How to Set Up a PT PMA

Indonesia is no longer just a frontier market on a watchlist. The country has firmly established itself as one of Southeast Asia's most compelling destinations for serious capital deployment. If your organisation is evaluating an Indonesian market entry, the structural question arrives early and decisively: how do you establish a legal, operating presence that gives you full commercial rights, contractual capacity, and the ability to generate revenue?

Contributing Advisor

Hardy Salim

Manager, Business Advisory Services

The answer, for virtually every foreign investor, is the same: a PT PMA (Perseroan Terbatas Penanaman Modal Asing), Indonesia's foreign investment limited liability company. Understanding what this structure entails, and how to build it correctly from the outset, is the difference between a smooth, six-week launch and a costly, compliance-driven restart.

What is a PT PMA?

A PT PMA is the sole legal vehicle through which a foreign individual or foreign corporation can hold shares directly, conduct commercial activities, generate revenue, enter into binding contracts, and employ staff in Indonesia. There is no equivalent grey-area arrangement. Operating commercially without this structure constitutes a violation of Indonesian investment law, carrying administrative sanctions under Government Regulation No. 28 of 2025, including license suspension, enforced closure, and tax exposure.

Critically, any level of foreign ownership, even one percent, is sufficient to classify a company as a PT PMA. This distinction matters for compliance planning, capital obligations, and licensing, as the PT PMA framework carries obligations that do not apply to purely domestic entities.

What the structure offers in return is substantive: full legal personhood, the ability to hold property rights (under Hak Guna Bangunan or Hak Pakai), access to the priority sector incentive regime, and the credibility of a recognised Indonesian legal entity when entering commercial agreements.

Step 1: Is your business activity open to foreign ownership in Indonesia?

Before engaging a notary, reserving a company name, or planning capitalisation, the foundational question is whether your intended business activity is open to foreign ownership — and, if so, to what extent.

Indonesia operates under a Positive Investment List (Daftar Prioritas Investasi), established under Presidential Regulation No. 10 of 2021 as amended by Presidential Regulation No. 49 of 2021. The framework replaced the former Negative Investment List and shifted the default premise to "open unless restricted." However, restrictions remain consequential, and they are tied not to your company's general description but to its specific five-digit KBLI code (Klasifikasi Baku Lapangan Usaha Indonesia) — Indonesia's standard business classification system.

Foreign ownership eligibility falls into four broad categories:

The KBLI code selection is not merely an administrative formality. It determines the permissible ownership structure, the applicable licensing pathway, the business risk classification within the OSS system, and eligibility for fiscal incentives. Selecting the wrong code at incorporation creates operational barriers that are expensive to correct after the fact — particularly if the company has already commenced activities or hired staff.

Where an organisation intends to operate across multiple business lines, each distinct five-digit KBLI code carries its own investment plan requirement, increasing the total capital commitment proportionally.

Step 2: How much capital does a PT PMA actually require?

One of the most significant developments in Indonesia's foreign investment framework occurred in October 2025. Under BKPM Regulation No. 5 of 2025, the minimum paid-up capital requirement for a PT PMA was reduced by 75 percent — from IDR 10 billion to IDR 2.5 billion (approximately USD 150,000). This is the most meaningful reduction in PT PMA entry costs in over a decade, and it removes a threshold that had previously excluded a significant cohort of mid-market investors and regional businesses.

However, the reduction in paid-up capital does not eliminate the broader investment commitment. The capital framework for a PT PMA now operates across two distinct figures:

For service sectors, the calculation basis for the IDR 10 billion investment threshold differs: wholesale trade and construction services apply the rule per the first four digits of the KBLI code, while food and beverage services apply it per the first two digits per operating location. These sector-specific variations require careful planning before investment commitments are finalised.

A separate consideration applies to investors seeking residency-based status. While the paid-up capital threshold has been lowered, the Investor KITAS (Temporary Stay Permit) still requires a minimum capital holding of IDR 10 billion, and the Investor KITAP (Permanent Stay Permit) requires IDR 15 billion. Investors planning to reside in Indonesia should factor this into their total capital structure from the outset.

Step 3: What governance structure must a PT PMA maintain?

Under Indonesian Company Law, a PT PMA must maintain a defined governance hierarchy. There is no flexibility on the minimum composition:

• Shareholders: Minimum of two, who may be foreign individuals, foreign corporations, or Indonesian entities. Each shareholder must hold shares with a minimum value of IDR 10 million.
• Board of Directors: Minimum of one Director, responsible for day-to-day management and operational execution. Foreign Directors residing in Indonesia require a valid KITAS.
• Board of Commissioners: Minimum of one Commissioner, responsible for oversight and supervision of the Board of Directors. Commissioners may reside abroad if they do not perform executive duties.

