Opening a PT PMA in Indonesia

[WhyMe]

Hi All,

Wanted to know if someone has successfully opened a PT PMA foreign owned company in Indonesia? I am not comfortable investing 10 Billion IDR to start a company and some lawyers have said that its just a requirement and i only need to put in 2.5% of it to get things started. After 2 or 3 years we can invest more and then get another 3 to 4 years extension. Is this really true?

Everywhere in official documents and some of the lawyers clearly say that no you have to invest 10 billion IDR to form a company in Indonesia. I know a couple of other expats who are doing businesses here with just 2 billion IDR as capital and they are not married to a local. According to them its just something the govt wants but in reality its not possible if you want to just do a small business.

Really want to learn and understand how, what and why about company formation.

 

[gemima]

Hi All,

Wanted to know if someone has successfully opened a PT PMA foreign owned company in Indonesia? I am not comfortable investing 10 Billion IDR to start a company and some lawyers have said that its just a requirement and i only need to put in 2.5% of it to get things started. After 2 or 3 years we can invest more and then get another 3 to 4 years extension. Is this really true?

Everywhere in official documents and some of the lawyers clearly say that no you have to invest 10 billion IDR to form a company in Indonesia. I know a couple of other expats who are doing businesses here with just 2 billion IDR as capital and they are not married to a local. According to them its just something the govt wants but in reality its not possible if you want to just do a small business.

Really want to learn and understand how, what and why about company formation.

I run and own a portion of a 100% foreigner owned PT PMA that was established before the 10 billion rule. We have not been forced to increase the capital retrospectively. However when the business was set up we had the full required paid up capital injected at the time.

I wouldn't be comfortable in a situation where some lawyers say one thing and others say the opposite. Because ultimately you are the one that suffers in the end not the lawyers. I know that the BKPM does monitor the paid up capital and does send warnings if it is not respected - I don't know if they go beyond warnings.

Are the expats you refer to like my company - established before the 10 billion requirement came into effect?

The government doesn't want foreigners coming over here setting up small businesses - 2.5% of 10 billion is only 250 million - its nothing. There are literally millions of middle class indonesians with that sort of money who the government would prefer set up SMEs. So I do think they might come after you and revoke your business license - but honestly I dont know what the risks actually are.

 

[WhyMe]

I run and own a portion of a 100% foreigner owned PT PMA that was established before the 10 billion rule. We have not been forced to increase the capital retrospectively. However when the business was set up we had the full required paid up capital injected at the time.

I wouldn't be comfortable in a situation where some lawyers say one thing and others say the opposite. Because ultimately you are the one that suffers in the end not the lawyers. I know that the BKPM does monitor the paid up capital and does send warnings if it is not respected - I don't know if they go beyond warnings.

Are the expats you refer to like my company - established before the 10 billion requirement came into effect?

The government doesn't want foreigners coming over here setting up small businesses - 2.5% of 10 billion is only 250 million - its nothing. There are literally millions of middle class indonesians with that sort of money who the government would prefer set up SMEs. So I do think they might come after you and revoke your business license - but honestly I dont know what the risks actually are.

Thanks for sharing and the folks i met have established companies in 2023 and 2024 so the 10 billion condition does apply to them. What they shared was this:

• Capital at the time of company formation 2.5%
• After one year, added another 500 Million IDR
• Second year, they were planning to do the same add another 500 million

They were of the view that we just need to justify that we are adding capital as the company grows and progress.

Its very confusing and the risk is getting your license cancelled due to capital requirement. Its like losing everything just because the capital requirement was not met and BKPM has not been very helpful up till now. No email response and the FDI WhatsApp response is in Bahasa Indonesia - they expect a foreigner to know bahasa Indonesia lol

 

[gemima]

Its very confusing and the risk is getting your license cancelled due to capital requirement.

I think its clear that the government wants FDI but only from bigger enterprises (10B+) that's why they brought in the rule.

Legal compliance is very fluid in Indonesia so you can take risks and get away with them sometimes but other times it can come back to bite you.

If lots of people start setting up PT PMAs with dribbles of investment I think they will end up cracking down eventually but I am not a fortune teller.

 

[quai1313]

From my experience or knowledge,
in Bali, back in years 2017 to 2020, 1 or 2 consulting companies for Expats where assuming you don't need to deposit the 10 Billion capital. But when incorporating must provide a letter of agreement you will in future time (in case of reclamation from the BKPM).
Back at that time, those consulting compaies were highly recommanding to buy-lease property with PT-Pma. (Eventually if needed with nominees directors, nominee share holders beeing subsidiaries PT Pma)
---------
Over the last 2-3 years, still in Bali, hundreds or thousands or PT Pma have been incorporated exclusively to buy - lease local real estate. Almost none with 10.000 billion capital.
Why this : almost all types of local proffessionals involved in the field of real estate- property owned by foreigners claim : this is the safest set up for a Bule in regards to Indo Property laws.
---------------
Nowdays Properties Managers in Bali claim : if you want to do Airbnb rentals with valid Pondok Wisata, and paid Pajak Hotel Ristoran : do it with a PT Pma and all legal papers under the PT Pma.
------------
I follow with my eyes a Pt Pma in Ubud : they are contrctors, promotors. For each villa of plan, including land they sale to foreign client. The villa is fully delivered with the new PT-Pma in the name of clients (foreign buyer-leaser).

