Are you aiming at the Indonesian market to expand your foreign investment or business yet still not sure which suitable legal entity you want to set up? Similar to other countries, Indonesia has its various company forms, to begin with. PT vs PMA Indonesia, two of the most widely popular business forms for this purpose, what makes them different?
Interestingly, there is also the so-called KPPA company that enters the discussion and surprisingly can be a helpful bridge in preparing the other two.
Know The Definition of PT vs PMA vs KPPA
Before knowing the differences, you need to know the definition of each type of company.
PT Company in Indonesia
Perseroan Terbatas (PT) company – a limited liability company – is one of the most widely used or preferred forms of business entity in Indonesia. PT is a legal entity established by at least two local citizens who functioned as responsible shareholders and are limited from the company’s debt. Indeed, local shareholders own 100% of the company.
Due to its flexibility, both local and foreign businesses choose PT to carry out various business pursuits in different fields. Furthermore, Law No. 40 the Year 2007 has provided a sound legal basis for this type of company – being the only alternative for foreign investors to expand in any business they usually are not opened for them.
It’s no longer a secret that founding a PT company in Indonesia requires a somewhat complicated process, including documents and permits.
Below are some of the requirements:
- Data on your PT establishment (company’s name, office address, mission and vision, capital structure, management structure, etc.)
- Deed of Establishment
- Ministerial Decree for your PT ratification
- Village domicile
- NPWP (Taxpayer Identification Number)
- Business licenses
- TDP (Company Registration Certificate)
If you want a somewhat simple one, register PT company Indonesia to expand or look for a promising spot for your business in Indonesia.
PMA Company in Indonesia
Continuing our discussion on PT vs PMA Indonesia, it’s time for outlining the PMA company in further detail. A Foreign Owned Company, PMA (Foreign Investment) is capital established by foreign investors with the primary aim to conduct business in Indonesia through full foreign capital or partly with domestic investors.
As part of the requirements, the owners must be a minimum of two, either human (an individual) or an entity (a legal body of the government or an investment company). Moreover, the company’s organizational structure needs a minimum of one director and one commissioner.
Also, one of the benefits is that the company is 100% or less owned by foreign investors, allowing them to sponsor numerous foreign employees as well.
How to establish a PMA company? Prospective investor needs to check their precise business undertakings concerning the so-called Positive Investment List before registering a PMA company. Issued by BKPM (the Investment Coordination Board), The List outlines the limit of foreign ownership in several classifications of certain businesses.
There will be a certain amount of deposit to pay – a minimum investment plan (allocated for land, building, working capital, etc. in Indonesia) and a minimum paid-up capital (after the company establishment and the issuance of your bank account). Some reports you need to submit after incorporation are Investment Activity and monthly tax reports, regardless of any activities or taxes or not.
Setup PMA company in Indonesia now if you are interested in investing or doing business in this country through simplified processes for affordable offers.
Representative Office (KPPA) in Indonesia
Now we have learned the difference between PT and PMA Indonesia. Still, there is also another form of business entity a foreign investor can establish in this country as its representative office, namely the KPPA. Its main function is to manage the foreign parent company’s business activities in Indonesia, including the preparation for establishing the above foreign-owned company.
Some limited activities a representative office can do are playing roles as supervisor, coordinator, connector, and caretaker of the company interests, conducting market research, and monitoring sales.
Led by individuals, either foreigners or Indonesian appointed by the parent company, this representative office needs KPPA permission to operate. The following are some requirements to fulfill before setting up a KPPA.
- Articles of Association of the foreign company that is going to be represented
- A designation letter from the foreign company that is going to be represented
- Photocopies of ID cards for Indonesian and passports for foreigners appointed as the representative executives
- Statement of willingness to work only as the Executive Representative and not to carry out other businesses
- A power of attorney in the case of the petition is not submitted by the management of the foreign company
If setting up a PMA is your near-future plan, have your professional representative office in Indonesia first and conduct your market research before coming to this country.
The Differences between KPPA vs PT vs PMA in Indonesia
Here are seven differences between PT, PMA, and KPPA:
PT: PT companies are limited liability companies in Indonesia, governed by the Company Law.
PMA: PMA companies are foreign investment companies established in Indonesia, subject to specific regulations and approvals.
KPPA: KPPA is a primary cooperative focused on the fishing and fishery sector in Indonesia, operating on democratic principles.
Also read: 14 Top Multinational Companies in Indonesia
PT: PT companies can be owned by both Indonesian and foreign individuals or entities.
PMA: PMA companies have partial or full foreign ownership.
KPPA: KPPA cooperatives are primarily owned by fishermen, fish farmers, or individuals involved in the fishing industry.
PT: Shareholders of PT companies are generally not personally liable for the company’s debts and obligations.
PMA: PMA companies have limited liability, similar to PT companies.
KPPA: Members of KPPA cooperatives share liability based on their participation and contribution.
PT: PT companies have minimum capital requirements based on their business activities.
PMA: PMA companies may have specific capital requirements determined by the Indonesian government.
KPPA: KPPA cooperatives require members to contribute capital for cooperative activities.
PT: PT companies have a board of directors and a board of commissioners responsible for managing and overseeing operations.
PMA: PMA companies follow corporate governance practices similar to PT companies.
KPPA: KPPA cooperatives operate on democratic principles, with equal voting rights for members.
PT: PT companies are subject to corporate income tax, value-added tax, and other applicable taxes in Indonesia.
PMA: PMA companies follow the same tax regulations as PT companies.
KPPA: KPPA cooperatives are subject to taxation based on their cooperative activities.
PT: PT companies can operate in various industries and sectors.
PMA: PMA companies can operate in any sector, but with specific regulations and restrictions for certain industries.
KPPA: KPPA cooperatives focus on the fishing and fishery sector in Indonesia.
That sums up the discussion of PT vs PMA Indonesia, not to mention how different they are from KPPA company. Each requires different requirements for the establishment that also lead to rights and responsibilities similarly applied to other local companies.
Professional assistance – guidance and support – can be your first helpful step to a smoother process. You can chat us now and get FREE consultation!