Keeping Foreign Investment Secure: Requirements and Procedures for Establishing a PT PMA

Foreign investment does not merely bring an injection of fresh capital into the Indonesian economy. It also opens opportunities for technology transfer and large-scale job creation.

Although Indonesia offers promising market opportunities, executing foreign investment is not merely a matter of financial capital. Investors must also comply with the applicable legal framework in order to secure the sustainability of their businesses.

Indonesian regulations expressly require direct foreign investment activities to use an official corporate vehicle in the form of a Foreign Investment Limited Liability Company or PT PMA.

To assist businesses and investors in structuring their investment safely, this article discusses the principal requirements, ranging from paid-up capital requirements of IDR 10 billion, analysis of the Positive Investment List, and the practical legal establishment process through the integrated licensing system, so that the investment is established on a solid legal foundation.

Capital Requirements and Minimum Investment Value for a PT PMA

Foreign investors seeking to expand their businesses into Indonesia need to understand the rules governing minimum investment value and capital.

These requirements constitute one of the principal distinctions between a domestic investment company and a PT PMA.

Under Article 12 paragraphs (1) and (2) of Investment Coordinating Board Regulation No. 4 of 2021, the Government expressly classifies a PT PMA as a large-scale enterprise.

This policy is intended to function as a barrier to entry so that foreign capital does not take over business sectors intended for Indonesian Micro, Small, and Medium Enterprises.

Under these provisions, the general minimum total investment value for a PT PMA is more than IDR 10,000,000,000, excluding land and buildings, calculated for each five-digit KBLI business classification at each project location.

However, the Government provides specific adjustments for certain business sectors under Article 12 paragraph (3):

1. For wholesale trade activities, the investment value must exceed IDR 10,000,000,000, excluding land and buildings, calculated for each first four digits of the KBLI classification.

2. For food and beverage service activities, the investment value must exceed IDR 10,000,000,000, excluding land and buildings, calculated for each first two digits of the KBLI classification for each location.

3. For construction service activities, the investment value must exceed IDR 10,000,000,000, excluding land and buildings, for one business activity, calculated for each first four digits of the KBLI classification.

4. For industrial activities producing different types of products under different five-digit KBLI classifications within one production line, the investment value must exceed IDR 10,000,000,000, excluding land and buildings.

5. For property development and operation activities:

   1. Where the property consists of an entire building or an integrated residential complex, the investment value must exceed IDR 10,000,000,000, including land and buildings.

   2. Where the property consists of individual units that do not form one complete building or one integrated residential complex, the investment value must exceed IDR 10,000,000,000, excluding land and buildings.

In addition to the project investment value requirement, the company's capital structure is also strictly regulated.

The founders of a PT PMA are required to contribute initial paid-up capital of at least IDR 10,000,000,000 into the company's account.

An important point to note is that the minimum investment value and IDR 10 billion paid-up capital requirements apply specifically to the establishment of a PT PMA and do not apply to the operation of Foreign Representative Offices or Foreign Business Entities.

Suitability of Business Activities

Before proceeding with the establishment of a PT PMA, foreign investors and their local partners need to conduct an analysis of the proposed business activities.

The principal reference is Presidential Regulation No. 49 of 2021 concerning the Positive Investment List.

Unlike the previous Negative Investment List regime, this framework adopts a more open principle. In general, commercial business activities are open to investment unless expressly prohibited by the State.

Under Article 2 paragraph (1) of Presidential Regulation No. 49 of 2021, there are two principal categories in which private or foreign investment is not permitted, namely business fields that are declared closed and activities that are reserved exclusively for the Central Government.

More specifically, Article 2 paragraph (2) identifies business sectors that are prohibited for investment, consisting of:

1. Prohibited Sectors under the Investment Law

   Business activities referred to in Article 12 of Law No. 25 of 2007 on Investment, as amended by the Job Creation Law, include:

   a. cultivation and industry of Category I narcotics;

   b. all forms of gambling and/or casino activities;

   c. fishing of species listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES);

   d. utilization or harvesting of coral and natural coral for building materials, lime or calcium, aquariums, souvenirs or jewellery, including live coral or recently dead coral from nature;

   e. manufacture of chemical weapons; and

   f. manufacture of industrial chemicals and ozone-depleting substances.

