Foreign Owned Corporation (PMA)

Article 1 Numbers 13 and 11 of BKPM Regulation Number 4 of 2021 concerning Guidelines and Procedures for Risk-Based Business Licensing Services and Investment Facilities ("BKPM Regulation No. 4/2021") defines Foreign Investors as individual business actors of foreign nationals, foreign business entities, and/or foreign governments that invest in the territory of the Republic of Indonesia. Meanwhile, what is meant as Foreign Investment or FDI is an investment activity to conduct business in the territory of the Republic of Indonesia carried out by Foreign Investors, both those who use foreign capital fully and those in contact with Domestic Investors.

Investors who invest in Indonesia must be carried out in accordance with the provisions as referred to in Article 5 of Law Number 25 of 2007 concerning Investment ("Law No. 25/2007"). According to the provisions of Article 5 paragraph (2) of Law No. 25/2007, PMA can only establish a business in the form of a Limited Liability Company based on Indonesian law and is also domiciled in Indonesia. For PMA companies in the form of PT, investment is carried out by:

1. taking a share of the shares at the time of the establishment of the LL
2. buying shares; and
3. other means in accordance with the provisions of laws and regulations.

Ratification of the establishment of a foreign investment business entity in the form of a Limited Liability Company is carried out in accordance with the provisions of the laws and regulations. Investment companies that will carry out business activities must meet the Business License from the Central Government or Regional Government in accordance with their authority based on norms, standards, procedures, and criteria set by the Central Government.

Based on Article 77 Number 2 of Law Number 11 of 2020 concerning Job Creation ("Law No. 11/2020"),all business fields are open for investment activities, except for business fields that are declared closed for investment or activities that can only be carried out by the Central Government.

According to the provisions of Article 9 paragraphs (8)-(9) of BKPM Regulation No. 4/2021, investment made by PMA business entities in the form of Limited Liability Companies can apply for Business Licenses. Industries that are FDI are the authority of the Central Government. Therefore, the Business License of PMA companies is issued by the OSS institution on behalf of the Minister/head of a non-ministerial government agency.

The OSS institution is authorized to issue NIB (Business Identification Number) for PMA companies by taking into account the level of risk, provisions for the investment business sector, minimum investment provisions, and capital provisions in accordance with statutory provisions.

Article 109 Number 3 of Law No. 11/2020 stipulates that the Company is required to have the authorized capital of the Company. The amount of the Company's authorized capital is determined based on the decision of the founder of the Company.

However, in the provisions of Article 12 of BKPM Regulation No. 4/2021, PMA companies are categorized as large businesses so they are required to follow the minimum investment value provisions, unless otherwise stipulated by laws and regulations. The minimum investment value requirement for PMA companies is a total investment of greater than IDR 10,000,000,000.00 (ten billion rupiah), outside of land and buildings per KBLI business field of 5 (five) digits per project location.

The terms of the total investment are excluded for some business activities:

• specifically for large trading business activities, greater than IDR 10,000,000,000.00 (ten billion rupiah) outside of land and buildings, is per the initial 4 (four) digits of KBLI;
• specifically for food and beverage service business activities, greater than IDR 10,000,000,000.00 (ten billion rupiah) outside of land and buildings, is per 2 (two) initial digits of KBLI per one location point;
• specifically for construction service business activities, greater than IDR 10,000,000,000.00 (ten billion rupiah) outside of land and buildings in one activity, is per the initial 4 (four) digits of KBLI. The construction services business in question, includes:
  • construction consulting services business;
  • construction work undertakings; or
  • integrated construction work undertakings.
• specifically for industrial business activities that produce types of products with 5 (five) different digit KBLI in 1 (one) production line, greater than RP10,000,000,000.00 (ten billion rupiah) outside of land and buildings; or
• specifically for business activities of construction and property operation, provisions apply:
  • in the form of property in the form of a whole building or an integrated housing complex with the provision that the investment value is greater than IDR 10,000,000,000.00 (ten billion rupiah) including land and buildings; or
  • in the form of property units not in 1 (one) building as a whole or 1 (one) residential complex in an integrated manner, the investment value is greater than RP10,000,000,000.00 (ten billion rupiah) outside the land and buildings;

In addition to the minimum investment value provisions, FDI is also required to be subject to the minimum capital requirements. The minimum capital requirement in question is issued/paid-up capital of at least IDR 10,000,000,000.00 (ten billion rupiah), unless otherwise stipulated by laws and regulations.

