Legal

Facts about entity formats in Indonesia: PT PMA, PT local, and RO!

Trường Lăng

September 28, 2019

Legal Entity Formats in Indonesia

Do you want to conduct business in Indonesia? There are various options for setting up a legal entity. The most common format used by investors who want to enter the Indonesian market is a limited liability company (PMA). However, there are alternative ways that you can consider.

Here are the most common legal entity formats in Indonesia:

TypeLimited Liability Company with Foreign Direct InvestmentLocal Limited Liability CompanyRepresentative OfficeRepresentative Office for Trading
Indonesian AbbreviationPT PMAPTKPPAK3PA
Allowed ActivitiesCan conduct all business activities within the business field it got approval forCan conduct all business activities within the business field it got approval forMarket research local representationLocal representation
Best option forForeign companies and investors looking for full or partial ownership in a company operating in IndonesiaLocal investors who are not involving any foreign shareholdersForeign companies studying the market
Foreign companies who don’t need to earn revenue from Indonesia
Foreign trading companies that don’t need to earn revenue to their Indonesian entity
Foreign Ownership RestrictionForeign ownership can be anything from 0% to 100% depending on the business classification. Classifications that are not in the Negative Investment List can be owned by 100%.It cannot have foreign shareholders.
Limited amount of work permits for foreigners depending on the size of capital.
No restrictions.No restrictions.
Minimum CapitalInvestment plan: Minimum $1.2 million USD.Paid-up capital: at least 25% of the investment plan. For some industries, the required capital is higher.Micro: Less than Rp.50 million
Small:Rp. 50 – 500 millionMedium: Rp. 500 – 10 billionLarge: above 10 billion
No capital requirement.No capital requirement.
Key BenefitsIt can operate fully as an independent limited liability company within the business classification.Smaller capital requirements and faster process as long as no foreign shareholders are involved.No capital requirement.
The easiest way to have a legal presence in Indonesia.
The license can always be extended every 3 years.
Key DisadvantagesLarge capital requirement.
Ownership restricted or forbidden in some industries.
No foreign shareholdersIt cannot seek or earn revenue in Indonesia.
Valid for maximum of 5 years, and cannot be extended.
Not allowed to earn any revenue.
Issuing Work Permits and Visas for ForeignerAll shareholders, directors, and commissioners are eligible for the work permits.
Unlimited amount of business visa sponsorships.
Work permits can be issued to foreign experts.
Only Medium Size PT can apply work permit for its foreign worker.
Unlimited amount of business visa sponsorships.
Work permit for the chief representative.
Unlimited business visa sponsorships.
3 Indonesians for every foreigner hired.
Work permit for the chief representative.
Unlimited business visa sponsorships.
3 Indonesians for every foreigner hired.
Additional Licenses RequiredPermanent Business License from BKPM.
Import license for importers.
Additional operating licenses  needed for some industries
Import license for importers.
Additional operating licenses for some industries
A representative office needs to be extended every 3 years.
ComplianceMonthly withholding tax report.
Quarterly/semi-annual investment reporting.
Annual tax reporting.
Monthly withholding tax report.
Annual tax reporting
Monthly withholding tax report.
Annual Activity report to BKPM.
Monthly withholding tax report.
Annual Activity report to BKPM.
Duration±10 weeks±8 weeks±6 weeks±6 weeks

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Are you still thinking about the best format for your company? Contact us!
 
 

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