Can Foreigners Own a Company in Indonesia? A Practical Legal Guide to Foreign Business Ownership, PT PMA, and Compliance
Table of Contents
Introduction
Indonesia is one of Southeast Asia’s most attractive destinations for foreign entrepreneurs, startups, investors, and multinational companies. With a population of more than 270 million people, a rapidly expanding digital economy, and strong government support for foreign direct investment, Indonesia presents real commercial opportunities.Yet one question appears again and again among foreign founders and investors:
“Can foreigners own a company in Indonesia?”The confusion is understandable. Many foreigners receive conflicting advice—from online forums, informal consultants, or acquaintances—suggesting everything from “100% ownership is easy” to “foreigners cannot own anything at all.” Both extremes are misleading.
The Main Legal Question
Can foreigners legally own a company in Indonesia?
Yes, foreigners can legally own a company in Indonesia, but only through a specific legal structure and subject to ownership restrictions depending on the business sector. Foreigners cannot simply open a local company in the same way Indonesian citizens can. Instead, foreign ownership is regulated, conditional, and closely monitored by the government.In practice, most foreigners who legally operate businesses in Indonesia do so through a foreign-owned limited liability company known as a PT PMA.
Legal Explanation
Why Foreign Ownership Is Regulated in Indonesia
Indonesia does not prohibit foreign business ownership, but it does not allow unrestricted ownership either. The government’s approach balances two objectives:- Encouraging foreign investment that supports economic growth
- Protecting local businesses, workers, and strategic industries
What Foreigners Cannot Do
Before discussing what is allowed, it is important to clarify what is not allowed:- Foreigners cannot register a local Indonesian company (PT Lokal)
- Foreigners cannot operate as sole proprietors
- Foreigners cannot use Indonesian “nominees” to secretly hold shares
- Foreigners cannot bypass licensing and capital requirements
The PT PMA: The Only Lawful Ownership Vehicle
What Is a PT PMA?
A PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a foreign investment limited liability company governed by Indonesian law. It is the primary legal vehicle that allows foreigners to:- Own shares in an Indonesian company
- Conduct revenue-generating business activities
- Hire local and foreign employees
- Sponsor work and investor visas
- Enter contracts under Indonesian jurisdiction
Ownership Percentages: How Much Can Foreigners Own?
The Positive Investment List
Foreign ownership limits depend on Indonesia’s Positive Investment List, which classifies business sectors into three main categories:- Fully open sectors – up to 100% foreign ownership allowed
- Conditionally open sectors – foreign ownership capped at a certain percentage
- Closed sectors – reserved for Indonesian citizens or small local enterprises
Examples:
- Software development: often 100% foreign ownership
- Construction services: ownership caps may apply
- Small retail businesses: typically closed to foreign ownership
Capital Requirements for Foreign-Owned Companies
Foreign-owned companies are treated as large-scale enterprises under Indonesian law. This means:- Higher minimum capital commitments
- Clear proof of investment intent
- Stricter reporting obligations
Directors, Commissioners, and Shareholders
A PT PMA must have:- At least two shareholders (individuals or companies)
- At least one director
- At least one commissioner (recommended for governance)
Legal Basis
Foreign ownership of companies in Indonesia is governed by several key laws and regulations, including:- Investment Law
- Company Law
- Job Creation (Omnibus) Law
- Government regulations on the Positive Investment List
- Ministry of Investment regulations
- Online Single Submission (OSS) licensing rules
Risks and Legal Consequences
Illegal Ownership Structures
Using nominee shareholders or informal agreements exposes foreigners to:- Total loss of share ownership
- Inability to enforce agreements in court
- Criminal or administrative sanctions
Licensing and Operational Risks
Operating without proper licenses can result in:- Suspension of business activities
- Revocation of the business license
- Inability to invoice clients legally
Immigration Consequences
Foreign owners who work without proper visas risk:- Fines and deportation
- Blacklisting from re-entry
- Closure of the company
Tax Exposure
Improper structuring may trigger:- Tax audits
- Withholding tax penalties
- Difficulty repatriating profits
Case Examples
Case Example 1: 100% Foreign-Owned Tech Startup
A foreign entrepreneur establishes a PT PMA in a fully open sector and complies with capital and licensing rules.Outcome: Lawful ownership, visa sponsorship, and scalable operations.
Case Example 2: Nominee Shareholding Arrangement
A foreign investor places shares in an Indonesian friend’s name with a private agreement.Outcome: The agreement is unenforceable; the foreign investor loses control.
Case Example 3: Joint Venture Without Clear Governance
A foreign investor enters a joint venture without a shareholder agreement.Outcome: Deadlock, loss of control, and limited exit options.
What Can Be Done
Step 1: Confirm Ownership Eligibility
Identify:- Business sector classification
- Maximum foreign ownership percentage
- Licensing requirements
Step 2: Establish the Correct Legal Entity
Use a PT PMA with transparent shareholding and lawful capital structure.Step 3: Secure Proper Licensing
Register through the OSS system and obtain all sector-specific approvals.Step 4: Address Immigration and Tax Early
Ensure that shareholders and directors hold proper visas and that tax registration is completed correctly.Step 5: Obtain Professional Legal Advice
Foreign ownership rules are not intuitive. Early legal advice prevents irreversible mistakes.If you are considering owning a company in Indonesia or are unsure whether your current structure is compliant, you are invited to consult with an experienced advocate. Please refer to the contact information available in this website’s navigation menu for professional assistance.
Conclusion
Foreigners can legally own companies in Indonesia, but only by following Indonesia’s specific foreign investment framework. The PT PMA structure, sector-based ownership limits, capital requirements, and licensing obligations are not optional—they are the foundation of lawful ownership.Foreign investors who succeed in Indonesia do so by respecting the legal system, structuring their businesses correctly from the outset, and seeking qualified legal guidance. Those who rely on shortcuts or informal arrangements often face serious legal and financial consequences.
With proper planning, Indonesia can be a stable, profitable, and rewarding place to own and grow a business.
Frequently Asked Questions (FAQ)
Can foreigners own 100% of a company in Indonesia?Yes, in business sectors that are fully open under the Positive Investment List.
Is a local partner always required?
No. A local partner is only required in restricted sectors.
Can one foreigner be the sole shareholder?
No. Indonesian company law requires at least two shareholders.
Is a PT PMA expensive to maintain?
It involves higher compliance costs than a local company, but it provides legal security.
Can a PT PMA sponsor visas?
Yes, once properly licensed and compliant.
Are nominee arrangements legal?
No. Nominee shareholding is prohibited and unenforceable.
Should I consult a lawyer before setting up a company?
Yes. Early legal advice significantly reduces risk and long-term cost.
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