PT PMA vs Local PT in Indonesia: Key Differences Foreign Investors Must Know

Indonesia remains one of Southeast Asia’s most attractive destinations for foreign investment. With a growing economy, large domestic market, and expanding infrastructure, many international investors are considering entering the Indonesian market. However, before starting a business, one critical decision must be made: should you establish a PT PMA or a local PT?

Understanding the differences between PT PMA vs PT is essential for compliance, ownership structure, and long-term business strategy. This guide explains the key distinctions foreign investors must know before incorporating a company in Indonesia.

What Is a PT in Indonesia

A PT (Perseroan Terbatas) is a limited liability company recognized under Indonesian law. It is the most common legal entity used for commercial activities in Indonesia.

There are two main types of PT structures relevant to investors:

• PT PMA – a foreign-owned limited liability company
• Local PT – a company owned entirely by Indonesian citizens or entities

While both structures operate under Indonesian corporate law, their ownership rights, capital requirements, and regulatory obligations differ significantly.

What Is a PT PMA

A PT PMA (Penanaman Modal Asing) is a company that includes foreign ownership, either partial or full, depending on the business sector. PT PMA entities are regulated by Indonesia’s investment laws and supervised through the OSS and BKPM systems.

PT PMA is the only legal structure that allows foreign individuals or companies to own shares directly in an Indonesian business.

Key Characteristics of PT PMA

• Allows foreign shareholding
• Subject to foreign investment regulations
• Requires higher minimum capital
• Mandatory investment reporting through LKPM
• Eligible to sponsor foreign work permits in certain roles

What Is a Local PT

A local PT is a limited liability company owned entirely by Indonesian citizens or Indonesian legal entities. Foreign individuals are not permitted to hold shares directly in a local PT.

Some foreign investors attempt to operate through a local PT using nominee arrangements, but this practice is highly not recommended due to the significant legal and financial risks involved. 

Key Characteristics of Local PT

• 100 percent Indonesian ownership
• Lower capital requirements
• Simpler reporting obligations
• Cannot legally include foreign shareholders
• Limited ability to employ foreign directors

Ownership Structure: PT PMA vs Local PT

The most fundamental difference between PT PMA and local PT lies in ownership rights.

PT PMA Ownership

• Foreign individuals and foreign companies may hold shares
• Ownership percentage depends on the business sector
• Some sectors allow 100 percent foreign ownership
• Others require partial Indonesian ownership

Ownership regulations are determined by Indonesia’s Positive Investment List, which classifies sectors as open, restricted, or closed to foreign investment.

Local PT Ownership

• Shares may only be held by Indonesian citizens or entities
• Foreign ownership is not legally allowed
• Nominee arrangements are not protected by law

For foreign investors seeking legal security and long-term protection, PT PMA is the only compliant structure.

Minimum Capital Requirements

Capital requirements represent another major difference between PT PMA vs PT.

PT PMA Capital Requirements

A PT PMA must meet foreign investment thresholds, including:

• Minimum IDR 10 billion investment value 
• Paid-up capital typically at least 25 percent of the investment plan
• Capital must be stated in the deed of establishment

These requirements demonstrate financial commitment and business viability to Indonesian authorities.

Local PT Capital Requirements

Local PT companies generally require:

• Significantly lower minimum capital
• Capital levels based on company classification (micro, small, medium)
• Greater flexibility for local entrepreneurs

While local PT structures are more affordable, they are not suitable for foreign ownership.

Business Licensing and Compliance

Both PT PMA and local PT must register through Indonesia’s OSS system. However, the scope of compliance differs.

PT PMA Compliance Obligations

• OSS registration and NIB issuance
• Business licenses according to KBLI classification
• Quarterly LKPM reporting to BKPM
• Monthly and annual tax reporting
• Investment realization reporting

Local PT Compliance Obligations

• OSS registration and licensing
• Monthly and annual tax reporting
• No LKPM obligation unless classified as investment-based

Taxation Differences

From a tax perspective, PT PMA and local PT are treated similarly in most cases.

Corporate Tax

• Corporate income tax rate currently applies equally to PT PMA and local PT
• Both are subject to VAT if registered as taxable enterprizes (PKP).

Operational Taxes

• Withholding taxes on salaries, services, and dividends
• Monthly tax filings regardless of business activity

The key difference is not the tax rate, but the regulatory framework, as PT PMA companies operate within Indonesia’s foreign investment compliance structure.

Employment and Work Permits

Foreign investors often need to appoint foreign directors or managers.

PT PMA Employment Rights

• Eligible to sponsor foreign work permits for specific positions
• Must comply with manpower regulations
• Required to employ Indonesian staff alongside foreign workers

Local PT Employment Limitations

• Limited ability to sponsor foreign employees
• Foreign involvement may raise regulatory issues
• Risk of non-compliance if foreigners act as de facto managers

For operational control and transparency, PT PMA provides strong legal standing.

Risks of Using a Local PT with Nominee Structure

Some foreign investors may attempt to bypass PT PMA requirements by using Indonesian nominees. This approach carries serious risks:

• No legal ownership protection
• Shares legally belong to the Indonesian nominee
• High risk in disputes or business exit

Indonesian law does not recognize nominee arrangements. Investors who choose this path may lose their investment without legal recourse.

Which Structure Is Right for Foreign Investors

Choosing between PT PMA vs PT depends on your investment goals.

PT PMA Is Suitable If You:

• Want legal ownership in Indonesia
• Plan long-term operations
• Require work permits for foreign staff
• Need regulatory certainty and scalability

Local PT May Be Suitable If:

• You are an Indonesian citizen
• You operate a purely domestic business
• No foreign ownership is involved

For foreign investors, PT PMA is almost always the recommended and compliant option.

Understanding the differences between PT PMA vs local PT in Indonesia is essential before investing. While local PT structures appear simpler and cheaper, they are not legally suitable for foreign ownership.

A PT PMA provides legal security, ownership rights, and long-term scalability, despite higher capital and compliance requirements. With proper guidance, the incorporation process can be efficient and fully compliant.