What is the minimum capital in Indonesia and does it all need to be paid up in advance? This is one of the most frequently asked questions from foreign investors considering to open a foreign owned company (PT PMA) in Indonesia.
In this article we will answer that and explain the differences between paid up capital and investment plan. We will also update you about recent changes in 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 (~ $US 750,000). In real life, the investment is merely a plan. The plan will help ensure local officials that the business is sustainable and will work as a sufficient proof to Indonesia when foreign investors are entering the market. This requirement applies for 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 (~ 190,000 $US). There is an exception if you are planning to operate in a capital intensive field. In that case the paid up capital marked on 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 the costs of buildings and land are not included.
Common questions about the paid up capital
When should I inject the paid up capital?
During company incorporation you must also inject the designated paid up capital or sign a capital statement letter.
Capital statement letter needs to be signed by the shareholders and confirm that the investors have sufficient funds to transfer the capital once the company is incorporated.
The other option is to transfer the amount to an Indonesian company’ s bank account. As it will be the stage of incorporation and you still don’t have your own company account, this is what Emerhub can help you with. Or if your shareholder is a company not an individual, that is an option as well.
Should I submit all the capital at once?
You need to either provide capital statement letter or transfer at least the minimum paid up capital amount which is Rp. 2.5 billion (~190,000 USD) in most cases.
Does my capital have to be in cash form?
Your capital can be both in the form of money or other assets. If you are including some other assets in your paid up capital, the value will be either set reasonable based on the current market prices or evaluated by an expert not associated with your PT PMA.
Keep in mind that if your company wishes to include other assets amongst 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
Since 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 companies are set up 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 can not 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 recent article on How to start a lifestyle business in Bali.
Emerhub can provide detailed information about your business field requirements and help you get started 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.
Setting up a company with smaller minimum capital
There are two ways to get around minimum capital requirements – one is to use a nominee company and the other one to go with Emerhub’s outsourced operations model.
Since the shareholders (with pledges shares) of nominee company are local companies, they follow the minimum capital requirements of local companies. This allows the investor to choose how much capital will is required.
Outsourced operations model means that instead of setting up a limited liability company (PT PMA) a company conducts business through an overseas office and local administration is done through outsourced services, such as:
- Distributor search
- Undername import
- Staff augmentation
The outsourced operations model allows foreign company to legally conduct business activities in Indonesia. This includes hiring employees, conducting sales, sending money overseas etc. without having to comply with foreign investment regulations.
Get in touch with our consultants by using the form below. Let’s discuss the most optimal way for your company to enter Indonesia.