HOW TO SET

UP

FOREIG

N DIRECT

INVESTM

ENT

COMPANIES

FOREIGN INVESTMENT IN INDONESIA

DIRECT INVESTMENT INDIRECT INVESTMENT

Only 1 (one) way of Foreign Direct Investment is allowed:

• Establish a Foreign Direct Investment Company (PT PMA) with Foreign Shareholders in it

• Open up a Representative Office (Kantor Perwakilan Perusahaan Asing or KPPA/KP3A)

• Finance a Local PT via Loan Arrangement or Other Arrangements

1. 2.

WHY PT PMA ?• Only Direct Form of Foreign Investment

• Ideal Form to incorporate Subsidiaries / Affiliates in Indonesia

• Unlimited Time Period

• Clear Separation of Responsibility

• Protection by the Laws and Regulations

• High Visibility for Branding in PT PMA Name

WHAT DO YOU NEED TO PREPARE ?

1. Business Activities

2. Investment Plan

3. Capital Structure and Shareholder Composition

4. People who will run Company and work in it

5. Apply for Principle License at BKPM

PT PMA BUSINESS ACTIVITIES• Be Specific and List all Activities that You are Doing

• Be Honest about What You Actually Do

• Check Out Negative Investment List

• Think Long-Term and Plan Accordingly

• Plan Your Investment for each Business Activity

• Consult with Your Tax Consultant

• Keep it Clear and Simple

1.

PT PMA INVESTMENT PLAN FOR BKPM• Only to Submit for Principle License at the Beginning

• Investors have 1-5 years to realize the Investment Plan

• Minimum above IDR 10,000,000,000 for each Business Activity

• Source of Investment can include Capital of the PT PMA and Loan from Foreign or Local parties

• Use of Investment include Fixed Capital and Working Capital

2.

CAPITAL STRUCTURE AND COMPOSITION• Consult Negative Investment List for Maximum % of Foreign

Shareholders in PT PMA

• Determine the Value of Each Share

• Determine the composition of shares owned by Each Shareholder

• Authorized Capital must be min. IDR 10,000,000,000

• Paid-up Capital must be min. IDR 2,500,000,000

3.

APPOINT DIRECTOR AND COMMISSIONER

• Appoint the People who will run PT PMA in Indonesia

DIRECTORS – Day-to-Day Activities

• PT PMA must have at least 1 Indonesian Director to sort out the Establishment process while the Foreign Director secure their Expatriate Working Permit in Indonesia

• All Directors must have a registered residence in Indonesia

COMMISSIONERS – Supervising Directors

• Are not required to have registered residence in Indonesia

4.

APPLY FOR PRINCIPLE LICENSE AT BKPM• Identity of Shareholders

• Office Space and Project Location

• Investment Plan and Company Structure of Organization

• Company Profile / Business Flowchart for Subsidiaries

• Technical Recommendation if needed

• Presentation at BKPM if deemed required by BKPM

• 3-Hour Investment License Principle License for PT PMA with large-scale Investment, mostly for Infrastructure Projects

5.

• Applies for PT PMA with Investments that fulfill these requirement:

1. Investment Plan Value = IDR 100 billion upwards

2. Absorbs at least 1.000 local workers• Submit Identity of Shareholders + Business Flowchart to

BKPM

• Investment License is composed of 8 + 1 License Products• Investment License, Deed of Establishment and

Ministerial Approval, NPWP, TDP, RPTKA, IMTA, API, NIK + Letter of Land Availabiity

3-HOUR INVESTMENT LICENSE (IZIN INVESTASI)

CONCLUSION: HOW TO SET UP PT PMA

1. Pre-Establishment

2. BKPM Principle License

3. Deed of Establishment and Ministerial Approval

4. Basic Legality Permits (SKDP, NPWP, TDP, etc.)

5. Post-Establishment (Operational Licenses)1. Technical Recommendations2. Government Approvals3. Investment Realization4. Permanent Business License (IUT)

TRENDING BUSINESS SECTORSBASED ON FOREIGN INVESTMENT

APPLICATIONSJanuary - December 2015 (Data from

BKPM)Services - USD 11.3 B (38,5%)

Manufacturing - USD 11,8 B (40,2%)

Mining - 4.0 B (13,7%)

Food Crops and Plantation - USD 2.0 B (7%)

Livestock, Fishery and Forestry - US 0.1 B (0,3%)

POPULAR BUSINESS ACTIVITIES FOR PT PMA

SERVICES BUSINESS SECTOR

• Portal Web – Operating Website and Mobile Apps, Collaborate with Service Providers to Connect Customers and Services

• Import – Collaborate with Local Distributors, Warehouse and Cold Storage Providers

• Export – Collaborate with Manufacturers and Selling Agents

• Consultancy – Global Quality and Local Presence, Assist Established Entrepreneurs in Achieving Business Goals

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