Registering a Foreign-Owned Company (PT PMA) in Indonesia: Is the 10 Billion Rupiah Capital Requirement a Formality or a Real Obligation?

Establishing a foreign-owned company in Indonesia (PT PMA — Perseroan Terbatas Penanaman Modal Asing) is the first step for international investors seeking to enter the burgeoning Southeast Asian market. However, one of the biggest initial hurdles is the minimum capital requirement: a government-mandated minimum of 10 billion Indonesian Rupiah (approximately USD 690,000–700,000 at current exchange rates).

In business circles and online forums, many suggest that this is purely bureaucratic — a requirement “on paper” only. But how accurate is this perception? Let’s explore the facts based on current regulations, real-world application, and investor conditions as of 2025.

What the Law Says About Minimum Capital for PT PMA

The minimum capital requirement of 10 billion IDR is established under BKPM Regulation No. 4/2021, which regulates direct foreign investment in Indonesia. According to this regulation:

• Minimum authorized capital: 10,000,000,000 IDR — regardless of the industry (with a few exceptions).
• Mandatory paid-up capital: at least 25% of the authorized capital at the time of incorporation, i.e., a minimum of 2.5 billion IDR.

In other words, investors must provide documentary proof that at least a quarter of the capital has been paid up — this can include a bank statement, proof of asset injection, or an asset transfer agreement.

To apply via the official OSS Indonesia (Online Single Submission) portal, declaring the capital amount is mandatory — the system will not allow registration without it. This data is automatically forwarded to BKPM (Indonesia Investment Coordinating Board).

Are Exceptions Allowed?

In practice — no. Despite widespread beliefs shared on social media and in professional circles that the capital can be “skipped” or is just a “technicality,” government authorities strictly enforce the investment conditions. If the required capital is not declared and partially paid-up, PT PMA registration is simply not possible.

Furthermore, moving forward with licensing processes or hiring foreign employees legally requires demonstrating that your investment plan is being executed as promised.

Investment Plan: Why It's Needed and How It Works

After setting up the legal entity, the investor must also submit a detailed Investment Plan (Rencana Investasi). Although this is not a formal legal requirement, BKPM reviews it to assess the business's viability.

The investment plan outlines how the capital will be used, such as:

• leasing or purchasing office or production facilities,
• buying equipment and machinery,
• paying staff salaries, including for foreign experts,
• marketing, logistics, IT, and administration costs.

BKPM monitors real investment implementation over a 1–3 year period as part of monitoring progress. In practice, follow-ups may start around 12 months after incorporation, requesting proof of capital utilization.

What Happens If You Fail to Comply?

If a company cannot show evidence of paid-up capital or fails to carry out the investment plan within a reasonable time, this is treated as a violation of the investment framework. Consequences may include:

• denial of business licenses or work permits (KITAS, RPTKA, IMTA),
• fines and administrative penalties,
• revocation of the NIB (Business Identification Number) and removal from the corporate registry.

Typically, investors are given at least one year to implement their investment plan, with options for extensions upon request. Timely reporting to BKPM and initiating an extension process if needed is crucial.

Who Can Be a Director of a PT PMA: Nationality Requirements

Under Indonesian law, company directors are legally responsible for company operations. According to corporate governance regulations:

• A PT PMA must have at least one executive director — either a citizen of Indonesia or a foreign national holding a valid work permit (RPTKA) and KITAS stay permit.
• Foreign nationals can hold executive roles (e.g., commissioner, co-director, commercial director), but without RPTKA/KITAS, their presence and management authority are not legally recognized.

In other words, foreigners can assume key positions, but only if they meet immigration and visa requirements. Otherwise, appointing an Indonesian citizen as executive director is mandatory.

Why the High Capital Requirement? The Key Objectives

The large minimum capital threshold serves several purposes:

• Preventing the establishment of shell companies with no genuine business intentions;
• Ensuring investor commitment — the capital must be traceable, protected, and supported by documentation;
• Driving economic development — businesses are expected to generate economic activity and employment.

In this sense, the 10 billion IDR figure is not symbolic. It functions as an economic filter in Indonesia’s foreign direct investment policy.

Alternatives for Investors With Limited Capital

If investing hundreds of thousands of US dollars is currently out of reach, there is an alternative: registering a business through a local partner — either an Indonesian citizen or an Indonesian legal entity.

Your participation in the business may be structured through:

• licensing agreements involving your brand or technology,
• consulting or service contracts,
• acting as a beneficial owner without formal shareholding.

However, this route comes with legal intricacies: legally, the company belongs to the local partner, and your interests are protected only by the strength of your legal agreements. This model is particularly risky where trust is lacking and is not advisable for long-term ventures.

Conclusion: A Lawful Path Requires Preparation and Capital

Establishing a PT PMA in Indonesia with a 10 billion IDR minimum capital is a legal requirement and is strictly enforced by authorities. There is no bypass — OSS portal registration and BKPM review both require full transparency and verification.

Before launching your business, you must:

• prepare a solid and credible investment plan,
• ensure payment of at least 25% of the stated capital (i.e., 2.5 billion IDR),
• appoint a qualified manager — either an Indonesian citizen or a foreigner with valid authorization,
• register with tax authorities (NPWP) and maintain regular financial reporting.

With the right approach, a PT PMA becomes more than a legal entity — it's a robust business platform offering legal protection for investors and a pathway to sustainable operations in Indonesia.