Indonesia has long been known as one of the top destinations that offer numerous business opportunities to both local and foreign investors. In order to run a successful business in Indonesia, foreign investment in Indonesia must be carried out through the establishment of a legal entity known as foreign limited liability company (PT PMA).
PT PMA is specially designed to meet the needs of foreign investors, which is why the majority of foreigners incorporate their company in the form of PT PMA, instead of choosing a partnership with a local company (PT).
Further into this article, we will elaborate the reasons many foreigners choose PT PMA to run their business, restrictions of PT PMA and how a special purpose vehicle company can help to overcome those restrictions.
REASONS FOR CHOOSING A PT PMA IN INDONESIA
PT PMA, also known as Perseroan Terbatas Penanaman Modal Asing, is often foreigners’ first choice of legal entity in Indonesia because it is the only type of establishment that allows 100% foreign ownership.
Since it is entirely owned by the foreigner, the foreign owner of a PT PMA has full authority over the operation and direction of the company. In addition, a 100% foreign-owned PT PMA avoids the need to finding a local partner who may not be unreliable, thus mitigating company risks.
Other than 100% ownership and risks reduction, another perk of PT PMA is that this type of legal entity can sponsor and apply for work permits and stay visas (ITAS) for its foreigner staff, as well as business visas for its clients visiting Indonesia.
Want to apply for an Indonesian business visa? Apply online for a quick and hassle-free process.
RESTRICTIONS ON PT PMA
Even though PT PMA provides many benefits to foreign investors, the government of Indonesia restricts foreign ownership of certain business fields, which can be found in the Negative Investment List (NIL). Some of these restricted sectors only allow partial foreign ownership, and some of them prohibit foreign ownership entirely.
SPECIAL PURPOSE VEHICLE COMPANY IN INDONESIA
Therefore, in the event of business field that is partially close to foreign ownership, foreign investors can always partner with an Indonesian company or individual.
As for sectors that are entirely closed to foreign ownership, a special purpose vehicle company will work for a PT PMA in this case. Foreigners can engage a special purpose vehicle company in the form of PT (local company) via a strictly guarded loan agreement.
Even though a special purpose vehicle company is solely owned by an Indonesian national, the foreign investor will have full control over the company – given that you find a reputable special purpose vehicle service provider, such as Cekindo, to draft an effective agreement for you.
Here’s the scope of work of a special purpose vehicle company in Indonesia by using Cekindo’s service:
- You get a complete set of legal agreements: Pledge of Shares Agreement, Director Appointment Letter, and Cooperation Agreement. Since you’re holding these documents, the Indonesian shareholders will have no control over the company operational and financial matters
- You are the legal director of the company with full authority
- All business operations, administration, recruitment and employment taxes will be taken care of by this special purpose vehicle company
HOW TO SET UP A SPECIAL PURPOSE VEHICLE COMPANY SECURELY IN INDONESIA
You can follow the following tips to ensure that your special purpose vehicle company setup is safe and complies with the Indonesian Law:
- You should have a minimum of 2 local shareholders in your special purpose vehicle company (just like PT PMA) to avoid one person owning most of the shares.
- Withdraw or transfer money/profits from the company on a regular basis.
- Look for experienced and reputable business and law consultation services to help you take care of all processes, draft the legal agreement and protect your rights in the special purpose vehicle company.
GET IN TOUCH WITH CEKINDO
To get into details about our special purpose vehicle company services, do not hesitate to contact us. One of our consultants will be happy to answer your questions and guide you through business incorporation process in Indonesia.