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Facts about entity formats in Indonesia: PT PMA, PT local, and RO!

Trường Lăng
Trường Lăng, founder and 15-year director of Viettonkin, guides the company's strategic direction, makes top-level decisions, and represents the firm in key business negotiations. With over 20 years of consulting experience in Belgium and Southeast Asia, including 15 years specializing in FDI projects, he has established himself as a top expert who helps clients across industries expand their businesses. His deep knowledge of risk management and business operations, combined with his proven track record of successful consultation projects, makes him a valuable partner for investors seeking quality consulting services.

Legal Entity Formats in Indonesia

Do you want to conduct business in Indonesia? There are various options for setting up a legal entity. The most common format used by investors who want to enter the Indonesian market is a limited liability company (PMA). However, there are alternative ways that you can consider.

Here are the most common legal entity formats in Indonesia:

Type Limited Liability Company with Foreign Direct Investment Local Limited Liability Company Representative Office Representative Office for Trading
Indonesian Abbreviation PT PMA PT KPPA K3PA
Allowed Activities Can conduct all business activities within the business field it got approval for Can conduct all business activities within the business field it got approval for Market research local representation Local representation
Best option for Foreign companies and investors looking for full or partial ownership in a company operating in Indonesia Local investors who are not involving any foreign shareholders Foreign companies studying the market
Foreign companies who don’t need to earn revenue from Indonesia		 Foreign trading companies that don’t need to earn revenue to their Indonesian entity
Foreign Ownership Restriction Foreign ownership can be anything from 0% to 100% depending on the business classification. Classifications that are not in the Negative Investment List can be owned by 100%. It cannot have foreign shareholders.
Limited amount of work permits for foreigners depending on the size of capital.		 No restrictions. No restrictions.
Minimum Capital Investment plan: Minimum $1.2 million USD.Paid-up capital: at least 25% of the investment plan. For some industries, the required capital is higher. Micro: Less than Rp.50 million
Small:Rp. 50 – 500 millionMedium: Rp. 500 – 10 billionLarge: above 10 billion		 No capital requirement. No capital requirement.
Key Benefits It can operate fully as an independent limited liability company within the business classification. Smaller capital requirements and faster process as long as no foreign shareholders are involved. No capital requirement.
The easiest way to have a legal presence in Indonesia.		 The license can always be extended every 3 years.
Key Disadvantages Large capital requirement.
Ownership restricted or forbidden in some industries.		 No foreign shareholders It cannot seek or earn revenue in Indonesia.
Valid for maximum of 5 years, and cannot be extended.		 Not allowed to earn any revenue.
Issuing Work Permits and Visas for Foreigner All shareholders, directors, and commissioners are eligible for the work permits.
Unlimited amount of business visa sponsorships.
Work permits can be issued to foreign experts.		 Only Medium Size PT can apply work permit for its foreign worker.
Unlimited amount of business visa sponsorships.		 Work permit for the chief representative.
Unlimited business visa sponsorships.
3 Indonesians for every foreigner hired.		 Work permit for the chief representative.
Unlimited business visa sponsorships.
3 Indonesians for every foreigner hired.
Additional Licenses Required Permanent Business License from BKPM.
Import license for importers.
Additional operating licenses  needed for some industries		 Import license for importers.
Additional operating licenses for some industries		 A representative office needs to be extended every 3 years.
Compliance Monthly withholding tax report.
Quarterly/semi-annual investment reporting.		 Annual tax reporting.
Monthly withholding tax report.
Annual tax reporting		 Monthly withholding tax report.
Annual Activity report to BKPM.		 Monthly withholding tax report.
Annual Activity report to BKPM.
Duration ±10 weeks ±8 weeks ±6 weeks ±6 weeks

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Are you still thinking about the best format for your company? Contact us!
 
 

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