What is the minimum capital in Indonesia and does it all need to be paid up in advance? These are the most frequent questions foreign investors ask when considering opening a foreign-owned company (PT PMA) in Indonesia.
In this article, we will answer that and explain the differences between paid-up capital and an investment plan. We will also update you about the regulations that affect companies that want to register more than one business classification.
Planning your investments
Paid up capital and minimum investment in Indonesia
The official minimum investment in Indonesia to start a PT PMA is IDR 10 billion (~USD 675,000). In reality, the investment is merely a plan. The plan will help to ensure local officials that the business is sustainable and will work as sufficient proof to Indonesia when foreign investors are entering the market. This requirement applies to all industries unless stated differently.
The current minimum paid-up capital amount when setting up a PT PMA company in Indonesia is IDR 2,5 billion (~USD 170,000). There is an exception if you are planning to operate in a capital-intensive field. In that case, the paid-up capital that you state in your investment plan must also be higher.
What to know about the investment plan
The investment plan and paid-up capital are two different things. With the investment plan, your company will demonstrate how much and where are you going to spend the funds of the investment capital.
Your investment plan can include working and fixed capital, however, you cannot include the costs of buildings and land.
Common questions about the paid-up capital
When should I inject the paid-up capital?
You must inject the paid-up capital at the company’s bank account. However, you can open this bank account only after you complete all the incorporation documents.
Since you will not have a bank account during the incorporation process, the shareholders need to sign a capital statement letter and confirm that the investors have sufficient funds to transfer the capital once the company is incorporated.
Should I submit all the capital at once?
By law, yes you need to inject the full amount of paid-up capital as soon as you open your company’s bank, as you also state this in your capital statement letter.
However, if you do not inject it fully, you should record the remaining amount as shareholders liabilities.
Does my capital have to be in cash form?
Your capital can be both in the form of money or other assets. If you include some other assets in your paid-up capital, their value will be set either based on the current market prices or an expert who is not associated with your PT PMA needs to evaluate them.
Keep in mind that if your company wishes to include other assets among the paid-up capital, it must also reflect on the Deed of Establishment.
Can I use paid up capital for working capital after the injection?
Yes, you can use it for working capital afterwards. For example, you can use it to pay salaries.
Minimum capital enforcement
A capital statement letter is an acceptable form of “proving” paid up capital. In reality, there is no enforcement of paid up capital in Indonesia. Many foreign investors set up companies without actually investing the minimum required capital.
Minimum capital in Indonesia for multiple business classifications
Some investors plan on operating in multiple business fields under one PT PMA. The minimum investment requirement is applicable per one business classification. Let’s say that from under one PT PMA you shall operate with two different business classifications. This is when you must double the initial IDR 10 billion investment plan.
However, despite the number of your business classifications, the paid up capital requirement is still IDR 2,5 billion.
Some business classifications are exceptional, and you cannot register them under one PT PMA. For example, for manufacturing and distribution, you would need to create separate legal entities. We have also covered this in our article on How to start a lifestyle business in Bali.
Straits Partners can provide detailed information about your business field requirements and help you start in the desired field at the soonest. With the support of a specialist, setting up a PT PMA requires minimal involvement from your side. Reach out to our consultants via the form below or share your contacts on our company registration page.
Doing business in Indonesia with smaller minimum capital
There are two ways to get around the minimum capital requirement – one is to use a nominee company and the other one to go with Straits Partners’s outsourced operations model.
Nominee company in Indonesia
Since the shareholders (with pledged shares) of a nominee company are local companies, they follow the minimum capital requirements of local companies. This allows the investor to choose how much capital is required.
Find more information in our article about using nominee shareholders in Indonesia the safe way.
Outsourced operations model
Outsourced operations model means that instead of setting up a limited liability company (PT PMA), you conduct business through an overseas office and local administration is done through outsourced services, such as:
The outsourced operations model allows you to do business activities in Indonesia legally. This includes hiring employees, conducting sales, sending money overseas etc. without having to comply with foreign investment regulations.
Get in touch with our consultants, feel free to reach out to us at [email protected] Let’s discuss the most optimal way for your company to enter Indonesia.