In Indonesia, a company is classified as foreign-owned if foreign investors hold as little as 1% of its shares. This broad definition ensures that any participation of foreign capital, no matter how small, automatically subjects the entity to Indonesia’s foreign investment regulations.
Legal Structure of Foreign Companies
The primary vehicle for foreign investment is the PT PMA (Foreign Investment Limited Liability Company). Under Law No. 25/2007 (Investment Law) and Law No. 40/2007 (Company Law), any company with foreign shareholders must establish itself as a PT PMA. This entity is recognized as a limited liability company and allows foreign investors to operate legally within Indonesia.
Also read: The Types of Companies and Business Entities in Indonesia
Capital Requirements
Foreign companies must meet minimum capital requirement that are more stringent than those for local companies.
Minimum investment plan: IDR 10 billion (≈ USD 700,000), excluding land and buildings.
This requirement ensure that foreign companies contribute significantly to Indonesia’s economy.
Also read: The Minimum Capital for Establishing PMA Company in Indonesia
Industry Restrictions
The level of foreign ownership permitted is determined by the Investment List (previously known as the Negative Investment List). Business sectors fall into three categories:
- Fully open: 100% foreign ownership permitted.
- Partially open: capped foreign ownership (e.g., joint ventures).
- Closed sectors: no foreign ownership allowed.
Also read: What Fields Can a PMA Company Operate in Indonesia?
Alternative Foreign Business Entities
Besides PT PMAs, foreign investors may choose other business structures:
Representative Offices (KPPA)
These offices allow market research, promotion, and coordination but cannot engage in commercial transactions or generate revenue.
Also read: Business Activities Allowed for Foreign Representative Offices in Indonesia
Branch Offices
Branch offices may conduct sales and sign contracts but are not independent legal entities, making the parent company fully responsible for liabilities.
Also read: Representative Office vs Branch: What’s the Difference?
Compliance and Licensing
All foreign-owned businesses must register with the Indonesian Investment Coordinating Board (BKPM) and obtain licenses through the Online Single Submission (OSS) system. Companies must adhere to capital, ownership, and industry-specific regulations.
Also read: What Happens If You Operate a Business in Indonesia Without a Proper License?
Why This Matters for Investors
For international investors, understanding what qualifies as a foreign company in Indonesia is crucial. Even small-scale foreign participation triggers regulatory requirements, making proper structuring essential to avoid compliance risks and business interruptions.
Smooth Path to Market Entry
Navigating Indonesia’s regulations can be complex. This is where professional support makes a difference.
InvestinAsia will assist you with PT PMA registration services that meet legal requirements and support long-term growth. For companies exploring opportunities without direct commercial operations, We also provides Representative Office setup services tailored to market research and liaison activities.
You can also enjoy special package prices for PT PMA and KITAS services.
With expert guidance, investors can enter Indonesia’s market with clarity and confidence.
Ready to start your business and investment in Indonesia? Chat with us now for FREE consultation!
FAQs
What qualifies as a foreign company in Indonesia?
Any business with foreign shareholding, even at 1%, falls under the category of foreign-owned companies.
What is a PT PMA?
A PT PMA (Foreign Investment Limited Liability Company) is the legal structure required for foreign-owned companies in Indonesia.
Can a foreign company be 100% foreign-owned?
Full foreign ownership is only possible in industries completely open to foreign investment under the Investment List. Check the details here: Can a Foreigner Own 100% of a Business in Indonesia?
What is the minimum capital for a PT PMA?
The required minimum investment commitment is IDR 10 billion.
Can a representative office earn revenue?
No, representative offices are limited to research, promotion, and coordination, not commercial transactions.
