In recent times, we have received numerous queries from clients regarding the basic capital requirements for a Foreign Investment Company (PT PMA) in Indonesia. A common question is whether it is mandatory to deposit IDR 10 billion into a Bank Indonesia account for a company to be legally established. To clarify, as per Article 6, paragraph (1) of the Investment Coordinating Board (BKPM) Regulation No. 5 of 2019, PT PMAs are classified as large businesses and must adhere to specific investment and capitalization requirements to obtain investment permits.

Qualifications for Large Business PT PMAs

1. Net Assets: A PT PMA must have net assets exceeding IDR 10 billion, excluding land and business premises, as per the latest financial report.
2. Annual Sales: The company should report annual sales exceeding IDR 50 billion based on the latest financial report.

The classification of PT PMAs as large businesses under BKPM Regulation No. 5 of 2019 is significant. This categorization is based on either net assets or annual sales, which immediately sets a high bar for entry. This classification aligns with Indonesia’s goal to attract substantial foreign investments that can contribute significantly to the economy.

Basic Capital Requirements for PT PMA

Article 6, paragraph (2) of BKPM Regulation 5/2019 specifies the amount of capital to be placed and deposited. According to this article:

1. Total Investment Value: Should be more than IDR 10 billion, excluding land and building per business field as per the Indonesian Standard Industrial Classification (KBLI) 5-digit per project location, unless otherwise specified by legislation.
2. Capital Placement and Paid-up Capital: The placed capital should be equal to the paid-up capital, at least IDR 2.5 billion.
3. Share Ownership: The percentage of share ownership is calculated based on the nominal value of shares.
4. Nominal Share Value: Each shareholder should have a minimum nominal share value of IDR 10 million.

Further Provisions for Total Investment Value:

• For wholesale business activities, the investment value should exceed IDR 10 billion, excluding land and buildings, as per the first 2 digits of the KBLI.
• For food and beverage service activities open to foreign investment, the investment value should exceed IDR 10 billion, excluding land and buildings, in a single district/city.
• For construction business activities open to foreign investment, the investment value should be more than IDR 10 billion, excluding land and buildings, per activity.

What Constitutes Investment Value?

As defined in Article 6, paragraph (5) of BKPM Regulation 5/2019, the investment value must be met within a maximum period of 1 year from the date the company obtains its business license. This value represents the investment of your business.

Should a PT PMA Deposit IDR 10 Billion Directly into Paid Capital?

When it comes to the question of whether a PT PMA (Foreign Investment Company) should deposit IDR 10 billion directly into its paid capital, the answer, based on the existing regulatory framework, leans towards “no.” The key reasons are rooted in the specific capital placement and paid-up capital requirements outlined in Indonesian regulations:

1. Regulatory Requirements for Paid-Up Capital: As per the Indonesian regulations, specifically the BKPM Regulation No. 5 of 2019, the requirement for paid-up capital for a PT PMA is set at a minimum of IDR 2.5 billion. This amount is significantly lower than the IDR 10 billion figure often discussed.
2. Distinction Between Total Investment Value and Paid-Up Capital: It’s important to distinguish between the total investment value and the paid-up capital. While the total investment value must exceed IDR 10 billion, excluding land and building costs, this does not directly translate to the paid-up capital requirement. The IDR 10 billion threshold is meant to encompass the overall investment in the business, not just the capital deposited in cash.
3. Financial Flexibility: By adhering to the minimum requirement of IDR 2.5 billion for paid-up capital, a PT PMA retains greater financial flexibility. This approach allows for more strategic allocation of resources, where additional funds can be channeled into areas such as operational expenses, market expansion, and other critical business needs.
4. Reduced Financial Risk: Depositing a smaller amount initially mitigates financial risk, especially in the initial stages of business establishment. It provides a buffer against market uncertainties and allows for gradual investment aligned with business growth and market adaptation.
5. Compliance Without Overextension: By depositing IDR 2.5 billion, a PT PMA fully complies with the legal requirements without overextending its financial commitments. This compliance ensures legal and operational legitimacy while maintaining a balanced capital structure.
6. Alignment with Business Scale and Needs: The scale and specific needs of the business should dictate the capital structure. Not all PT PMAs may require or justify a IDR 10 billion cash deposit upfront, especially if their operational model or market strategy does not demand such a substantial immediate investment.

Exceptions Under Perpres 10/2021

However, under Presidential Regulation Number 10 of 2021 on Business Fields for Investment, exceptions exist where foreign investments in special economic zones in technology-based startup sectors can invest with a value equal to or less than IDR 10 billion, excluding land and building values.

Key Takeaways: Therefore, it is essential to review the regulations related to the PT PMA business field based on the KBLI. We also advise consulting directly with the Investment Coordinating Board regarding any unwritten policies concerning the basic capital of a PT PMA.

Need Assistance?

For professional assistance in establishing PT PMA, contact us at WhatsApp: 08118887270, Email: gultomnando@gmail.com or info@gultomlawconsultants.com. Gading and Co and Gultom Law Consultants are ready to assist you with the process of establishing your PT PMA in Indonesia.