Indonesia has become one of Southeast Asia’s most attractive investment destinations, offering access to a large consumer base and strong economic growth.
For many multinational groups, the ideal approach is to establish a company that is fully owned by the foreign parent.
But is this allowed in Indonesia? The answer depends on the business sector, government regulations, and proper structuring under Indonesia’s foreign investment framework.
What A PT PMA Means for Foreign Ownership
To operate legally in Indonesia, a foreign-owned company must take the form of a PT PMAÂ (foreign-owned limited liability company). This is the official structure for foreign direct investment. A PT PMA can be owned either partially or entirely by foreign entities, including corporate shareholders. The percentage of allowable foreign ownership is determined by Indonesian regulations based on the nature of the business.
Sectors Open to Full Foreign Ownership
Indonesia uses a classification system known as KBLI, which stands for Klasifikasi Baku Lapangan Usaha Indonesia. Each business activity is assigned a KBLI code. Whether a foreign company can own 100% of a business depends entirely on the KBLI code selected and how it is treated under the current Positive Investment List. This list replaced the former Negative Investment List and sets out which sectors are open, partially open, or closed to foreign investors.
If your chosen KBLI code falls into a fully open category, your company can be 100% owned by a foreign corporate entity with no Indonesian partner required. Sectors like wholesale trading, consultancy, certain types of manufacturing, and software development are typically open, but the list is periodically updated by the government.
Restrictions That May Limit Foreign Ownership
Some sectors are not fully open to foreign investment. In these cases, the regulations may require a certain percentage of local Indonesian ownership, limit the maximum foreign shareholding, or impose partnership requirements. In restricted sectors, a foreign company cannot legally hold 100% of the shares in the Indonesian entity.
Additionally, some general conditions, such as minimum capital requirements, licensing thresholds, or local workforce quotas, may apply regardless of ownership percentage or control structure. These operational limitations must be factored into early planning even for companies that qualify for full foreign ownership.
Setting Up a Wholly-Owned Foreign Subsidiary
If your business falls within an eligible sector, your foreign parent company can proceed to establish a fully owned PT PMA. The registration process involves several steps, including selecting the correct KBLI code, reserving a company name, preparing the deed of establishment, and registering through the Online Single Submission (OSS) system. Once the company is formed, you will also need to obtain relevant business licenses and tax registrations.
Unsure which KBLI code allows full foreign ownership? Contact MAP Resources Indonesia to verify eligibility before you invest.
Ownership of the company is documented through the Articles of Association, which will list the foreign corporate entity as the 100% shareholder. Directors and commissioners must also be appointed, but they do not have to be Indonesian nationals.
Post-Establishment Obligations for Foreign-Owned Companies
After the company is set up, it must remain compliant with Indonesian regulations. This includes regular reporting to the Indonesian Investment Coordinating Board (BKPM), fulfilling tax obligations, maintaining financial records, and submitting company filings. You may also need to register employees with the social security system (BPJS) and comply with labor laws, especially if hiring locally. These requirements apply equally to fully owned subsidiaries and group structures with multiple foreign corporate shareholders.
What To Do If 100% Ownership Is Not Allowed
In cases where your target business activity is not fully open to foreign ownership, alternative structures may be required. These may include forming a joint venture with an Indonesian partner, working with a local distributor, or setting up a licensing arrangement. Each structure has its own legal and operational implications, and care must be taken to ensure the arrangement is compliant and enforceable under Indonesian law.
Know Your Sector Before You Invest
At MAP Resources Indonesia, we help foreign investors navigate KBLI classifications, sector restrictions, and investment requirements.
Contact us today at info@mapresourcesindonesia.com to set up your fully foreign-owned company in Indonesia.
