Indonesian Company Formation & Business Licensing Service

Indonesian Company Formation & Business Licensing Service

Set up a new Foreign Direct Investment (FDI) Company

Approval for Foreign Direct Investment

Application for new Investment under PMA arrangements can be filed by :

a). Foreign citizens and/or foreign statutory bodies and/or PMA companies;

b). Foreign citizens and/or Indonesian statutory bodies

Applications for new investment as well as the alteration projects under PMA arrangements shall be filed to the Head of BKPM Applications for new investments under PMA arrangements shall be filed by using Model I/PMA form.

To apply for a new investment approval applicants have to complete and submit 2 (two) copies of form Model I/PMA which should be a minimum participated by 2 (two) shareholders.


SP-PMA shall be issued by the Head of BKPM and shall be issued not later than 10 (ten) working days starting from the receipt of correct and complete applications.


Following the evaluation process, The Chairman of BKPM will issue The Investment Approval- Upon the issuance of the investment approval, a new company can be legally established through the execution of the articles of incorporation in notary deed form.

Foreign Investment (Penanaman Modal Asing/PMA) should be incorporated as an

Indonesian limited liability company

(Perseroan Terbatas/PT)

and domiciled in Indonesia.

Limited Liability Co or Perusahaan Terbatas (PT)

Foreign Direct Investment, most often referred to by its Indonesian abbreviation - PMA, is governed primarily by the Foreign Capital Investment Law No. 1 of 1967, amended by Law No. 11 of 1970. As a legal basis, the law is fairly accommodative to various deregulatory policies and measures to date, and those that will be taken by the government in the foreseeable future.


As stipulated by Foreign Investment Law, PMA companies shall take

the form of a Limited Liability Company (Perseroan Terbatas, PT)

and subject to Corporate Law.

Articles of association of PT shall be registered by the founder of

PMA companies or their proxies to the Directorate General of Civil Affairs of

the Ministry of Justice and Human Rights.


In addition to Investment Law No. 1/1967, PMA companies as well as other companies, in their business operations are still subject to sector/industrial policies as required by corresponding ministries.
Incorporation of PMA Company

The Investment Coordinating Board (BKPM), the government body which processes and handles FDI companies, issued an important deregulation package on PMA in May 1994 referred to as PP-20/1994. It was seen as a very significant step toward a much more conducive and attractive investment environment in Indonesia. The regulation:

* Allows 100% FDI investment in selected areas of business
* Limits foreign direct investment to 95%, with a minimum of 5% ownership by an Indonesian
* Allows FDI investment with certain conditions
* Stipulates the sectors which are closed to FDI investment

You can obtain a copy of the FDI application in English from Indonesian embassies overseas or from the Investment Coordinating Board office either from the head office in Jakarta or from regional offices in the provinces.

For those companies choosing to make a 100% foreign investment, there is a requirement that 15 years from the commencement of commercial operations, the 100% foreign shareholder must sell at least 5% of the firm to an Indonesian entity. A company which is initially 95% foreign owned is not subject to any divestment requirement.

The amount of capital to be invested in a foreign-owned company is decided by the investing parties themselves, and the BKPM approval is based on the economics and scale of the project. Foreign investment companies are basically free to choose where in Indonesia they will set up operations, with the proviso that factories must be in areas zoned for industry or in an industrial estate.

The life of foreign investment companies has been extended by allowing the renewal of the fixed operating license (IUT) for an additional 30 years. In other words, the initial licenses are valid for 3 years (SPPP BKPM), plus 2 x 30 years, for a total of 63 years.


The process of incorporation of PT-PMA company :

Step 1. Approval for Foreign Direct Investment “PMA-Company”

· Prepare and send the application (Model I/PMA) with required documentation, compiled according to the investment plan. Set up a joint venture agreement if you are making the investment with Indonesian partners.

· PMA companies with SP-PMA shall file applications for investment implementation licenses required for the realization of their investments. SP-PMA shall be automatically cancelled if no realization of projects taken place in the form of concrete activities for 3 (three) years starting from the date of its issuance.

Step 2. Establish Articles of Association of PT-PMA Company from Notary

· As stipulated by Foreign Investment Law, PMA companies shall take the form of a Limited Liability Company (Perseroan Terbatas, PT) and subject to Corporate Law. Articles of association of PT shall be registered by the founder of PMA companies.


Step 3. Registration of company address with local council (domicile)

· Determine of Company Addrees


Step 4. IRD registration

· NPWP - Tax registration code

· SPPKP - Value added tax registration code


According to Value Added Tax Laws, PMA companies are subject to report their business activities to the Directorate General of Taxation in its respected operational area.

Application for registration for tax-payer registration number (Nomor Pendaftaran Wajib Pajak, NPWP) and for taxable entrepreneur confirmation number (Nomor Pengukuhan Pengusaha Kena Pajak, NPPKP) shall be filed to the Directorate General of Taxation of the Ministry of Finance.

Step 5. Approval of Article of Association Company from Ministry of Justice and Human Rights


· Detailing proof of capital investment and open Bank Account in the name of PMA Companies (especially for new PMA Companies) and send it to the Ministry of Justice for approval and issuance of State Gazette


Step 6. Registration of Company with the Department of Industry and Trade

· Approval of TDP - Company registration code


Approvals, Licenses, Decrees and Permits in implementation stage :

Step 7. Employment Report,

· Approval of Employment Report (UU No. 7/1981)


Step 8. Plan for Employment of Foreign Personel,


· Approval of application for RPTKA plan for employment of foreign personnel

· Expatriates Work Permits & Stay Permits,

Step 9. Import License & Incorporate Facilities,


· Approval of APIT-Limited importer’s identification number from BKPM

· Approval of NPIK - Special Importer Identification Number from the Ministry of Industry and Trade


Step 10. Letter of Approval of Custom Facilities



· Approval of Capital Goods Masterlist from BKPM,

· Approval of Raw Materials Masterlist from BKPM,


Step 11. UUG/HO-Nuisance act Permits


· Approval of Nuisance act permit (Izin Undang-Undang Gangguan, Izin UUG/HO) is issued by the office of regency/municapality concerned.

· PMA companies reside in industrial estate are not required to obtain this permit.

Step 12. Other Approval & License to build a Factory or Office Building


· Location permit

· Land title (title deed)

· Building construction permit


Step 13. Fixed Business License, click here

· Provincial approval for Fixed Licenses (BAP)

· Approval of IUT - Fixed Business License (IUT)


A Limited Liability company is established either under foreign shareholders or through a joint venture with Indonesians or wholly owned by Indonesian shareholders and must be approved by the Ministry of Justice. It doesn't matter who is the owner of an Indonesian Limited Liability company, they must comply with Indonesian law and are considered an Indonesian company and the company can subsequently be changed or sold to the shareholders, foreign or Indonesian.

As you can see from this very brief introduction, the process is a complicated and lengthy one and can be a virtual mine field to those who are unfamiliar with dealing with Indonesian ministries. It is essential to acquire the advisory services of a professional investment consultant which specializes in assisting foreign companies who want to


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