How to Start a Business in Indonesia: Capital Requirements and PT PMA Registration

Indonesia is the largest country in Southeast Asia, boasting a rapidly growing economy, a vast domestic market, and a strategic location between Asia and Australia. These advantages continue to attract foreign companies and private investors looking to expand across the region.

However, establishing a foreign-owned business in Indonesia requires compliance with strict regulatory procedures. In this article, we break down key points for setting up a foreign-owned entity known as a PT PMA (Perusahaan Terbatas Penanaman Modal Asing):

• The minimum capital requirements
• The step-by-step PT PMA registration process
• What to consider when applying for visas and licenses
• The restrictions and conditions for foreign investors

This content reflects the most up-to-date regulations as of 2025, based on the latest guidelines issued by BKPM (Indonesia’s Ministry of Investment).

Minimum Capital Requirement for Foreign-Owned Companies in Indonesia

Companies with foreign ownership registered as PT PMA must meet the investment requirements set by the Indonesian government. These include both minimum capital and total project investment requirements.

Mandatory Paid-Up Capital

As of 2025, the following minimum thresholds apply:

• Minimum paid-up capital — IDR 1 billion (approximately USD 65,000–70,000, subject to exchange rate).
• Minimum total project investment — IDR 10 billion (around USD 670,000), which includes capital and operating costs.

Actual transfer of funds to an Indonesian corporate bank account is required to finalize the registration process. A portion of the capital may be transferred in stages if pre-approved by BKPM and stated in the business plan.

What Qualifies as a Foreign Company?

If even 1% of the company's shares are held by a foreign individual or entity, it is classified as a PT PMA and subject to the Foreign Investment Law.

Important note: ownership percentages may directly affect sector-specific limitations — more on this in the industry eligibility section below.

Sectors Open and Restricted to Foreign Investment under the Positive Investment List

Indonesia uses the Positive Investment List to determine which business sectors are fully or partially open to foreign participation. This framework has replaced the previously restrictive Negative Investment List.

As per BKPM guidelines, sectors currently welcoming foreign investment include:

• Manufacturing and industrial businesses
• Export-oriented trade
• Digital technology and software development
• Tourism and hospitality
• Education and healthcare (with limitations)

Commonly restricted sectors include:

• Fisheries and marine bioproducts
• Certain areas of media and telecommunications
• Sectors relevant to national security

Always consult the official OSS Indonesia portal to verify that your intended business activity is eligible for PT PMA registration.

Steps to Register a Foreign Company (PT PMA)

The registration process involves multiple steps, utilizing state-run platforms and working closely with authorized local consultants. Below is a simplified overview of how to launch a foreign-owned business.

Step 1: Entry and Work Authorization

• Before registering, the investor must apply for an Investment Stay Permit (ITAS) through the online visa system.
• Upon receiving an electronic visa (e-Visa), the investor enters Indonesia and completes the process to obtain a temporary stay permit — the Investor KITAS.
• The previously used C314 visa has now transitioned to the ITAS classification (Investor KITAS / Index 313-314) since 2022.

Step 2: Establishing a Legal Entity — PT PMA

• Choose a unique company name with at least three words — this can be registered via the AHU system.
• Appoint at least one Director and one Commissioner. Foreign nationals may fill both roles, though partnering with a local can enhance credibility.
• Create and notarize incorporation documents through a licensed public notary.
• Register through OSS (Online Single Submission) to receive a Business Identification Number (NIB), Taxpayer Number (NPWP), and basic permits.

Step 3: Capital Injection

Once the company is registered, a corporate account is opened at an Indonesian bank. The paid-up capital (minimum IDR 1 billion) must be deposited into this account.

Banks may require:

• A detailed business plan
• Proof of funds origin
• Shareholder/beneficiary documents for KYC (Know Your Customer) compliance

Step 4: Licensing and Operational Permits

License types vary by business field:

• Manufacturing — IUI (Izin Usaha Industri)
• Wholesale/Retail Trade — SIUP (Surat Izin Usaha Perdagangan)
• Tourism and Hospitality — TDUP (Tanda Daftar Usaha Pariwisata)

All licenses are applied for via OSS Indonesia, typically within 1–3 weeks.

Ongoing Obligations for PT PMA After Registration

Following license approvals, PT PMA entities must comply with relevant laws on corporate governance, taxation, and labor.

Key responsibilities include:

• Maintaining financial statements under the Indonesian PSAK standards (similar to IFRS).
• Filing regular tax reports: corporate income tax (PPh), value-added tax (VAT/PPN), and employee-related taxes.
• Registering with the tax office and obtaining an NPWP (tax number).
• Meeting labor regulations: maintaining employment contracts and BPJS social security contributions.

Companies must also submit periodic investment updates and project status reports to BKPM.

Liabilities and Legal Risks

While a PT PMA is a limited liability legal entity, directors and shareholders may still face personal liability in cases such as:

• Tax evasion or false financial reporting
• Violation of sector-specific investment restrictions
• Misuse of designated investment capital

Government oversight has increased significantly in recent years. Non-compliant companies risk fines, license revocation, or being delisted.

Final Thoughts: Preparing to Register a PT PMA in Indonesia

Establishing a foreign-owned business in Indonesia requires a methodical and informed approach. Key preparatory steps include:

• Confirming sector eligibility via the Positive Investment List
• Calculating total capital and investment requirements
• Drafting a business plan to present to banks and BKPM
• Completing immigration and registration processes via AHU and OSS

Given the dynamic regulatory landscape, it is highly recommended to work with certified legal and accounting professionals who can help you avoid costly mistakes, expedite the process, and ensure your business remains compliant.

Official Resources:

• Ministry of Investment / BKPM – Official Government Portal
• OSS Indonesia – Centralized Licensing System
• AHU Online – Legal Affairs Administration

Additional Materials:

• ILA Global – Guide to Setting up a PT PMA
• Bali Legal – Overview of Legal Updates

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