2. Alcoholic Beverage Industry

   This consists of the Distilled Alcoholic Beverage Industry (KBLI 11010), Wine Industry (KBLI 11020), and Malt Beverage Industry (KBLI 11031).

The implementation provisions concerning investment in the business fields referred to above do not apply to investments that had already been approved before the Presidential Regulation was enacted, as reflected in the relevant Business Licensing.

By understanding the Positive Investment List from the outset, foreign investors can ensure that the proposed PT PMA business is not only financially promising but also securely positioned within the legal framework applicable in Indonesia.

STAGES AND PROCEDURES FOR ESTABLISHING A PT PMA

To conduct direct investment activities in Indonesia, foreign investors must structure their investment through a Limited Liability Company established under Indonesian law.

Foreign investment can be carried out through several lawful mechanisms, including subscribing for shares when a PT PMA is established, purchasing or acquiring shares in an existing company, or undertaking other legally permitted restructuring methods in accordance with applicable regulations.

The establishment procedure for a PT PMA is carried out by the applicant with the assistance of a Notary through the electronic registration form available on the Legal Entity Administration System portal.

To obtain approval, the founders must complete the supporting documentation stipulated in detail under Article 6 of Minister of Law Regulation No. 49 of 2025, including:

1. an electronic statement from the applicant confirming that all documents required for establishing the company have been completed;

2. a copy of the company's deed of establishment;

3. the original minute deed of establishment or original minute deed amending the company's establishment;

4. the original merger deed where the company is established as a result of a consolidation;

5. evidence of payment of the company's capital in the form of:

   1. a copy of the deposit slip or a copy of a bank statement in the name of the company or a joint account in the names of the founders, or an original statement confirming that the capital has been paid, signed jointly by all members of the board of directors, all founders, and all members of the board of commissioners, where the contribution is made in cash;

   2. an original valuation statement issued by an independent expert or evidence of purchase where the contribution is made in a form other than money, accompanied by evidence of publication in a newspaper where the contribution consists of immovable property;

   3. a copy of the relevant Government Regulation and/or Minister of Finance decision in the case of a State-owned company, or a Regional Regulation where the founder is a regional company or provincial, regency, or municipal government; or

   4. a copy of the balance sheet of a company participating in a consolidation or the balance sheet of a non-legal-entity business contributed as capital;

6. a statement from the founders confirming their commitment to obtain decisions, approvals, or recommendations from the relevant technical authorities for companies operating in particular business sectors, or copies of such decisions, approvals, and recommendations where already obtained;

7. a statement from the founders confirming their commitment to obtain a Taxpayer Identification Number and evidence of receipt of the annual tax return;

8. a copy of a statement confirming the company's complete address from the building management or competent authority, or an original statement of the company's complete address signed jointly by all members of the board of directors, all founders, and all members of the board of commissioners; and

9. corporate Beneficial Ownership documents consisting of:

   1. a power of attorney from the board of directors to the Notary concerning submission of Beneficial Ownership information;

   2. a statement from the board of directors identifying the Beneficial Owner; and

   3. written consent from the person designated as the Beneficial Owner of the company.

All supporting documents must be safely retained by the Notary handling the registration.

Once the data have been uploaded and the application has been accepted by the system, the Minister of Law, through the Director General of General Legal Administration, will electronically issue the Decree approving the establishment of the legal entity.

The Notary can then print the Decree of Approval as official evidence that the PT PMA has been validly established and legally recognized in Indonesia.

Risk-Based Business Licensing through the OSS System

Once the PT PMA has completed the legal entity approval process with the Ministry of Law and Human Rights, the next crucial step before the business can legally operate is obtaining the required Business Licensing.

Referring to Article 7 paragraph (1) of Investment Coordinating Board Regulation No. 4 of 2021, the business licensing process for a PT PMA is based on two principal stages: fulfilment of basic requirements and fulfilment of Risk-Based Business Licensing.

The basic requirements establish the legal foundation for the business location and include three important matters:

• Conformity of Spatial Utilization Activities or KKPR;

• Environmental Approval, such as AMDAL or UKL-UPL; and

• Building Approval or PBG and Certificate of Proper Function or SLF.

After the basic requirements have been satisfied, the business operator can access the Online Single Submission system using its official access rights to process Risk-Based Business Licensing.