--------------
Will the central Governement carck down thousands of PT-Pma holding real estate assets ?
Or will the local Regency ?

 

[fastpitch17]

They could be checking the legality of what they are doing.

Bali Plans To Bring An End To Illegal Tourist Accommodation

Leaders in Bali are speaking out about the impact that illegally operating tourist accommodation is having on the island.

thebalisun.com

 

[centurion]

They could be checking the legality of what they are doing.

Bali Plans To Bring An End To Illegal Tourist Accommodation

Leaders in Bali are speaking out about the impact that illegally operating tourist accommodation is having on the island.

thebalisun.com

Blame the foreigners, says the xenophobe/mysogynist Koster.

 

[centurion]

From my experience or knowledge,
in Bali, back in years 2017 to 2020, 1 or 2 consulting companies for Expats where assuming you don't need to deposit the 10 Billion capital. But when incorporating must provide a letter of agreement you will in future time (in case of reclamation from the BKPM).
Back at that time, those consulting compaies were highly recommanding to buy-lease property with PT-Pma. (Eventually if needed with nominees directors, nominee share holders beeing subsidiaries PT Pma)
---------
Over the last 2-3 years, still in Bali, hundreds or thousands or PT Pma have been incorporated exclusively to buy - lease local real estate. Almost none with 10.000 billion capital.
Why this : almost all types of local proffessionals involved in the field of real estate- property owned by foreigners claim : this is the safest set up for a Bule in regards to Indo Property laws.
---------------
Nowdays Properties Managers in Bali claim : if you want to do Airbnb rentals with valid Pondok Wisata, and paid Pajak Hotel Ristoran : do it with a PT Pma and all legal papers under the PT Pma.
------------
I follow with my eyes a Pt Pma in Ubud : they are contrctors, promotors. For each villa of plan, including land they sale to foreign client. The villa is fully delivered with the new PT-Pma in the name of clients (foreign buyer-leaser).

--------------
Will the central Governement carck down thousands of PT-Pma holding real estate assets ?
Or will the local Regency ?

You do not need to deposit 10 trilinoquadrilions at incorporation. Time to deposit the 10 billions is one year. If you build a real estate it is calculated in the paid-in capital.

Properties, would be interesting to see. Technically you have right to rent a property, and it is a subject of a 10% tax (that goes to the central governemnt). In that case, is the company holds the villa it is registered as real-estate owning/rental business.

What the Balinese government argues is that only registered villas that can get license can be rented. This kind of license (called pondok wisata) as I know, is issued only to a villa owned by Indonesian citizens or local PTs. In this case, the villa is registered as tourist acivity and pays 10% tourist tax (that goes to the local government).

 

[Shadrach]

This is a matter pertaining to permits, and taxes, too technical for me to comment about. I can say that over the years, I have seen so much construction, without proper building codes enforced! Such as improper concrete mixing, resulting in walls cracking. Painting on concrete without using a waterproofing seal first, resulting in the painted walls turning black, with mold, the paint peeling off in huge chunks. Steps built without any rules on height between steps, no guardrails. Hugh loss of rice fields. No foresight into road construction pertaining to the huge increase in traffic.
And very importantly, Proof that the tax received by the government, is being used to improve the infrastructure and being used for the Public, and not to benefit corrupt Politicians only!

 

[quai1313]

Blame the foreigners, says the xenophobe/mysogynist Koster.

••• you make me smile••••

Obviously for Kostner and his afficiodanos, including the "Hôtel Mafia" that's all the fault of the bule.

On the over side : isn't it the bule and international tourists floodings Billions in the local ecomomy ?
(I'm out of original topic).

 

[pantaiema]

What the Balinese government argues is that only registered villas that can get license can be rented. This kind of license (called pondok wisata) as I know, is issued only to a villa owned by Indonesian citizens or local PTs. In this case, the villa is registered as tourist acivity and pays 10% tourist tax (that goes to the local government).

The Balinese government can say whatever they want. However, while foreigners are not permitted to rent out their properties without setting up a PMA, the Balinese government has no authority to stop Indonesian citizens from renting out their rooms, houses. In reality, this practice is widespread throughout the country. For example, in many university cities, including in Bali, Yogjakarta, Bandung, Surabaya, etc locals regularly rent out rooms or homes to students without needing any kind of special license.

All that’s required to do this legally (if they bother to do that) is to report the income on their tax returns. That said, some international property platforms like Airbnb do require hosts to have a 'Pondok Wisata' license before they can list their properties in there.