management of the company) and ownership(the minimal domestic ownership and with maximum foreign ownership).
    Please guide us through the process.

  12. MUHAMMAD SHAHID

    I want to setup a retail business in indonesia through a nominee company.
    I want to know capital structure that would of the company with minimum capital investment.
    the organizational structure in the form of management(I want to control the management of the company) and ownership (the minimum domestic ownership and maximum foreign ownership.
    Please guide me through the process
    thanks n regards !
    MUHAMMAD SHAHID

  13. duncan

    Hi

    I would like to start up a property development & building company in Indonesia, what are the restrictions on foreign share and ownership of the Company?
    Is this Structure able to purchase the land?

  14. paek

    If a PMA company and a foreign company invests together to form a JV, will the PMA’s capital regarded as “foreign” when there’s cap limit of foreign ownership(negative list)?

  15. Eva

    Hi laura, because of many chances in the past months we got the information that a pt now have to be owned a 100 percent by local people.. Is that true? And do you know how to get the negative list? Thanks so much.. Very interesting page.

    • Indosight

      Hi Eva,

      Your sources might be mixing up local PT (limited liability company) and PT PMA (llc with foreign direct investment). A local company is a local company as long as it doesn’t have any foreign ownership. Even 1% of foreign investment makes it a PT PMA.

      Negative Investment List can be found here: Negative Investment List

      You can send us more information about your plans to our email (contact@indosight.com).

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