The licensing documents issued by the system depend significantly on the level of business risk, namely low, medium-low, medium-high, or high, as well as the applicable business-scale classification.

The relevant licensing documents consist of:

1. Business Identification Number or NIB;

2. Standard Certificate; and

3. Risk-Based Business Licence.

In addition to the principal licences, business operators may also apply for Supporting Business Licensing or PB-UMKU to fulfil specific product or operational standards required by the relevant technical ministries.

Under Article 9 paragraph (9) of Investment Coordinating Board Regulation No. 4 of 2021, foreign investment is expressly required to take the form of a Limited Liability Company governed by Indonesian law.

Because it involves foreign investment, Article 10 paragraph (2) of Investment Coordinating Board Regulation No. 4 of 2021 provides that the authority to issue licences for a PT PMA rests entirely with the Central Government through the OSS Institution rather than regional governments.

This also applies to foreign investment in nationally prioritized industrial sectors and investments based on intergovernmental cooperation.

As the principal gateway for business activities, the OSS Institution will issue a Business Identification Number after the PT PMA satisfies the applicable investment value and paid-up capital requirements.

Under Article 17 of Investment Coordinating Board Regulation No. 4 of 2021, each company has only one NIB as its official business identity.

The NIB also functions as:

1. Importer Identification Number or API;

2. customs access for export and import activities;

3. registration for BPJS Health and BPJS Employment programs; and

4. evidence of the company's initial Mandatory Manpower Reporting registration.

Divestment Obligations

As regulated under Article 14 of Investment Coordinating Board Regulation No. 4 of 2021, divestment obligations imposed on a foreign investment company through an approval letter and/or Business Licence issued before the regulation came into force remain binding and must be implemented within the prescribed period.

Sector-specific divestment obligations applicable to foreign investment companies must likewise continue to be implemented in accordance with applicable laws and regulations.

The relevant shares may be divested to Indonesian citizens or Indonesian business entities whose entire share capital is owned by Indonesian citizens.

The divestment may be conducted through direct ownership based on an agreement between the parties and/or through the domestic capital market, with minimum ownership of IDR 10,000,000 for each shareholder.

The divestment obligation is implemented on the basis of a deed recording the agreement of the parties concerning fulfilment of the share divestment requirement.

Following approval from the ministry responsible for legal affairs, shares owned by Indonesian participants as a result of the divestment may subsequently be resold to Indonesian individuals, foreign individuals, Indonesian business entities, or foreign business entities, subject to applicable laws and regulations.

A share divestment obligation may not need to be implemented where the applicable regulations no longer require divestment and the shareholders agree in the company's deed that:

a. in the case of a foreign investment company that is not 100% foreign-owned, the Indonesian party states that it does not wish to demand the share ownership required under the divestment obligation contained in the approval letter and/or Business Licence; or

b. in the case of a 100% foreign-owned foreign investment company, the shareholders state that they have no commitment or agreement with any Indonesian party to sell the shares.

Where a divestment obligation is not implemented on this basis, the shareholders and business entity remain responsible if an Indonesian party subsequently demands implementation of the divestment obligation.

Once a change in share ownership implementing a divestment obligation has been completed and approved by the ministry responsible for legal affairs, the business operator is required to update its data in the OSS system.

The business operator must also submit the shareholders' agreement to the government institution responsible for coordinating investment.

The relevant investment authority will then evaluate and assess the shareholders' submission.

If approved, the authority will issue confirmation that the divestment obligation has lapsed.

If the submission is rejected, the authority will provide an explanation and the reasons for the rejection.

CONCLUSION

Establishing a PT PMA is the legal vehicle for foreign investors seeking to conduct direct investment within Indonesian territory.

The security of foreign investment depends significantly on the proper calculation of the capital structure, including fulfilment of the minimum IDR 10 billion paid-up capital requirement and total investment exceeding IDR 10 billion per KBLI classification, as well as careful compliance with the Positive Investment List.

By following the proper establishment process through approval from the Ministry of Law and Human Rights and fulfilling Risk-Based Business Licensing requirements through OSS, investors not only obtain comprehensive legal protection from the State but also support sustainable business operations that are protected against administrative sanctions and the risk of business licence revocation in the future.