It is worth noting that the Indonesian Manpower Law restricts foreign directors from performing human resources-related functions. In certain regulated sectors — including direct trading and multi-level marketing — Indonesian citizens must hold specific director and commissioner positions. Where the company appoints a foreign national to an executive role, the PT PMA is responsible for sponsoring the appropriate work and stay permits.

Step 4: How long does it take to register a PT PMA?

Indonesia's investment registration infrastructure has been substantially modernised. The Omnibus Law on Job Creation and its implementing regulations, including Government Regulation No. 5/2021, consolidated the licensing process into a single digital platform: the OSS-RBA (Online Single Submission, Risk-Based Approach) system, managed by the Ministry of Investment (BKPM). Physical presence in Indonesia is not required for most registration steps; the process can be managed remotely via power of attorney.

The standard registration sequence proceeds as follows:

• Company Name ReservationThe proposed name, which must consist of at least three non-obscene words, is submitted through the AHU Online platform by a licensed notary. Names already registered, overly similar to existing entities, or resembling government institutions will be rejected.
• Deed of EstablishmentA notary prepares the Deed of Incorporation (Akta Pendirian), which formally records the company's shareholder structure, KBLI business activities, authorised and paid-up capital, and management appointments. This document forms the constitutional foundation of the entity.
• Ministry of Law and Human Rights (AHU) RatificationThe notarial deed is submitted to the Ministry of Law and Human Rights for legal entity status. Under updated procedures in BKPM Regulation No. 5 of 2025, each shareholder and the company must provide distinct phone numbers for verification purposes, a new administrative step that adds minor complexity to multi-shareholder structures.
• Tax Identification Number (NPWP)The corporate NPWP is required for banking, licensing, and all subsequent tax compliance obligations. It is typically processed concurrently with the AHU ratification step.
• NIB Issuance via OSS-RBARegistration in the OSS system generates the NIB (Nomor Induk Berusaha, Business Identification Number), which functions as the company's unified operating licence, import licence, customs identification number, and business registry entry. For low-risk activities, the NIB may be issued the same day or within three business days.
• Sector-Specific LicencesDepending on the risk classification of the registered KBLI codes, additional sectoral permits may be required before operations can commence. Medium-high and high-risk classifications require fulfilment of specific commitments, such as environmental permits or technical approvals, before the business licence moves from "unactivated" to operational status.

Indicative Timeline

The most common cause of delay is missing or incorrect documentation at submission. Careful preparation, including correct KBLI selection, shareholder documentation, and capital declaration letters, is the single most controllable variable in compressing the timeline.

Step 5: What ongoing obligations does a PT PMA need to comply with?

Establishing the entity is the beginning, not the end, of the compliance cycle. A PT PMA carries ongoing obligations that decision-makers should factor into operational planning:

• Investment Activity Report (LKPM): Filed quarterly through the OSS system, reporting on realised investment, employment figures, and operational progress against the declared investment plan.
• Corporate Income Tax (CIT): PT PMAs are subject to the standard 22% CIT rate, with potential access to tax holidays (for investments exceeding IDR 500 billion in priority sectors) or tax allowances (for investments between IDR 100 billion and IDR 500 billion).
• Start-of-Operations Deadline: Under BKPM Regulation No. 5 of 2025, companies must declare an estimated commencement-of-operations date during OSS registration. Standard businesses are expected to begin operations within 12 months; construction-dependent or high-risk businesses may receive windows of up to five years.
• Capital Deposit Restriction: Paid-up capital funds cannot be transferred out of the company account for non-business purposes during the first 12 months post-incorporation.

Step 6: Why does market entry structure matter more than market entry timing?

Indonesia's regulatory reforms over the past four years, the Omnibus Law, the Positive Investment List, the OSS-RBA digitisation, and the 2025 capital reduction, represent a coherent liberalisation trajectory, not an isolated policy moment. The government has signalled continued openness to substantive foreign capital, particularly in priority sectors including renewable energy, digital infrastructure, pharmaceutical manufacturing, and advanced technology services.

For organisations that have already identified the opportunity, the structural and compliance requirements of PT PMA establishment are navigable within a defined and increasingly predictable framework. The more material risk is not the complexity of the process itself, it is entering the market with a structure that has not been optimally configured from the start.

Considering market entry into Indonesia?

Establishing a PT PMA involves overlapping regulatory regimes, sector-specific eligibility rules, and compliance timelines that interact in ways that are not always intuitive from the outside. Missteps at the KBLI selection or capital structuring stage tend to surface months later, often at the least convenient moment in an investment cycle.

Our advisory team works with foreign investors and multinationals entering the Indonesian market, from initial sector eligibility analysis through incorporation, licensing, and post-establishment compliance. If your organisation is at the evaluation or planning stage, we would welcome the opportunity to provide a structured assessment of your market entry options.