Frequently Asked Questions: #foreigninvestmentindonesia

A PMA (Penanaman Modal Asing) company is a foreign direct investment entity in Indonesia that allows foreign investors to own and operate a business in the country. Key points about PMA companies include:

• Legal structure for foreign investment in Indonesia
• Allows foreign ownership of businesses, subject to certain restrictions
• Registered through the Online Single Submission (OSS) system, overseen by the Ministry of Investment and Downstream Industry (BKPM)
• Must comply with the Positive Investment List (Presidential Regulation 10/2021, as amended), which replaced the old Negative Investment List (DNI) and opens most sectors to full foreign ownership
• Requires an investment plan of more than IDR 10 billion (approximately USD 600,000) per business classification (KBLI) per location, with minimum paid-up capital of IDR 2.5 billion
• Offers benefits such as the ability to sponsor foreign work permits and conduct business activities across Indonesia
• Subject to specific tax regulations and reporting requirements for foreign-owned entities
• May require local shareholders in a small number of restricted business sectors
• Provides a formal structure for foreign investors to participate in Indonesia’s growing economy

Setting up a PMA company involves several steps, including OSS registration, company incorporation, obtaining necessary risk-based licenses, and ensuring ongoing compliance with Indonesian regulations. It’s advisable to seek professional assistance when establishing and managing a PMA company to navigate the complex regulatory environment effectively.

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In Indonesia, foreigners can establish several types of business entities, each with its own characteristics and requirements:

1. PT PMA (Perseroan Terbatas Penanaman Modal Asing)
   • This is the most common form for foreign investment
   • A limited liability company with foreign shareholders
   • Subject to the Positive Investment List (Presidential Regulation 10/2021, as amended), which opens most sectors to full foreign ownership
   • Minimum capital requirements apply
2. Representative Office
   • Types include:
     • Foreign Company Representative Office (KPPA)
     • Foreign Trade Company Representative Office (KP3A)
     • Foreign Construction Services Representative Office (BUJKA)
   • Cannot engage in direct commercial activities or generate revenue in Indonesia
   • Useful for market research, liaison, and promotional activities
3. Branch Office
   • Only available in certain sectors (e.g., banking, oil and gas)
   • Directly controlled by the foreign parent company
   • Limited availability and subject to specific regulations
4. CV (Commanditaire Vennootschap - Limited Partnership)
   • Available to Indonesian citizens only
   • Foreign direct investment must take the form of a PT PMA under Law 25/2007, so a CV is not an option for foreign investors
5. Foundation (Yayasan)
   • Non-profit organization
   • Can be established by foreigners for social, religious, or educational purposes
   • Cannot engage in commercial activities
6. Permanent Establishment (Bentuk Usaha Tetap - BUT)
   • A permanent establishment for tax purposes
   • Not a separate legal entity
   • Typically used for specific projects or contracts

When considering which entity to establish, foreigners should:

• Consult the latest Positive Investment List (which replaced the Negative Investment List in 2021) to check sector conditions
• Consider the nature and scope of their intended business activities
• Evaluate minimum capital requirements and investment plans
• Assess long-term business goals and expansion plans in Indonesia

It’s important to note that regulations and requirements can change, so it’s advisable to consult with a professional service provider like Okusi Associates for the most up-to-date information and guidance tailored to your specific business needs.

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The process for setting up a PMA company in Indonesia involves several key steps:

• Investment Permit: This involves document research, review, and preparation for investment approval.

• Company Incorporation:

  • Preparation of Articles of Incorporation
  • Drafting and notarization of the Deed of Establishment

• Obtaining Operating Licenses and Other Permits:

  • Business Identification Number (NIB) via the OSS system
  • Tax Number (NPWP)
  • Risk-based business licenses as required for the sector
  • Submission of all required documents and follow-ups

• Document Translations: English translations of all important company documents are provided.

• Bank Account Setup: Assistance in opening corporate bank accounts in Indonesia.

• Business Visa Sponsorship: Free Single Entry Business Visa sponsorships are provided while the company establishment is in progress.

• Additional Support and Advice: Guidance on staff recruitment, community relations, and government relations to help navigate the Indonesian business landscape.

Before initiating the process, it’s crucial to:

• Check the Positive Investment List (Perpres 10/2021 jo. 49/2021), which replaced the Negative Investment List in 2021, to confirm your business sector is open to foreign investment and to determine if local shareholders are required.
• Consider additional services if needed, such as:
  • Professional Shareholder Services — a temporary placeholder shareholding — if your sector requires Indonesian shareholding
  • Company Domicile Services in Jakarta, Bali, or Batam

After establishment, ongoing support is typically provided for:

• Regulatory compliance
• License renewals
• Accounting and tax services
• Human resources and payroll management
• Corporate secretarial services
• Business expansion support
• Immigration services (work permits and visas)

It’s important to note that the specific requirements and timeline can vary depending on the business sector and location. Working with experienced professionals can help ensure a smooth and efficient process.

