The Obligation of Foreign Investment Company in Indonesia

After the Foreign Investment Company (“PT PMA”) has been approved by Ministry of Laws and Human Rights (“MoLHR”), it means that PT PMA is duly established in Indonesia. PT PMA should take the following obligations.

Corporate Housekeeping

There are several corporate actions must be conducted by PT PMA. PT PMA must held First Meeting of the Shareholders, Directors and Commissioners. The Shareholders should confirm that the appointment of members of the Board of Directors (“BoD”) and Board of Commissioners (“BoC”) and together with the Directors and Commissioners approve all action conducted in the name of PT PMA prior to MoLHR approval of the Deed of Establishment. The founding Shareholders do not oblige with the actions that not approved.

Further the resolution must be agreed, if the Directors are to be indemnified by the Shareholders for corporate action prior to publication of Deed of Establishment.

PT PMA also must prepare the Share Certificates, the Shareholders Registry and the Special Registry,

Reporting Obligation

PT PMA must submit periodic reports to the Coordinating Investment Body (“BKPM”) describing the actual operations conditions of its company in the standard form of BKPM. That report is called Report of Capital Investment Activity (“Laporan Kegiatan Penanaman Modal or LKPM”).

If PT PMA has not obtained the Permanent Business License (“Izin Usaha Tetap or IUT”), PT PMA must submit LKPM every six (6) months e.g. first period January 1 to June 30 and second period July 1 to December 31. The submission must be made no later than one (1) month after the end of each period.

If PT PMA has obtained IUT, PT PMA must submit LKPM annually. The submission must be made no later than January 31 of the following year.

Permanent Business License

The Initial Investment Approval only serves as a temporary operating license until PT PMA reaches the commercial operation or commercial production. At that time, PT PMA must submit IUT application to BKPM. After PT PMA obtains IUT, PT PMA is authorized to operate for a period of 30 years.

Environment Protection

PT PMA may be required to conduct analysis of the business’ impact on the environment (AMDAL) before PT PMA may conduct its business activities. However, this obligation depends on PT PMA’s type of business activities.

AMDAL is one of the required documents to obtain IUT. PT PMA must submit environmental management (RKL) and environmental monitoring plan (RPL) to BKPM. The RKL and RPL also must be submitted to the relevant authorities where the property or project is located.

If a business activity is deemed to cause insignificant adverse effect on the environment, PT PMA is required to submit environmental management effect (UKL) and an environmental monitoring effort (UPL).

Manpower Report

PT PMA must report to the relevant regional office of the Ministry of Manpower (“MoM”) regarding its employees within the period of 30 days from the date of establishment of PT PMA. The manpower report is in the standard form of MoM. Moreover, PT PMA must prepare an annual report of its employees after the commencement of its commercial production.

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15 thoughts on “The Obligation of Foreign Investment Company in Indonesia

  1. Suphot says:

    Surprisingly, I was wandering around several website for more information of company registration and import license in Indonesia, suddenly I am on your page and gotta say it’s very impressive.

    On your about page, your main practice is getting our attention. It’d be great if we can communicate for more information. Our company are planning to establish a PMA there (FDI).

    I’ll be looking forward to hearing back from you

    • Umar says:

      Hi Mary,
      I was doing some preliminary research on the feasibility of establishing PMA company in Indonesia. I’m considering using the PMA to acquire 1)residential property; 2) obtain a permanent resident visa;3)corporate entity to engage in some type of business;4) estate planning.Specifically, are there any limitations
      on the type of business activity a PMA may engage in? Your response would be appreciated. Thanks

      • missjc says:

        Dear Umar,

        1. You cannot use a PT PMA to acquire residential property in Indonesia. When you establish a PT PMA, the said PT PMA can buy a property as the result the said property under PT PMA’s assest.

        2. If you have a permanent resident visa, it does not mean you will automatically obtain a working permit. So, in order to live and work in Indonesia, you have to get a sponsor from an Indonesian company.

        3. A proposed PT PMA may have some type of business activities but it must be related for example, a Company that carries activities of manucfacturing and exporting goods.

