Choosing the right entity is an essential key for a successful start in Bali. Although there are several entities to choose from, such as Local Limited Liability Company (PT) and Representative Office, the most common option for foreign investors is Foreign Limited Liability Company (PT PMA).
What is PMA?
PMA (Penanaman Modal Asing) or PT PMA (Perseroan Terbatas Penanaman Modal Asing) is known as a Foreign-Owned Company in Indonesia. This is a type of legal entity in which foreigners can choose to conduct commercial activities in Bali established under the Indonesia Law. Many investors open a PT PMA company in Indonesia in order to start their real estate business or investing in property.
What is a PT company?
PT is an acronym for Perseroan Terbatas, a term that represents a limited liability company in Indonesia. Also known as a foreign investment limited liability company, a Perseroan Terbatas (PT) is a business entity that allows foreign investors to conduct commercial activities in Indonesia. The PT is a legal entity that acts per commercial Indonesian law.
Benefits of PT PMA
1. Ease of getting license & permits
Business activities that are undertaken in Indonesia require licenses or permits to be obtained before such activities may commence. One of the benefits in this regard which is experienced by those who had a PT PMA Indonesia is much easier to obtain a particular license or permit for a PT PMA than is it for any other business entity in Indonesia.
Compared to other legal entities in Indonesia, PT PMA has a greater chance to obtain its licenses and permits more easily with less time and resources spent.
2. Sponsorship for foreign employment
PT PMA may have to hire foreign professionals to fill the positions. PT PMA is also allowed to sponsor as many foreign employees as desired who have to meet the specified criteria and qualifications.
3. Lower import duties
PT PMAs in Indonesia need to import materials or products from abroad to operate their businesses.
PT PMAs, however, can reduce the amount of money they spend on import duties by utilizing tax benefits and other financial advantages for which they are eligible. This in turn would lead to the PT PMA being able to save significant amounts of money, thus making it more profitable.
Who can set up a PT PMA
Minimum 2 (two) or more Foreign Individuals, Foreign Entities, Indonesian Citizens, and Indonesian Legal Entities are allowed to hold shares in PT PMA. Whether it is individuals or legal entities, the two parties can be the shareholders.
License / documents for establishment PT PMA
- Domicile letter
- Tax ID Number (NPWP) & taxable entrepreneur confirmation (PKP)
- Company Registration Certificate (TDP)
- Legal entity status PT PMA
- Deed of Establishment
- Principle License & Business license
- Manpower Report and Company Welfare Report
How to establish PT PMA
– Request for a company name approval and wait for The Ministry of Law and Human Rights recommendation.
– Submit and get an approved Investment Plan to BKPM. Once BKPM thinks that the investment is complying, they will release a license which is valid for one year and can be lengthened for two years renewal.
– Legal Entity (SK Kehakiman), Certificate of Domicile, Tax Registration Number (NPWP), and a company identity or Nomor Izin Berusaha (NIB).
Capital Requirements for the PT PMA
For the establishment of a PT PMA, the foreign investor needs to comply with minimum capital requirements for foreign investment. Currently, the minimum requirement stands at IDR 10 billion or the equivalent value in US dollars.
Paid-up capital is generally set at 25 percent of the minimum capital requirement (hence IDR 2.5 billion). In certain (capital intensive) industries paid-up capital requirements are higher.
The advantages of PT PMA Company in Indonesia
– PT PMA is allowed to become a 100% foreign-owned limited liability company or else it can also be established as a limited liability company in the form of a joint venture with Indonesian partners.
– Easy and quick license permits
– On-site tax or import duties are lower
– Can sponsor many foreign employees
The disadvantages of PT PMA Company in Indonesia
– PT PMA is not allowed to establish some types of business activities that are closed for foreign ownership
– The company obliged to make monthly tax reports
– The company is also required to make report their business activities to the BKBM every three months
Conclusion
There are a variety of business entities in Indonesia to choose from if you wish to set up a company there. However, some entities may not permit foreign ownership.
As we are not qualified legal advisers, we can only provide a general guideline as to how the process is done. For those wanting full legal advice regarding the process of starting a business or investing in Bali.
Here are recommendations If you have any questions about the establishment of a PT PMA, you can contact Valve Consulting Service.
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