Indonesia is a rapidly growing economy with a large and diverse market. Foreign investors who are looking to expand into this market have a number of options, but one of the most popular is to incorporate a PT PMA (Perseroan Terbatas Penanaman Modal Asing) company.
A PT PMA is a limited liability company that is owned by foreign investors. It offers several advantages, including full foreign ownership, legal recognition, and access to the Indonesian market. However, there are also a number of requirements that must be met in order to incorporate a PT PMA, so it is important to do your research before you get started.
In this blog post, we will provide you with an overview of the PT PMA company incorporation process. We will discuss the benefits of PT PMAs, the key steps involved in registration, and the distinction between PT PMAs and representative offices. We will also provide you with some practical tips to help you get started.
So, if you are thinking about expanding your business into Indonesia, then this blog post is for you. We will show you how to incorporate a PT PMA and give you the information you need to make informed decisions about your business.
Why should you care about PT PMA company incorporation in Indonesia?
There are several reasons why you should care about PT PMA company incorporation in Indonesia. First, Indonesia is a rapidly growing economy with a large and diverse market. The country’s GDP is expected to grow by 5.5% in 2023, and the middle class is expected to grow by 50% by 2030. This means that there is a huge potential market for foreign businesses in Indonesia.
Second, PT PMAs offer several advantages over other business structures in Indonesia. For example, PT PMAs offer full foreign ownership, which means that you can have 100% ownership of your business. PT PMAs also offer legal recognition, which means that your business will be protected under Indonesian law.
Finally, PT PMAs offer access to the Indonesian market. This is a huge market with a population of over 270 million people. By incorporating a PT PMA, you will be able to tap into this market and reach a large number of potential customers.
How do you set up a foreign company as a PT PMA in Indonesia?
Foreign Investment (PMA) according to Article 1 point 3 of Law Number 25 of 2007 concerning Capital Investment (UUPM) is the activity of investing capital to carry out business in the territory of Indonesia carried out by foreign investors, whether using foreign capital entirely or joint ventures. with domestic investors (joint venture). A Limited Liability Company (PT) that has elements of foreign investment must be in the form of a PT PMA.
To establish a PT PMA, one of the things you need to pay attention to is what business fields are open or closed to the PT PMA. This is regulated in Presidential Regulation Number 44 of 2016 concerning the List of Closed Business Fields and Open Business Fields with Requirements in the Investment Sector or what is commonly called the Negative Investment List (DNI). DNI or what is known in English as the Negative Investment List functions to find out what business fields are open for investment, both domestic investment and foreign investment and if the business field is open to foreign investment, what is the permitted composition of foreign investment. Apart from being based on the DNI, regulations regarding open or closed business sectors are contained in the Economic Policy Package Volume X which continues to be issued by the government.
PT PMA vs RO comparison table
When considering market entry in Indonesia, it is essential to understand the differences between a PT PMA (Perseroan Terbatas Penanaman Modal Asing) and a Representative Office (RO). In this section, we will clarify these distinctions and highlight the strategic roles of ROs in market research activities, trade contacts, intellectual property rights, and more.
Distinguishing PT PMA from Representative Office (RO) A PT PMA is a fully incorporated company that allows foreign investors to establish a legal entity in Indonesia. It provides greater flexibility in conducting business operations, including engaging in commercial activities and revenue generation. On the other hand, a Representative Office (RO) serves as a liaison office representing a foreign company in Indonesia. While an RO cannot generate revenue directly, it plays a crucial role in conducting market research, building trade contacts, and establishing a presence in the Indonesian market.
Strategic Roles of RO in Market Research Activities One of the primary functions of an RO is to conduct comprehensive market research activities. This involves gathering information on potential clients, understanding local consumer preferences, analyzing market trends, and identifying business opportunities. By conducting thorough market research, ROs provide valuable insights for their parent companies to make informed business decisions and tailor their products or services to the Indonesian market.