Regulation of Paid-in Capital for Foreign Companies – The Investment Coordinating Board (BKPM) has issued Regulation No. 4 of 2021 concerning Guidelines and Procedures for Licensing and Risk-Based Investment Facilities. This regulation follows a change in the approach to licensing from a commitment-based system to a risk-based system.
Following below, we will explain Regulation No. 4 of 2021 concerning guidelines and procedures for risk-based business licensing services and investment facilities – Provisions regarding the minimum requirements for investment paid-up capital in several types of businesses & Regulation No. 5 of 2021 concerning Guidelines and Procedures for Supervision of Risk-Based Business Licensing.
Keep reading to learn about regulatory changes related to Foreign Investment (PMA) that you may be interested in.
The changes regulated in BKPM Regulation No. 4 of 2021 is part of improvements in Indonesia to increase investment.
Foreign investment companies are now required to have a paid-up capital of Rp 10 billion, up from the previous Rp 2.5 billion. This investment value does not include investment in land or buildings.
Minimum Paid-in Capital Requirements for Foreign Investment Companies (PMA)
Below are the minimum paid-in capital requirements for foreign companies (PMA) which have now changed and are regulated in the Regulation of the Investment Coordinating Board (BKPM) No. 4 of 2021 concerning guidelines and procedures for risk-based business licensing services and investment facilities.
Based on Article 12 of the Regulation of the Perka BKPM No. 4 of 2021, which explains that the minimum investment value provisions for foreign companies (PMA).
On Paragraph 1
The business entity as referred to in Article 9 paragraph (1) letter b which is classified as PMA is categorized as a large business and must comply with the minimum investment value provisions, unless stipulated otherwise by the laws and regulations.
On Paragraph 2
The provisions for the minimum investment value for PMA as referred to in paragraph (1), namely the total investment is greater than Rp. 10,000,000.00 (ten billion rupiahs), excluding land and buildings per KBLI business field, 5 (five) digits per project location.
On Paragraph 3
The provisions on total investment as referred to in paragraph (2) are excluded for several business activities. Conditions that are excluded for some activities are as follows:
- For wholesale trading business activities, greater than Rp. 10,000,000,000 (ten billion rupiahs) excluding land and buildings, are the initial 4 (four) digits of the KBLI;
- For Food and Beverage Services business activities, greater than Rp. 10,000,000,000 (ten billion rupiah) excluding land and buildings in one activity, is per 2 (two) initial digits of KBLI per 1 (one) location point;
- Specifically for Construction Services business activities, greater than Rp. 10,000,000,000 (ten billion rupiahs) excluding land and buildings in one activity, per 4 (four) initial digits of the KBLI;
- Specifically for Industrial business activities that produce different types of products with 5 (five) digits KBLI in 1 (one) production line, greater than 10,000,000,000 (ten billion rupiah) including land and buildings.
- Specifically for property development and business activities, the following provisions apply:
- in the form of property in the form of a building as a whole or an integrated housing complex provided that the investment value is greater than Rp. 10,000,000,000.00 (ten billion rupiah) including land and buildings; or
- in the form of a property unit not in 1 (one) building as a whole or 1 (one) housing complex in an integrated manner, the investment value is greater than Rp. 10,000,000.00 (ten billion rupiah) excluding land and buildings;
Thus, for foreign entrepreneurs who will establish or have already established a Foreign Capital Company (PMA) in Indonesia, if the paid-up capital is still not adjusted to the latest regulations, then immediately adjust it to the existing changes. If the company does not understand and has difficulty understanding the changes, you can contact us ‘’Indoservice’’ a consultant who can be trusted to help you in understanding the regulation of foreign companies (PMA) in Indonesia.
The obligation to divest shares as referred to in the Regulation Of The Investment Coordinating Board Of The Republic Of Indonesia No. 4 Year 2021 in article 14 paragraph 1 may not be implemented if the applicable provisions do not require divestment and in the company deed document the shareholders agree:
- For a PMA business entity which is not 100% (one hundred percent) of its shares owned by foreigners, the Indonesian side declares that it does not want/demand share ownership in accordance with the share divestment provisions contained in the approval letter and/or Business License; or
- For PMA business entities whose shares are 100% (one hundred percent) owned by foreigners, the shareholders declare that they have no commitment/agreement with any Indonesian party to sell the shares.
The implementation of Risk-Based Business Licensing through the Online Single Submission (OSS) System is the implementation of Law No. 11 of 2020 concerning Job Creation (UU Cipta Kerja).
Risk-Based OSS must be used by entrepreneurs, Ministries/Agencies, Regional Governments, Special Economic Zone Administrators (KEK), and Free Port Free Trade Zones (KPBPB).
Based on Government Regulation No. 5 of 2021, there are 1,702 business activities.
Foreign investors now have to face new criteria for obtaining a business license in Indonesia. In addition to having the required paid-up capital, business licenses will now be issued based on a ‘level of business risk’ assessment which is determined by the scale of the hazard a business can pose.
- Identify relevant business activities;
- Assess the hazard level;
- Assess potential hazards;
- Determination of risk level and business scale rating;
- Determination of the type of business license.
Based on the risk analysis above, the company will be classified into one type of risk level, the following is the classification:
- Low risk business;
- Medium-low risk business;
- Medium-high risk business;
- High risk business.
The lower the business risk, the simpler the process for obtaining a business license. High-risk business activities may require approval from the central or local government while low-risk activities only need to obtain a business registration number (NIB).
Sector in Risk-Based Business Licensing
The following is a list that includes the implementation of risk-based business licensing:
- Marine and fisheries;
- Environmental and forestry;
- Energy and mineral resources;
- Nuclear power;
- Public works and public housing;
- Health, medicine, and food;
- Education and culture;
- Postal, telecommunications, broadcasting, and electronic systems and transactions;
- Defense and security; and
Requirements for Foreign Investment/Setting Up a Foreign Company (PMA) in Indonesia
For details, you can ask Indoservice. What is needed to establish a foreign company (PMA) in Indonesia.
Based on the explanation above. If you are a Foreigner who is interested in doing business & planning to invest in Indonesia, and will set up a company in Indonesia, and is looking for an understanding of the current regulations, especially for Foreign Investments (PMA), related to adjustments to the new regulatory provisions.
You can Contact Indoservice Now!
Indoservice, a secretarial and licensing services consulting company firm that can assist you in establishing a company in Indonesia and business-related licensing. Trusted and experienced in Indonesia, committed to providing the best and fast service to meet your needs.