Legality Guide for Foreign Investment Companies (PMA) in Indonesia

Indonesia has become one of the most attractive investment destinations in Southeast Asia. With a stable economy, abundant natural resources, and a growing consumer base, the country offers great potential for foreign investors looking to expand their presence in Asia.

However, foreign investors must comply with specific legal frameworks before operating. The most common vehicle for foreign business operations in Indonesia is the PMA (Penanaman Modal Asing), or Foreign Investment Company.

This article will explain the definition of PMA, legal establishment requirements, and additional licenses that foreign investors need to secure to ensure full compliance with Indonesian law.

What Is a PMA (Foreign Investment Company)?

A PMA, or Penanaman Modal Asing, is a legal entity established in Indonesia that allows foreign individuals or entities to invest and own shares in an Indonesian company. It is regulated under:

• Law No. 25 of 2007 on Investment (Undang-Undang Penanaman Modal) 
• Government Regulation No. 40 of 2021 on Business Licensing 
• Regulation of the Indonesia Investment Coordinating Board (BKPM)

The PMA structure allows foreigners to own a certain percentage (or in some cases, 100%) of company shares, depending on the business sector and the Negative Investment List (DNI) or the current Positive Investment List (2021).

Key Characteristics of a PMA:

1. Foreign ownership — at least one shareholder must be a foreign entity or individual. 
2. Registered capital — a minimum paid-up capital of IDR 10 billion (approximately USD 650,000). 
3. Mandatory business license — obtained via the Online Single Submission (OSS) system. 
4. Legal domicile in Indonesia — the company must have a registered local office address. 

Legal Requirements to Establish a PMA in Indonesia

Before establishing a PMA, foreign investors must fulfill the following legal and administrative requirements.

1. Determine the Business Classification (KBLI)

The first step is identifying the appropriate KBLI (Indonesian Business Classification Code) for your business activity. The KBLI determines:

• Whether your business sector is open to foreign ownership. 
• The percentage of shares foreigners are allowed to hold. 
• The applicable licensing requirements under Indonesian law. 

2. Prepare the Company Structure

A PMA must have at least:

• 2 shareholders (foreign individuals or companies) 
• 1 director (can be foreign or Indonesian) 
• 1 commissioner (can be foreign or Indonesian) 

The director represents the company legally, while the commissioner oversees compliance and company direction.

3. Determine the Authorized and Paid-Up Capital

The minimum investment value for a PMA is IDR 10 billion, excluding land and building costs.
From that amount, at least 25% must be paid up and recorded in the company’s bank account before registration.

4. Draft the Company Deed

A Deed of Establishment (Akta Pendirian Perusahaan) is created by a notary in Bahasa Indonesia and must include:

• Company name and objectives 
• Shareholders’ details and capital distribution 
• Board of directors and commissioners 
• Business address 
• Articles of Association 

The deed is then submitted to the Ministry of Law and Human Rights (Kemenkumham) for legalization.

5. Obtain a Tax ID and NIB

Once legalized, the PMA must obtain:

• NPWP (Taxpayer Identification Number)
• NIB (Business Identification Number) through the OSS system

The NIB functions as the main business license and allows the company to start operations legally in Indonesia.

Legality Guide for Foreign Investment Companies (PMA) in Indonesia

To help foreign investors navigate the bureaucracy, here’s a simplified overview of the PMA establishment process:

Step 1 – Pre-Consultation and Business Feasibility

Foreign investors should first determine whether their intended business activity is open for foreign investment under the Positive Investment List. Consulting with a business legal expert like Korsia Group helps avoid costly mistakes during classification.

Step 2 – Document Preparation

Collect essential documents such as:

• Passports or corporate documents of foreign shareholders 
• Power of attorney (if applicable) 
• Proof of office address (rental agreement or property certificate) 
• Draft Articles of Association 
• Capital statement letter 

Step 3 – Notary and Legalization

The notary prepares the Deed of Establishment, which must be approved by the Ministry of Law and Human Rights.

Step 4 – Obtain NIB via OSS

After the company is legalized, register it on the Online Single Submission (OSS) platform to get your NIB, which acts as:

• Company registration number 
• Import identification (if applicable) 
• Business operating permit 

Step 5 – Apply for Specific Licenses

Depending on the business sector, you may need additional permits such as:

• Industrial Business License (IUI)
• Tourism Business License
• Construction Permit (SBU)
• Environmental Impact Assessment (AMDAL)

Step 6 – Open a Corporate Bank Account

The company must open a bank account in Indonesia under its registered name to deposit paid-up capital and manage operational funds.

Additional Permits Required for PMA Operations

Some sectors require special licenses or sectoral permits to operate legally. Examples include:

Sector	Required License	Issuing Authority
Manufacturing	Industrial Business License (IUI)	Ministry of Industry
Import/Export	API-U License	Ministry of Trade
Construction	SBU & IUJK	Ministry of Public Works
Hospitality	TDUP License	Ministry of Tourism
Food & Beverage	BPOM & Halal Certificate	BPOM & MUI

Failure to obtain these permits may result in business suspension, penalties, or revocation of operational rights.

Benefits of Establishing a PMA

Establishing a PMA in Indonesia offers multiple strategic advantages:

1. Access to a large and growing market
   Indonesia has over 275 million consumers, providing massive potential for product and service expansion. 
2. Full legal recognition
   A PMA is recognized as a separate legal entity with rights to own property, hire employees, and engage in contracts. 
3. Ownership flexibility
   Many industries now allow up to 100% foreign ownership under the 2021 Positive Investment List. 
4. Eligibility for tax incentives
   PMAs engaged in priority sectors may receive tax holidays or reductions from the government. 
5. Repatriation rights
   Profits and dividends can be legally transferred abroad in accordance with Bank Indonesia regulations. 

Common Challenges in PMA Establishment

Despite its potential, foreign investors often encounter challenges such as:

• Misclassification of business activities (KBLI errors)
• Incomplete documentation during OSS submission 
• Language barriers in legal documents 
• Unclear shareholding structure
• Delays in permit issuance due to compliance issues 

Working with an experienced business consultancy like Korsia Group helps minimize these risks and ensures smooth registration and compliance.

How Korsia Group Helps Foreign Investors

Korsia Group is a trusted business consulting and licensing firm that assists foreign investors in setting up legal entities in Indonesia. Our services include:

• PMA feasibility study and sector analysis 
• Preparation and legalization of company documents 
• OSS registration and NIB issuance 
• Sectoral license application (trade, construction, F&B, etc.) 
• Compliance monitoring and license renewal services 
• Legal advisory and notarial support 

By partnering with Korsia Group, foreign investors can save time, reduce bureaucratic complexity, and ensure all legal aspects of their PMA are in full compliance with Indonesian law.

Conclusion

Setting up a Foreign Investment Company (PMA) in Indonesia opens doors to one of the largest markets in Southeast Asia. However, success begins with proper legal compliance—from determining your business classification to registering through OSS and obtaining sectoral permits.

Foreign investors must follow a transparent, step-by-step process to avoid regulatory issues and maintain long-term business stability.

With Korsia Group, you gain a reliable partner who understands Indonesia’s complex regulatory landscape. Our expertise ensures your PMA establishment is efficient, compliant, and ready to grow sustainably in the Indonesian market.

A legally established PMA isn’t just about fulfilling requirements — it’s the foundation for trust, protection, and long-term success in Indonesia.