Foreign Investment in Indonesia
There are two legal entities that are permitted for foreigners in Indonesia:
1) a foreign investment limited liability company (in Indonesian: Perseroan Terbatas Penanaman Modal Asing, or, PT PMA), and
(2) a representative office (in Indonesian Kantor Perwakilan Perusahaan Asing, or, KPPA).
| Foreign Investment Company | Representative Office | |
| Allowed Activities | All business activities related to the sector it is engaged in and received approval for from BKPM | Only for market research & local representation |
| Best Option for | Companies that want to engage in commercial activities in Indonesia | Companies that want to engage in market research, networking, etc. It is strictly forbidden to generate profit and revenue or engage in sales directly |
| Foreign Ownership Restriction | Foreign ownership varies between 0% – 100% depending on the Negative Investment List | No restriction |
| Minimum Capital | IDR 10 billion (paid up capital at least 25% of investment plan) | No requirement |
| Benefits | Operates as an independent limited liability company within the business classification | No capital requirement, Takes less time to establish |
| Disadvantages | Large capital requirement | Cannot engage in commercial activities, Valid for a maximum period of 5 years |
| Issuing Work Permits and Visas for Foreigners | All shareholders, directors and commissioners eligible for work permit, unlimited amount of business visa sponsorships, work permits can be issued to foreign experts | Work permit for the chief representative, unlimited business visa sponsorships, 3 Indonesians for every expat hired |
| Compliance | Monthly withholding tax report, quarterly/semi-annual investment report | Monthly withholding tax report, annual activity report to the BKPM |
| Time to Establish | 10 weeks | 6 weeks |
| Estimated Costs | ± USD 4,000 | ± USD 2,500 |