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Foreign Investment Law in Indonesia

Foreign Investment Law in Indonesia

Foreign Investment Law in Indonesia – The establishment of an enterprise located in Indonesia is performed through foreign investment and is aimed to the specific requirements of the establishment of the company. Foreign Investment Law in Indonesia no. 25 Year 2007 regarding Investment (“Investment Law”) is classified as an investment activity performed by foreign investors to conduct business in Indonesia (including the establishment of the company).

Those foreign investments can use 100% foreign stock or capital (subject to some limitations) or part of domestic capital. Foreign investors may be foreign nationals, foreign companies or foreign government agencies.

Prior to the Head of Indonesian Investment Coordinating Board Regulation No. 6 of 2016, the Principle Permit is only granted to Foreign Investors when the PT is established. Currently, Indonesian Investment Coordinating Board also provides approval of Principal License or Investment Permit to foreign investors, before PT is established.

The Principle Permit is also a requirement for other licenses for subsequent Government authority as well as Regional authorities to issue licenses such as:

  1. Location Permit;
  2. Plan for the Use of Foreign Workers;
  3. Environmental Permit; and
  4. Certificate of Operational Feasibility and Operational Permit.

Type of Establishment of PT PMA in Indonesia

Article 5 (2) of the Foreign Investment Law in Indonesia gives that, unless generally gave, outside financial specialists may execute remote interest in Indonesia by setting up outside venture organizations under Law no. 40 of 2007 on Limited Liability Company and its executing directions. Outside venture organizations are otherwise called PT Penanaman Modal Asing, which is regularly truncated as “PT PMA”.

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Outside interest in Indonesia as PT PMA should be possible by responsibility for at the season of foundation of the organization or buy of offers in organization that has been set up either PT or PT PMA. This article will concentrate on remote speculation through the foundation of PT PMA. Different types of outside venture, remote agent workplaces, will be examined in partitioned articles.

Important Regulations Associated with Establishment of PT PMA Company

Foreign investors who want to invest in Indonesia should consider the following rules (establishment of PT PMA):

  1. Negative List of Investment as stipulated in Presidential Regulation no. 39 of 2014 concerning the List of Closed Business Fields and Open Business Fields with Requirements in the Field of Investment (“Negative List of Investments”), which governs:
  2. Rundown of shut business fields for speculation (for both household and remote financial specialists); and
  3. Rundown of business fields open to remote speculators, where the business field is liable to a few limitations.

Fields of business in the Negative List of Investment are under the Classification of Indonesian Business Class which is additionally depicted in point 2 underneath. Business fields excluded in the Negative List of Investment are 100% open for outside venture, unless generally set out in different controls.

  1. Grouping of Indonesian Business Sector Standard should be controlled by Regulation of the Head of Central Bureau of Statistics no. 57 of 2009 on Classification of Business Sector Classification. This Regulation clarifies in detail the extent of every business line in view of their Classification of Indonesian Business Class number. This direction is imperative for outside speculators to check whether the foundation of their PMA in Indonesia is liable to confinements in view of the Negative List of Investment.
  2. Rules and techniques for permitting and non-authorizing of outside capital interest in Indonesia should be represented by the directions of the leader of the Indonesian Investment Coordinating Board No. 5 of 2013 which has been revised by Indonesian Investment Coordinating Board Regulation no. 12 of 2013 on Guidelines and Procedure of Licensing and Non-Capitalization of Investment, this lead incorporates all standards, norms,
  3. Techniques and criteria identified with the type of PT PMA in Indonesia, which is required by the controls of the leader of the Indonesian Investment Coordinating Board, before PT PMA can begin its exercises, it is important to meet every one of the prerequisites put forward in this run the show.
  4. Restricted Company Law manages general prerequisites of constrained risk organizations and applies to PT PMA. This law directs the prerequisites for foundation of PMA which isn’t controlled in.
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Licensing and Document of Establishment of PT PMA

The required permit/establishment documents for foreign investors for the establishment of PT PMA in Indonesia are as follows:

  1. Principle Permit from Indonesian Investment Coordinating Board;
  2. Notary Deed of PT PMA from Notary;
  3. Ministerial Decree on legalization of status of legal entity of PT PMA from Minister of Law and Human Rights;
  4. Domicile from local government;
  5. NPWP and Taxable Person for VAT purposes (PKP) from the tax office;
  6. Business License from Indonesian Investment Coordinating Board;
  7. Company Registration Certificate from the agency for integrated licensing service; and
  8. Compulsory employment reports and welfare reports from sub-departments of the Ministry of Manpower.

The mentioned licensing/establishment document is a requirement of general company establishment of PT PMA. Establishment of a PMA in a special sector requires additional licensing documents and/or additional establishment. Therefore, input of foreign investment law in Indonesia should be considered by foreign investors before investing.

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