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
• Regulated by the Indonesian Investment Coordinating Board (BKPM)
• Must comply with the Negative Investment List (DNI) which outlines sectors open or restricted to foreign investment
• Requires a minimum investment amount, typically around USD 700,000 (though this can vary)
• 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 certain business sectors, as per the DNI
• Provides a formal structure for foreign investors to participate in Indonesia’s growing economy

Setting up a PMA company involves several steps, including investment approval, company registration, obtaining necessary 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 Negative Investment List (DNI) restrictions
   • 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. Foreign Investment Limited Partnership (CV PMA)
   • A partnership between foreign and local investors
   • Less common and more restricted than PT PMA
5. Foundation (Yayasan)
   • Non-profit organization
   • Can be established by foreigners for social, religious, or educational purposes
   • Cannot engage in commercial activities
6. Foreign Company Domicile (Badan 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 Negative Investment List (DNI) to check sector restrictions
• 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:

  • Domicile Certificate
  • Tax Number (NPWP)
  • Company Registration
  • 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 Negative Investment List (DNI) to ensure your business sector is open to foreign investment and to determine if local shareholders are required.
• Consider additional services if needed, such as:
  • Professional (“Nominee”) Shareholder Services 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) is a crucial regulation in Indonesia that affects foreign investment in the following ways:

• Definition: The DNI is a list of business sectors that are either closed or have restrictions for foreign investment in Indonesia.

• Purpose: It aims to regulate and control foreign investment to protect certain sectors of the Indonesian economy and promote local business development.

• Impact on foreign investors:

  • Determines which business sectors are open, partially open, or closed to foreign investment
  • Specifies maximum foreign ownership percentages for partially open sectors
  • May require partnerships with local Indonesian companies in some sectors

• Key considerations:

  • The list is periodically updated by the Indonesian government
  • Some sectors may require a minimum investment amount for foreign participation
  • Certain sectors may have additional licensing or operational requirements

• Examples of restrictions:

  • Some sectors may be completely closed to foreign investment
  • Others may allow only partial foreign ownership (e.g., 49% or 67%)
  • Some businesses may require local partners or shareholders

• Importance for PMA companies:

  • Foreign investors must consult the DNI before planning their investment in Indonesia
  • It helps determine the feasibility and structure of a proposed PMA company
  • Compliance with DNI regulations is essential for obtaining necessary permits and licenses

• Seeking professional advice:

  • Due to the complexity and frequent updates of the DNI, it’s advisable to consult with experts like Okusi Associates for the most current information and guidance on how the DNI affects specific investment plans.

By understanding and adhering to the DNI, foreign investors can ensure their PMA company plans align with Indonesian regulations and avoid potential legal issues or investment restrictions.

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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 investment amount should meet the minimum required by regulations (typically around USD 1 million, but this can vary)

• 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 (IMTA) 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 up to 4 times (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 (Temporary Stay Permit Card) - MERP (Multiple Exit Re-entry Permit) - IMTA (Work Permit) * 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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