Indonesia is one of the fastest-growing economies in Southeast Asia, driven by a robust domestic market, rich natural resources, and a strategic location. With a population of over 260 million, Indonesia offers a huge consumer base and a skilled workforce. As a result, it attracts foreign investment from all over the world.
If you are planning to invest in Indonesia, you need to be familiar with the laws and regulations that govern foreign investment. The UU PT PMA is one such regulation that you need to be aware of. In this article, we will provide you with a comprehensive guide on UU PT PMA and how it affects foreign investors in Indonesia.
What is UU PT PMA?
UU PT PMA stands for Undang-Undang Perseroan Terbatas Penanaman Modal Asing, which translates to the Limited Liability Company Law for Foreign Investment. It is a law that regulates foreign investment in Indonesia, including the establishment, operation, and dissolution of foreign-owned companies.
The UU PT PMA was introduced in 2007 to replace the previous regulation that governed foreign investment, which was considered outdated and insufficient to attract foreign investors. The new law provides a more transparent and investor-friendly environment for foreign investment in Indonesia.
Why is UU PT PMA important?
UU PT PMA is important for foreign investors because it sets out the rules and regulations that govern foreign investment in Indonesia. It provides guidelines on how to establish a foreign-owned company, the minimum investment required, the sectors that are open to foreign investment, and the procedures for obtaining necessary permits and licenses.
By complying with UU PT PMA, foreign investors can ensure that their investment is legally protected and that they are operating in a transparent and stable business environment. It also helps to avoid any potential legal or regulatory issues that may arise from non-compliance.
Who is affected by UU PT PMA?
UU PT PMA affects foreign investors who are planning to establish a foreign-owned company in Indonesia or to acquire an existing Indonesian company. It applies to all sectors that are open to foreign investment, including manufacturing, services, and infrastructure.
Foreign investors who do not comply with the UU PT PMA may face legal and regulatory issues, including fines, penalties, and even revocation of their business license. Therefore, it is essential for foreign investors to understand and comply with the UU PT PMA when investing in Indonesia.
What are the key provisions of UU PT PMA?
The UU PT PMA contains several key provisions that foreign investors need to be aware of. These include:
Minimum investment requirements
The UU PT PMA requires foreign investors to invest a minimum amount of capital to establish a foreign-owned company in Indonesia. The minimum investment varies depending on the sector and the size of the company. For example, the minimum investment for a small-scale manufacturing company is IDR 10 billion (approximately USD 700,000), while the minimum investment for a large-scale infrastructure project is IDR 1 trillion (approximately USD 70 million).
Sectoral restrictions
Not all sectors are open to foreign investment in Indonesia. The UU PT PMA provides a list of sectors that are open to foreign investment, as well as those that are restricted or prohibited. For example, foreign investment in the retail sector is restricted, while investment in the mining sector is subject to certain conditions.
Ownership structure
The UU PT PMA requires foreign-owned companies to have a minimum of two shareholders, with the foreign shareholder owning at least 1% of the company’s shares. The company must also have a local director and a commissioner, who is responsible for overseeing the company’s operations.
Permits and licenses
The UU PT PMA sets out the procedures for obtaining necessary permits and licenses to establish and operate a foreign-owned company in Indonesia. These include the business license (Izin Usaha), the domicile letter (Surat Keterangan Domisili), and the taxpayer identification number (Nomor Pokok Wajib Pajak).
How to comply with UU PT PMA?
To comply with UU PT PMA, foreign investors need to follow these steps:
1. Choose a sector
Foreign investors need to choose a sector that is open to foreign investment in Indonesia and conduct a feasibility study to determine the viability of their investment plan.
2. Establish a company
Foreign investors need to establish a foreign-owned company in Indonesia by following the procedures set out in the UU PT PMA. This includes obtaining necessary permits and licenses, registering the company with the relevant authorities, and opening a bank account in Indonesia.
3. Obtain necessary approvals
Foreign investors need to obtain necessary approvals from the relevant authorities, such as the Investment Coordinating Board (BKPM) and the Ministry of Law and Human Rights, to establish and operate their foreign-owned company in Indonesia.
4. Comply with regulations
Foreign investors need to comply with all regulations set out in the UU PT PMA, including minimum investment requirements, sectoral restrictions, ownership structure, and permits and licenses.
Conclusion
The UU PT PMA is an important regulation that foreign investors need to be familiar with when investing in Indonesia. By complying with UU PT PMA, foreign investors can ensure that their investment is legally protected and that they are operating in a transparent and stable business environment. This guide provides a comprehensive overview of the key provisions of UU PT PMA and the steps that foreign investors need to take to comply with it.
