Is there information on the procedures for how to Establish a PT PMA and what licenses must be fulfilled for the company's operations?
DAFTAR ISI
INTISARI JAWABAN
Foreign investment (Penanaman Modal Asing/ "PMA") must be in the form of a Limited Liability Company or LLC (Perseroan Terbatasi/ "PT") based on Indonesian law and domiciled in Indonesia unless otherwise provided by law.
Thus, the rules for establishing PT PMA in Indonesia refer to the provisions in the LLC Law as amended, deleted, and/or new provisions provided by the Government Regulation in Lieu of Law, or Perppu Job Creation.
PMA itself can only carry out business activities in large businesses, so it can only establish a PT in the form of a capital partnership. In addition, it is also necessary to pay attention to risk-based business licensing in the business activities carried out.
Please take a look at the review below for a further explanation.
This article is an update of the article entitled New! Here are the Rules for Establishing PT PMA in Indonesia, which was first published on Friday, 2 October 2020.
All legal information available on Klinik hukumonline.com has been prepared for educational purposes only and is general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.
What is PMA?
Foreign investment, or known as Penanaman Modal Asing (“PMA”) an investing activity to do business within the territory of the Republic of Indonesia which is undertaken by foreign investors, either by fully using foreign capital or in the form of joint venture with domestic investors.[1]
Meanwhile, what is meant by a foreign investor is a foreign individual, foreign corporation, and/or foreign government conducting investment within the territory of the Republic of Indonesia.[2]
Belajar Hukum Secara Online dari Pengajar Berkompeten Dengan Biaya TerjangkauMulai DariRp. 149.000
Matters Related to the Establishment of PMA in Indonesia
Before investing foreign capital in Indonesia, there are several things that foreign investors need to know, including:
A Foreign Investment Company or PMA must be in the Form of an LLC/PT
PMA must be in the form of a Limited Liability Company (“LLC”) a.k.a. Perseroan Terbatas ("PT") based on Indonesian law and domiciled in Indonesia, unless otherwise provided by law, and carried out by:[3]
subscribing for shares at the time of establishment of the LLC;
purchasing shares; and
conducting other means in accordance with the provisions of laws and regulations.
Can Only Conduct Business Activities in Large Businesses
Foreign investors can only conduct business activities in large businesses.[4] Therefore, foreign investors are not allowed to conduct business activities in micro, small, and medium enterprises in Indonesia.
In addition, before choosing a line of business, it is also necessary to consider whether the line of business is open, open with certain requirements, or closed to investment.
Business sectors that are declared closed to investment are:[5]
Business fields that cannot be operated in accordance with the business fields listed in Article 77 number 2 Perppu Job Creation that amended Article 12 section (2) Investment Law, namely:
cultivation and industry of category I narcotics;
all forms of gambling and/or casino activities;
capture of fish species listed under Appendix I of Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”);
utilization or taking of corals and utilization or taking of reefs from nature which are used for building materials/lime/calcium, aquarium, and souvenirs/accessories, as well as live coral or recent death coral from nature;
chemical weapon manufacturing industry; and
chemical industry and ozone-depleting substance industry.
Alcoholic Beverages Industry (KBLI 11010), Alcoholic Beverages Industry: Wine (KBLI 11020), and Malt Beverages Industry (KBLI 11031). KBLI stands for Klasifikasi Baku Lapangan Usaha Indonesia (Indonesia Standard Industrial Classification).
In addition, there are also business fields that are open with certain requirements for foreign investors, in this case, investment requirements with restrictions on foreign capital ownership.[6]
For example, foreign investors who wish to carry out business activities in the form of rental and leasing activities without option rights, which include land transportation equipment (rental without operator) with the KBLI code 77311, are required to partner with Indonesian cooperatives and Micro, Small, and Medium Enterprises (“MSMEs”), as summarized in Is There a Foreign Capital Ownership Limit for the Heavy Equipment Rental Business Field?
However, this foreign capital ownership restriction does not apply to:[7]
Investments that have been approved in certain business fields prior to the promulgation of this Presidential Regulation 10/2021, as listed in the business licensing, unless the provisions under Presidential Regulation 10/2021are more profitable for Investment; or
Investors who obtain special rights based on an agreement between Indonesia and the country of origin of said investor, except if the same provisions on business fields regulated under Presidential Regulation 10/2021 are more profitable for the Investor.
Foreign investors must meet the investment value requirement, which is more than IDR 10 billion excluding the value of land and buildings per 5-digit of KBLI business sector field per project location.[8]
However, the above provisions are exempted from foreign investments in Special Economic Zones ("SEZs") in the field of technology-based start-up businesses. Foreign investments in SEZs in the field of technology-based start-up businesses can invest with an investment value equal to or less than IDR 10 billion excluding the value of land and buildings.[9]
Minimum Paid-up Capital of IDR 10 Billion
In addition to the minimum investment value provision, for PMA, there is a minimum capital provision, namely a minimum issued/deposited capital of IDR 10 billion, unless otherwise determined by laws and regulations.[10]
In addition, Andrey, Easybiz Consultant, added, that in addition to the above, it is also necessary to pay attention to the nationality of a person who will later be appointed as a member of the board of directors of the PT PMA/Foreign Investment LLC.
