PMA vs Nominee
Updated: Feb 2, 2022
A PT PMA ‘Perseroan Terbatas Penanaman Modal Asing’ which translates as ‘Limited Liability Foreign Investment Company’, established under Agrarian Law, Law No. 40/2007 with regard to Limited Liability Companies is the only legal mechanism through which foreigners can conduct business, own property or enter into long term property lease agreements in full compliance with Indonesian laws and property regulations.
The PT PMA is the only legal entity through which foreigners can obtain a foreign direct investment license, granted by the BKPM ‘Badan Koordinasi Penanaman Modal’. Hence, conducting your business through your own PT PMA or through an existing PT PMA is the only safe and secure way to invest. The simplest of the two options being the latter.
Whilst there are long term benefits to establishing your own PT PMA, which can be 100% foreign owned, investing through an existing PT PMA is far more convenient, faster, less administrative and less costly.
Registering your own PT PMA company would require a minimum paid up capital of 10 Billion IDR. This would take you anywhere from 1-2 months to set up and would require its own extensive range of administrative duties. This also requires a minimum of two shareholders (director and commissioner).
Structuring your investment through an existing PT PMA which holds the applicable licencing for the real estate sector, such as the The Meraki Concept, comes with a comprehensive service agreement between both parties. The lease agreement will be registered directly in the investors name with a specified investment cost, full duration of investment, security of investment as well as an exit strategy, should you wish to cash out on your investment.
Through this, the investor will be able to take full ownership and control of the structure erected on his land holdings and with the appropriate licensing, generate revenue and profit from it. Under the legal title of ‘Hak Guna Bangunan’, the investor will be able to renew and hold ownership of this title for a maximum period of up to 80 years. It will allow the investor the freedom to operate the property in the interest of capital gain for the full duration of its legal term and afford them the flexibility to sell any interest in the property offshore, should they wish to do so.
Finally, the third option, which in our humble opinion is not really an option at all, is the infamous ‘Indonesian Nominee’ system. Whilst for many foreign investors in the past, this has been the fastest and easiest way to invest in the ever growing Indonesian property market, this method is extremely risky and requires full and complete trust in your local nominee.
The Indonesian Nominee system in layman’s terms means using an Indonesian national to hold your title and invest through. This method of investment is in fact quite illegal and any contract or agreement entered into between yourself and your nominee will not be recognized in court. Should any dispute ever arise between yourself and your nominee, you will almost certainly lose the full value of your investment and stand a very good chance of having the land seized by the government, in which event, the land ownership will immediate revert back to the state.