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The Negative Investment List (DNI) was Indonesia’s former list of business sectors closed or restricted to foreign investment. In 2021 it was replaced by the Positive Investment List (also called the Priority Investment List, Daftar Prioritas Investasi), issued under Presidential Regulation No. 10/2021 as amended by No. 49/2021. Key points for foreign investors:

• The default flipped: under the DNI, sectors were assumed restricted unless listed as open; under the Positive Investment List, all business sectors are open to 100% foreign ownership unless specifically listed otherwise.

• Closed sectors: only a small set of activities remains completely closed to investment — for example gambling and casinos, cultivation of class-I narcotics, capture of protected and endangered species, coral extraction, and chemical weapons production. The alcoholic beverage manufacturing industry also remains closed to new investment.

• Conditional sectors: a limited number of sectors keep foreign ownership caps or special requirements (for example postal services and domestic air transport), or are reserved for — or require partnership with — Indonesian cooperatives and micro, small, and medium enterprises (MSMEs).

• Priority sectors: several hundred business fields are designated as priority sectors and qualify for incentives such as tax holidays, tax allowances, and customs facilities.

• Impact on PMA companies:

  • Far more sectors are available for wholly foreign-owned PMA companies than under the DNI
  • Business activities are defined by 5-digit KBLI classification codes chosen at registration through the OSS (Online Single Submission) system
  • Compliance with the list is checked automatically during OSS registration

• Seeking professional advice:

  • Sector conditions still change from time to time, so it’s advisable to consult with experts like Okusi Associates for the most current information and guidance on how the Positive Investment List affects specific investment plans.

By understanding the Positive Investment List, foreign investors can confirm early whether their planned activities allow full foreign ownership and structure their PMA company accordingly.

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Yes, a foreign investor can obtain a KITAS (Kartu Izin Tinggal Terbatas, or Limited Stay Permit Card) without a job offer in Indonesia. This is possible through the following methods:

• Investor KITAS: Foreign investors who own shares in a PMA (Penanaman Modal Asing) company can apply for an Investor KITAS. This type of KITAS is not tied to employment but to the individual’s status as a shareholder in the Indonesian company.

• Requirements for Investor KITAS:

  • The foreigner must be a shareholder in a PMA company
  • The company must be properly established and registered in Indonesia
  • The foreigner must personally hold shares of at least Rp 10 billion in the PMA company, the current requirement for the Investor KITAS (visa index E28A)

• Benefits of Investor KITAS:

  • Allows the investor to stay in Indonesia for extended periods
  • Provides the ability to act as a director or commissioner of the company
  • Does not require a separate work permit (RPTKA ratification) for working in the invested company

• Alternative: Retirement KITAS:

  • For individuals aged 55 or older
  • Allows long-term stay without employment
  • Requires proof of pension or sufficient funds to support oneself

• Process:

  • Establish or invest in a PMA company
  • Prepare necessary documents (company registration, proof of investment, etc.)
  • Apply for the Investor KITAS through the immigration authorities
  • May require assistance from a sponsor company or agent

• Duration:

  • Initially granted for 1 or 2 years
  • Can be extended as long as the investment remains active

• Limitations:

  • Investor KITAS holders are generally restricted from working for companies other than the one they’ve invested in
  • Regular reporting and compliance with immigration regulations is required

It’s important to note that immigration regulations can change, and the process can be complex. Working with a professional service provider experienced in Indonesian immigration matters is advisable to ensure compliance and smooth processing of the Investor KITAS application.

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Indonesia offers several types of visas for foreign investors and workers:

Business Visa (Visa Bisnis) * For business-related activities such as meetings, conferences, or market research * Valid for 60 days and can be extended twice, 60 days each (maximum stay of 180 days) * Does not permit employment or receiving income in Indonesia

Investor KITAS (Kartu Izin Tinggal Terbatas) * For foreign investors in PMA companies * Valid for 1-2 years and renewable * Allows the holder to live and work in Indonesia

Work Permit and KITAS * For foreign employees working in Indonesia * Includes: - KITAS/e-ITAS (electronic Temporary Stay Permit, which includes a multiple re-entry permit) - RPTKA Ratification (Pengesahan RPTKA) — the work permit issued by the Ministry of Manpower, which replaced the IMTA in 2018 * Usually valid for 1 year and renewable

Dependent KITAS * For family members (spouse and children under 18) of KITAS holders * Allows them to stay in Indonesia but not work

Retirement Visa * For retirees aged 55 or older * Valid for 1 year and renewable * Requires proof of pension/income and health insurance

Key points: * All visas require sponsorship, either from a company or an individual * Visa regulations can change, so it’s important to check current requirements * Some visas have specific financial or investment requirements * Processing times and costs vary depending on the type of visa

For assistance with visa applications and renewals, Okusi Associates offers immigration services for foreign investors and workers in Indonesia.

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