FDI in Indonesia

How to expand our business in Indonesia?

Foreign companies and citizens which intended to perform their business in Indonesia (Foreign Investors) are not allowed to perform it directly in Indonesia. Law No.25/2007 on Investment (Investment Law) stipulates that direct capital participation is required. Therefore, foreign companies and citizens shall establish a limited liability company or purchase the existing local company’s shares. Essentially the entity will be an Indonesian limited liability company with foreign-owned shares (PMA Company).

Under Article 7 Law No.40 of 2007 on Limited Liability Company (“Company Law”) limited liability company shall be established by 2 (two) or more persons by a notarial deed made in the Indonesian language.

How about the shares ownership?

Foreign ownership in Indonesia is subject to negative investment list as set out under President Decree Number 44 the Year 2016 on Negative Investment List (“NIL”). NIL is periodically updated by the government. Note that there are 2 (two) types of investment determined under NIL which consist of closed and open with a certain condition. for open with certain condition business activity, NIL determined the maximum foreign-owned shares composition of PMA Company and other requirements.

How is the Board Structure?

Article 92 Paragraph (3) jo. Article 108 Paragraph (3) of Company Law stipulates that at least 1 (one) director and 1 (one) commissioner run Limited Liability Company. For certain business activity. Certain business activities shall have at least 2 (two) directors, the mentioned business activity generally a fund management company such as banking and insurance. The public listed company also at least have 2 (two), directors.

Is it allowed to appoint the foreign director and commissioner in PMA Company?

Yes, it is allowed under our Company Law. Note that under Ministry of Employment and Transmigration No.40 of 2012 on Certain Positions Which Prohibited for Foreign Worker stipulates that foreign worker is prohibited to be appointed for Personnel Director. Furthermore, in order to appoint a foreign director of the commissioner the Foreign Investor shall inform the notary not to include a prohibition on the appointment of foreign directors or commissioner under the article of association of the company.

Is there any minimum capital requirement to establish PMA Company?

Yes. Under Article 13 Paragraph (3) letter d BKPM Regulation 14/2015 the value of issued capital equals to the paid-up capital of at least Rp. 2,500,000,000.00 (two billion, five hundred million rupiah).

Is there any minimum investment amount to establish PMA Company?

Under Article 13 Paragraph (3) letter a BKPM Regulation 14/2015 total investment value is shall more than Rp.10.000.000.000,00 (ten billion rupiah) excluding land and buildings for every subgroup of the same business based on KBLI in 1 (one) project site in one (1) District /Regency/City, specially for Industrial sector or for every subgroup of the same business based on KBLI within one (1) District/Regency/City, outside the industrial sector.

How to Establish PMA Company in Indonesia?

Commonly, Foreign Investors shall perform as follows.
request company name approval through online general law administration in which administered by Ministry of Law and Human Rights (MOLHR) the name shall consist of 3 (three) words and not violating Government Regulation No. 43 of 2011 on Procedure for Submission and Usage of Limited Liability Company Name;
Submit principal license to Indonesian Investment Coordinating Board;
establish the company by signing the deed of establishment before the notary public;
obtain the approval from the ministry of law and human rights on legal entity status of the company;
submit an application for company domicile to the regional government;
submit the application to obtain tax payer identification number; and
submit the application to obtain Company Registration Certificate.

How long is the principle license will be issued?

The Principle License will be issued 3 (three) days after Indonesia Investment Coordinating Board (“BKPM”) completely receive all the requirements. This time period clearly stipulated under Head of BKPM Regulation No.14 of 2015 on Guideline and Procedures of Principle License for Investment as amended by Head of BKPM Regulation No.6/2016 and Head of BKPM Regulation No.8/2016. However, practically Foreign Investor may need more than 2 (two) months to complete the documents (“BKPM Regulation 14/2015”). BKPM does not charge for the issuance of principle licenses.

What are the required documents to obtain principle license?

Identity documents of shareholders in Company
foreign individual, attaching a recording sheet of a valid passport which includes the name and signature of the owner clearly;
foreign business entities, attaching the copy of the articles of association/incorporation) in English or translated into Indonesian by a sworn translator and equipped with a document of the last composition of the board of directors;
Indonesian individual, attaching a copy of valid ID card and copy Tax Identity Number (can be excluded for Indonesian individuals who live abroad, but he/she shall attach Passport and/or Permanent Residence legalized by local Indonesian Embassy);
Indonesian legal entity, attaching a copy of the deed of establishment and its amendments following with the complete ratification of the Company’s Articles of Association and the approval/notification of the Ministry of Justice, the copy of Tax Identification Number of the companies and the copy of company licenses.

Description of planned activities
for the industry, such as flow chart of production comes with a detailed explanation of the production process by stating the type of raw material to the final product;
for the service sector, such as a description of activities to be performed, the details of investment (if necessary), and product information services

The original power of attorney
if the processing of the application is not done directly by the applicant and the documents of an authorized person, the provisions regarding the power of attorney and documents of the authorized person specified in this Regulation.

Do we have to come to Indonesia to establish PMA Company?

The BKPM possibly summon the foreign investors to perform a presentation. This presentation may be represented by 1 (one) prospective shareholder or director.

How to Choose the Office Address for our PMA Company?

A PMA Company may buy or lease an office space of the building. PMA Company shall make sure that the land usage is permitted for business activity under spacial planning made by the local government. Foreign Investor also shall register the office address and apply for Certificate of Domicile to the sub-district office.

Is there any mandatory report after the establishment of PMA Company?

PMA Company shall submit the Capital Investment Activity Report as required under Head of BKPM Regulation No. 17 Tahun 2015 on Guidelines And Procedures For Controlling The Implementation Of Investment.

How to Open Corporate Bank Account in Indonesia?

Each bank has various requirements to open a corporate account. Essentially, the bank will ask for Tax Payer Identification Number, Deed of Establishment, Amendment of Article of Association, Power of Attorney to appoint account manager, Identity of proxy and authorizer.

 

 



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