Investment

Foreign investor interest in business opportunities in Indonesia continues to grow. With a stable economic outlook and a vast market, Indonesia has become a strategic destination for foreign investment. However, before launching a business, there are several foreign investment requirements that must be fulfilled to ensure operations comply with prevailing regulations.

Here are 8 key requirements foreign investors should consider before establishing a business in Indonesia:

1. Establishing a Limited Liability Company (PT) in Indonesia

Foreign investors wishing to operate a business in Indonesia must establish a legal entity in the form of a Limited Liability Company (PT). For foreign ownership, the required entity is a Foreign Investment Company (PT PMA).

PT PMA allows foreign investors to hold shares in a business established in Indonesia, with ownership limits varying depending on the business sector.

2. Minimum Investment Capital of IDR 10 Billion

A mandatory requirement for foreign investment is having a minimum investment capital of IDR 10 billion, excluding land and building costs. Additionally, the paid-up capital in the PT PMA must be at least 100% of the stated capital.

This regulation ensures that incoming investments have strong economic capacity and contribute to the growth of Indonesia’s industries.

3. Completing the Required Documents for PT PMA Establishment

To establish a PT PMA, foreign investors must prepare several key documents, including:

• Deed of Incorporation from a notary
• Approval from the Ministry of Law and Human Rights
• Business Identification Number (NIB)
• Business License in accordance with the business field

This process must be carried out formally to ensure business legality and obtain the necessary operational permits in Indonesia.

4. Compliance with Approved Business Sectors

Not all business sectors in Indonesia are open to foreign investment. Some sectors have foreign ownership limits, while others are completely closed. These are regulated under the Presidential Regulation on the Negative Investment List (DNI) or the latest investment priority list.

Thus, it is crucial to ensure that the intended business falls within a sector that is open to foreign investors.

5. Reporting Obligations to BKPM

After establishing a PT PMA, foreign investors are required to submit regular reports to the Indonesia Investment Coordinating Board (BKPM). These reports must include investment progress, workforce data, and other operational aspects.

Compliance with this obligation is vital for smooth operations and to avoid administrative sanctions.

6. Adherence to Foreign Manpower Regulations

The use of foreign labor in Indonesia is subject to strict regulations. Every foreign worker employed must have a Foreign Worker Employment Plan (RPTKA) and a Foreign Worker Employment Permit (IMTA).

Additionally, companies are required to prioritize local labor for most positions, except for highly specialized roles that are difficult to fill domestically.

7. Compliance with All Applicable Laws and Regulations

Foreign investors must comply with all applicable laws in Indonesia, including those related to taxation, environmental permits, and industry-specific regulations. Adherence to these laws ensures smooth business operations and helps avoid legal risks in the future.

Meeting foreign investment requirements in Indonesia can be complex for those unfamiliar with local regulations. However, completing these steps is essential to ensure your business remains legal and operates efficiently.

Elmar Consultant Business Indonesia is here to support foreign investors in establishing a PT PMA and fulfilling all necessary requirements with ease. Contact Elmar today for professional consultation on PT PMA formation and other foreign investment needs!