PT PMA or Representative Office: Benefits and Considerations

 

Introduction

Overseas entities planning to expand their business in Indonesia have two options of setting up their presence—they can either incorporate a PT PMA or a Representative Office. If you are only planning to conduct market research in Indonesia without generating any income, you can incorporate a Representative Office as it is generally cheaper in comparison to PT PMA. There are other differences between the two options and in this article we will explain each type of company and discuss the main differences between them.

What is a PT PMA?

PT PMA is short for Perseroan Terbatas Penanaman Modal Asing or foreign-owned limited liability company, meaning that foreign individuals or entities can own anywhere from 1-100% of the company shares and they can have full control of their business in Indonesia.

Advantages

  • Fully fledged company — the company can conduct business and generate profits

  • Ease of obtaining operating licences and permits

  • Can have operations anywhere in Indonesia

  • Easier sponsorship of foreign employees

  • A foreign individual shareholder who also holds a director position is entitled to a two-year work and stay permit, otherwise known as the Investor KITAS

  • Can own land and property in Indonesia

Disadvantages

  • Considerably high authorised and paid-up capital requirements

  • Some types of business activities are totally or partially closed for PT PMA. In this case, you can use a nominee to incorporate a local-owned company or PT PMDN

Requirements

  • Minimum authorised capital requirement of IDR 10 billion (~SGD 920,000)

  • Minimum paid-up capital requirement of IDR 2.5 billion (~SGD 240,000)

  • 2 shareholders — at least one foreign individual or foreign entity

  • 1 director — a local or foreign individual can become a director

  • 1 commissioner — a local or foreign individual can become a commissioner

What is a Representative Office or KPPA?

The official term of Representative Office in Indonesia is KPPA, which stands for Kantor Perwakilan Perusahaan Asing. The biggest difference between a PT PMA and a Representative Office is that Representative Offices cannot handle transactions  and generate any profit from their operations as their only purpose is market research.

Advantages

  • No authorised or paid-up capital requirement

  • No shareholder or director requirement

  • No corporate tax income

  • Cheaper way to expand your business in the Indonesian market

Disadvantages

  • Cannot generate income from operations

  • Strictly limited in hiring foreign employees

  • Can only operate in the provincial capitals, e.g. Jakarta, Surabaya, Medan, Makassar, etc

  • Cannot own land or property in Indonesia

Requirements

  • A parent company registered in the country of origin

  • A Chief Representative Officer or CRO — The CEO of the parent company cannot be a CRO

  • A registered address in an Indonesian provincial capital

Permitindo offers PT PMA and Representative Office incorporation services and with more than 30 years of experience, Permitindo is committed to providing holistic services to our clients. If you require any further information in regards to company incorporation services in Indonesia, do not hesitate to reach out to us at contact@permitindo.com or learn more about our services here.

IncorporationNorris ChanIncorporation