Starting a business in Indonesia can be a daunting task, especially when it comes to deciding on the type of business entity to establish. Two popular options are Perseroan Terbatas (PT) and Penanaman Modal Asing (PMA). While both entities offer certain advantages, it is important to understand their differences to make an informed decision that suits your business needs.
What is a PT?
A PT is a limited liability company that is established under the Indonesian Company Law. This type of entity is suitable for both local and foreign investors looking to set up a business in Indonesia. A PT can have up to 50 shareholders, and its shares can be owned by individuals or corporate entities.
One advantage of a PT is that it provides limited liability protection to its shareholders, meaning that they are not personally liable for the company’s debts and obligations. Additionally, a PT can easily raise capital by issuing shares to investors.
What is a PMA?
A PMA is a foreign investment company that is established under the Indonesian Investment Law. This type of entity is suitable for foreign investors looking to set up a business in Indonesia. A PMA can be wholly owned by foreign investors or in partnership with local investors.
One advantage of a PMA is that it provides foreign investors with legal protection and certainty, allowing them to operate their business in Indonesia with greater ease. Additionally, a PMA can enjoy certain tax incentives provided by the Indonesian government.
Registration Process
The registration process for a PT and PMA is similar, but there are some differences. To establish a PT, you will need to obtain a deed of establishment from a notary public, obtain a taxpayer identification number, and register with the Ministry of Law and Human Rights. The registration process can take up to two weeks.
To establish a PMA, you will need to obtain a foreign investment approval from the Indonesia Investment Coordinating Board (BKPM), obtain a deed of establishment from a notary public, obtain a taxpayer identification number, and register with the Ministry of Law and Human Rights. The registration process can take up to three months.
Ownership Restrictions
A PT can be owned by both local and foreign investors, but certain industries are restricted to local ownership. These include banking, insurance, and telecommunications. Additionally, there are restrictions on foreign ownership in certain industries, such as shipping and mining.
A PMA is wholly owned by foreign investors, but there are restrictions on foreign ownership in certain industries, such as broadcasting and transportation.
Taxation
Both PTs and PMAs are subject to Indonesian taxation laws. A PT is subject to corporate income tax, value-added tax, and withholding tax. The corporate income tax rate is 25%, while the value-added tax rate is 10%. Withholding tax rates vary depending on the type of payment.
A PMA is subject to corporate income tax, value-added tax, and withholding tax. The corporate income tax rate is also 25%, while the value-added tax rate is 10%. However, a PMA can enjoy certain tax incentives provided by the Indonesian government, such as tax holidays and tax allowances.
Shareholders and Management
A PT can have up to 50 shareholders, both local and foreign. The shareholders appoint a board of directors to manage the company’s day-to-day operations. The board of directors is accountable to the shareholders and must act in the best interests of the company.
A PMA can have fewer than five shareholders, all of whom must be foreign. The shareholders appoint a board of commissioners to oversee the company’s management. The board of commissioners is accountable to the shareholders and must act in the best interests of the company.
Conclusion
Deciding on the type of business entity to establish in Indonesia requires careful consideration of various factors. While both PTs and PMAs offer certain advantages, they also have specific differences that can affect your business operations and legal obligations. It is advisable to seek professional advice from a qualified lawyer or accountant to help you make an informed decision that meets your business needs.
