Foreign Owned Company (PMA)

How to Establish a Foreign Company (PT PMA) in Indonesia?

As the biggest country in Southeast Asia, Indonesia is a developing country which possesses a great deal of opportunity when it comes to business. Setting up a company in Indonesia allows you to grasp the chance to develop your business. However, to make your company successful, you need to understand every important thing regarding how to set up a company in Indonesia.

Before planning to set up a company in Indonesia, at least, there are three important things, which are regulations, diversity, and capital. Those things as very important to shape a smart business plan that will be a foundation for your business in the country. Setting up a company in Indonesia without understanding these important things will lead you to unfavorable difficulties for your business.

Indonesian regulations clearly differentiate between local companies and foreign companies. There is a set of regulations that specifically made for foreign investors, which is meant to protect the local business. However, the government also provides an interesting incentive for foreign investors to encourage them in setting up a company in Indonesia. Understanding the regulations will help you to get more benefit in the process of registering your company. The process itself consists of three stages: getting approval on the establishment of your company, having an identification number to operate, and getting the operational or commercial license.

The Diversity and Cultures of The People

Being a vast country with a wide area, Indonesia has so many different races and cultures. Each race has its own language and local custom that shape a unique market character. Regarding to this fact, understanding as many as Indonesian cultures is a good way to know understand the Indonesian market. Having a local partner is advisable to help you get deeper knowledge about the culture so that your company can operate as expected.

Capital Requirements

Having enough capital that met the requirements from the Indonesian government is a must. The Indonesia Investment Coordinating Board (BKPM) as the government agency in-charge, requires a foreign company to provide investment value at least IDR 10 Billion, 100% of it (or IDR 10 Billion at least) must be the paid-up capital. The paid-up capital can be presented in the form of cash or fixed assets apart from land and buildings.

Apart from understanding those three important things, you also need to avoid basic mistakes in setting up your company and make sure that your company will be running well. First, you need to make sure that you use the trusted agent to register your company. BKPM requires you to have locally owned company to process the application.

Second, it is necessary to learn about the Indonesian business classification (KBLI) and check the Negative Investment List (DNI) issued by BKPM. The DNI will clearly show you about fundamental regulations related to foreign capital in the certain business. It will help you find whether your business is good to go or needs special attention as the DNI also states some number of business areas that are closed to foreign capital. Lastly, be sure not to fail in reporting the taxes. Understanding the important things and avoid the basic mistakes could lead you to succeed in setting up a company in Indonesia.