The documents that need to be provided to establish a PT PMA are as follows:

1. The name of the PT (minimum 3 sentences, for example: "PT Maju Sukses Makmur");
2. Full address of PT;
3. PT email address;
4. PT phone number;
5. Composition of members of the Board of Directors and Board of Commissioners:
   1. Foreigners, providing:
      • Copies of Passports and KITAS (if they already exist);
      • Residential address;
      • Email address; and
      • Phone number (minimum 10 digits).
   2. Indonesian citizens, providing:
      • Copy of ID card;
      • Copy of NPWP;
      • Email address; and
      • Phone number (minimum 10 digits).
6. Shareholder Data of Indonesian Legal Entities:
   • The Articles of Association of the Pt are the following with its amendments and the Decree of the Ministry of Law and Human Rights of the Republic of Indonesia;
   • Copy of Licensing in the form of NPWP and NIB;
   • Copy of KTP of the Board of Directors and Board of Commissioners;
   • Approval of the Board of Commissioners or GMS that has been adjusted to the Articles of Association;
   • Email address;
   • Phone number (minimum 10 digits).
   • Power of Attorney is sufficiently stamped if authorized along with the identity of the Power of Attorney;
7. Articles of Association (AOA);
   • • Articles of Association (AOA);
     • List of members of the Board of Directors (or its ACRA);
     • Passport of a member of the Board of Directors;
     • Residential address of members of the Board of Directors;
     • Email address;
     • Phone number (minimum 10 digits).
     • Full Address, Email Address and Mobile Number/ Tel. minimum 10 digital
     • Surat Kuasa apabila dikuasakan yang telah dilegalisasi oleh Notaris setempat dan Kedubes RI setempat berikut dengan Identitas Penerima Kuasa.
8. Purpose and Objectives of PT PMA (in accordance with the latest KBLI); and
9. Composition of Authorized Capital and Paid-up Capital of PT PMA.

If the documents have been completed, the Deed of Establishment will be prepared within approximately 2 (two) working days. After the draft Deed of Incorporation has been signed by the Founders, the final copy of the Deed of Incorporation will be issued 2 (two) days after that. To obtain the Ratification Decree, there must be a PNBP payment first.
Divestment Obligations

According to the provisions of Article 14 of BKPM Regulation No. 4/2021, PMA companies are required to divest shares. Divestment of shares can be done to Indonesian citizens or Indonesian business entities whose share capital is entirely owned by Indonesian citizens through direct ownership in accordance with the agreement of the parties and/or the domestic capital market. The direct ownership referred to for Indonesian citizens or Indonesian business entities is at least RP10,000,000.00 for each shareholder. The obligation to divest shares is carried out on the basis of a deed document stating the agreement of the parties regarding the implementation of the divestment of shares.

In the event that the change in share ownership for the implementation of the obligation to divest shares has been completed and ratified by the Ministry that organizes government affairs in the field of law and human rights, Business Actors are required to make data changes in the OSS System.

Fiscal Facility Services and Non-Fiscal Facility Services
The Central Government provides facilities to investors who make investments. The investment facility can be given to investment companies that expand their business or make new investments. However, the investment that gets the facility must at least meet the following criteria:

• absorbs a lot of labor;
• including high priority scales;
• including infrastructure development;
• carry out technology transfer;
• conducting pioneer industries;
• be in remote areas, disadvantaged areas, border areas, or other areas deemed necessary;
• preserving the environment;
• carrying out research, development and innovation activities;
• partnering with micro, small, medium enterprises or cooperatives;
• industries that use capital goods or domestically produced machinery or equipment; and/or
• including tourism business development.

From these provisions, it can be concluded that investment that is included in the category of tourism business development will get investment facilities from the Central Government.

Article 4 paragraphs (3)-(5) of BKPM Regulation No. 4/2021 specifies that investment facility services include fiscal facility services and non-fiscal facility services. The fiscal facility services include:

• facilities for exemption of import duties on imports;
• income tax facilities for investment in certain areas of business and/or in certain areas;
• corporate income tax deduction facilities;
• corporate income tax reduction facilities and income tax facilities for investment in certain business fields and/or in certain areas of the SEZ;
• gross income reduction facilities for certain research and development activities in Indonesia;
• providing gross income reductions for the implementation of work practice activities, internships, and / or learning in the context of coaching and developing human resources based on certain competencies; and
• providing facilities for reducing net income for new investment or business expansion in certain business fields which are labor-intensive industries.

Meanwhile, what is meant by non-fiscal facility services is an immigration recommendation consisting of:

• recommendations for the transfer of the status of a visit stay permit to a limited stay permit; and
• recommendation to transfer the status of a limited stay permit to a permanent residence permit.

Source:

• Law Number 25 of 2007 concerning Investment.
• Law Number 40 of 2007 concerning Limited Liability Companies.
• Law Number 11 of 2020 concerning Job Creation.
• BKPM Regulation Number 4 of 2021 concerning Guidelines and Procedures for
• Risk-Based Business Licensing Services and Investment Facilities.