        4. Yes. There is limitation for a foreign investment company to conduct its activities in Indonesia. You must check the Negative List, President Regulation No. 36 of 2007 whether your business activities open or close for foreign investors.

        Hope my explanation is sufficient.

  2. Chris says:

    Dear MISSJC,
    I have a standard PT in Bali with 2 local “go-betweens”, a Diector and a Commissioner also declared as shareholders. The PT is sponsoring me for my KITAS as it is the case for many here who have not decided to set up a PMA.
    However, I have a plan to set up a PMA in Java in a different line of business while keeping my first company and I am being told that I cannot own a company if I am already sponsored by another one. A person handling visas for Foreigners told me I could risk being deported as immigration would consider I have interests in two companies. Another person told me it was possible but I could not be a Director in that company, only a Commissioner.
    What is true in all of this?
    Thanks you in advance,
    Chris

    • missjc says:

      Dear Chris:

      I believe that you are a technical consultant under Ordinary PT. Please be noted that Ordinary PT can hire expatriates only as its technical consultant. I believe you conduct nominee arrangement here because a foreign can not be a shareholder in Ordinary PT.

      Please be advised that your ownership under this nominee agreement is in grey area because of the new investment law of Indonesia stipulates that the nominee arrangement is null and void. If you conduct nominee arrangement, I hope that you also have to good relationship with the locals who act as Director and Commissioner. Please noted that all legal documents are under the nominees’ name, not your name. You do not have strong position in the event of dispute.

      If you wish to set up a PT PMA with different business line, I suggest that you change your sponsorship of working permit and KITAS under PT PMA especially if you wish to be a director in PT PMA as well. Please be informed that Commissioner function under Indonesia Company Law is only as a supervisor. Indonesia Company Law recognizes two tier system.

  3. Ron Maidment says:

    I wish to know do you need to register a business trading name in Indonesia.If so does anyone know the required procedure.
    Thanking in anticipation
    Ron

    • missjc says:

      Hi Ron, yes you must register your business trading name because trading name is important for your company assets. You can register business trading name by yourself to Directorate General of Intellectual Property Rights/DG IPR (Dirjen Hak Atas Kekayaan Intelektual) or you can appoint a IPR Lawyer to conduct registration. If you need a IPR lawyer, please let me know. I can recommend you. Please be informed that lawyers that have IPR license that can conduct registration to DG IPR.

  4. Tony Wong says:

    Miss JC,

    firstly compliments to your site.

    Does a PMA have obligations to Kadin as well? I am setting one up (PMA) and would like advise on authorised paid up capital as we intend to particpate for bids in the banking sector, BUMNs as well.

    Sometimes the T & Cs of these projects require the PM<A to have a standing with Kadin who would then categorise the company as large, medium or small. Am I right??

    Thank you

  5. Pawan joshi says:

    we have incorporated our company at jakarta and now our consultant says that we need lkpm, ip, iut licences if we want to do trading and export of coal. is this necessary and if yes how much time does it take for the same? thanks. pkj.

    • missjc says:

      Yes, you must submit LKPM once you receive the BKPM approval. You also need IUT license. The LKPM report will take a day to submit it. However, the Company must provide all data to its consultant. So in this stage, it depends on how fast Company delivers its necessary information to its consultants for LKPM report. The process of obtaining IUT is 14 days based on regulation. If you need assistance, I can help you. I work for a law firm.

  6. Richard Perez says:

    Hello,
    I would like to open up a company in Jakarta which imports and sell different products.at the same time would like a permanent visa and eventually a Indonesian passport.please advise.

    Richard

    • missjc says:

      Hi there! Before you obtain Permanent Stay Permit (KITAP), you will get Temporary Stay Permit (KITAS). With regard to obtain Indonesian passport, you have to be an Indonesian citizen. Please be advised that Indonesia doesn’t recognize dual-citizenship. If you want to obtain Indonesia Passport, you must give up your existing citizenship.

  7. Joel says:

    What are the ‘company’ obligations when sponsoring an expatriate in Indonesia? Is it such things as medical, return ticket, etc.?

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