Because, although the LLC Law does not regulate the obligation/requirement for a Foreign Investment LLC to appoint members of the board of directors who are Indonesian citizens, as explained in Should There Be Indonesian Directors in PT PMA?, but in practice, in the issuance of s Taxpayer Identification Number, tax officers usually urge or suggest that the main director of PT PMA is an Indonesian citizen (Warga Negara Indonesia/ “WNI).
The reason is that there was a case where PT PMA committed tax violations. However, unfortunately, none of the directors are Indonesian citizens. The directors of PT PMA are foreigners and have returned to their home countries, so their whereabouts are difficult to know. If you want to appoint directors who are foreigners, then they should at least have a Permanent Stay Permit Card (Kartu Izin Tinggal Tetap/ "KITAP") which shows that the foreigner has a permanent domicile in the territory of Indonesia.
Procedures for Establishing PT PMA in Indonesia
As explained earlier, PMA is required to form a PT based on Indonesian law and domiciled in Indonesia, one of which is done by taking shares at the time of PT establishment.
This means that the rules for establishing a PT PMA in Indonesia refer to the provisions in the LLC Law as amended, deleted, and new provisions provided by Perppu Job Creation.
Because foreign investors can only conduct business activities in large businesses, PT PMA can only be established in the form of a capital partnership company. Here's the procedure for establishing a capital partnership company according to Minister of Law and Human Rights Regulation 21/2021:
Prepare supporting documents
Before establishing a capital partnership company, in this case, a PT PMA, first prepare the supporting documents that will be attached, namely:[11]
An electronic statement from the applicant that the documents for the establishment of the PT are complete;
A copy of the deed of establishment of the PT uploaded to Legal Entity Administration System (Sistem Administrasi badan Hukum/ “SABH”);
Minutes of the deed of establishment of the PT/minutes of the deed of amendment of the establishment of the PT;
Proof of PT capital deposit, in the form of:
A copy of the deposit slip/bank statement in the name of the PT or joint account in the name of the founder or the original statement letter has deposited the capital of the PT signed by all members of the board of directors together with all founders, as well as all members of the board of commissioners of the PT, if the capital deposit is in the form of money;
Original certificate of valuation from an unaffiliated expert or proof of purchase of goods, if the capital deposit is in a form other than money accompanied by proof of announcement in a newspaper, if the deposit is in the form of immovable property;
A copy of the government regulation and/or decree of the minister of finance for a joint stock company or regional regulation, in the event that the founder is a provincial/regency/city regional company; or
A copy of the balance sheet of the dissolving PT or the balance sheet of the non-legal entity company that is included as a capital deposit;
A letter of commitment from the founder to obtain a decision, approval, or recommendation from a technical agency for a PT in a certain line of business or a photocopy of the decision, approval, and recommendation from the relevant technical agency for a PT in a certain line of business;
A statement of the founders' ability to obtain a Taxpayer Identification Number and a report on the receipt of the annual tax notification letter; and
A copy of the certificate regarding the complete address of the PT from the building manager or authorized agency or the original statement letter regarding the complete address of the PT signed by all members of the board of directors together with all founders and members of the board of commissioners of the PT.
The supporting documents referred to in numbers 3 to 7 are kept by the notary.[12]
Fill in the form of establishment of LLC electronically through SABH
The establishment of a capital partnership company is carried out by the applicant through a notary by filling in the electronic establishment form through SABH and attaching supporting documents as previously mentioned.[13]
Issuance of certificate of registration of legal entity of an LLC electronically
Upon registration, the Minister of Law and Human Rights issues a certificate of registration of a legal entity of an LLC electronically. The applicant can print the certificate independently using F4/folio size white paper.[14]
Then regarding risk-based business licensing, broadly speaking, business licenses that must be fulfilled by business actors are determined based on the level of potential for injury or loss from a hazard or a combination of the possibility and consequences of hazards. Business activities in risk-based business licensing are divided into:
Business activities with a low risk level. The required business license is in the form of a Business Identification Number;
Business activities with medium risk levels (low medium and high medium). Both business licenses are in the form of Business Identification Number and standard certificate;
Business activities with a high-risk level in the form of Business Identification Number and license.
Later, business licenses for PMA are issued by the OSS institution on behalf of the minister/head of a non-ministerial government agency, which is the authority of the central government.[18]
So, in principle, the business license required for a PT PMA to be able to carry out operational activities depends on the level of risk of the business activities carried out by the PT PMA concerned. However, since PMA is only intended for large businesses, it is likely that the business licenses required by PT PMA are not only Business Identification Numbers but also standard certificates or licenses, depending on the level of risk.
In addition to complying with risk-based business licensing, PT PMA carrying out certain business activities must also comply with “business licensing to support business activities”. For example, in the event that PT PMA wants to carry out shopping building construction business activities with KBLI code 41014, it must also have “business licensing to support business activities” in the form of a Construction Business Entity Certificate, as summarized from the OSS page.
Enrich your legal research with the latest bilingual legal analysis, as well as the collection of regulatory translations integrated into Hukumonline Pro, click here to learn more.
This is our answer, hopefully, you find it useful.
Indonesia Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia) 2020 41014, accessed on 4th January 2022, at 15.00 West Indonesian Time (zone).
NB:
We have interviewed Easybiz Consultant Andrey, via phone on Wednesday, 5th January, 2022 at 09.35 West Indonesian Time (zone).
