Foreign investors can hold shares in an Indonesian PT PMA either personally or through a foreign corporate entity. Individual ownership places the Indonesian investment directly in the investor’s name, while corporate ownership places it within a wider ownership chain.
Who Can Hold Shares in a PT PMA?
A PT PMA can have foreign individuals or foreign legal entities as shareholders, provided the company’s business activities permit the relevant level of foreign ownership.
A PT PMA generally requires at least two shareholders, which can be individuals, legal entities, or a combination of both.
Establishing a PT PMA with individual or corporate shareholders? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com to review the ownership structure
The percentage that each foreign shareholder can hold depends on the business activities conducted by the company and any applicable foreign ownership restrictions. A second shareholder should not be treated merely as a name used to satisfy the minimum shareholder requirement.
How Does Individual Ownership Differ From Corporate Ownership?
With individual ownership, the foreign investor personally owns the PT PMA shares and exercises the shareholder rights attached to them. The Indonesian investment is held directly by that individual.
With corporate ownership, a foreign legal entity owns the PT PMA shares. The corporate shareholder exercises its shareholder rights through the persons authorized to act on its behalf, placing the Indonesian company within the foreign group’s corporate ownership structure.
How Does the Shareholder Affect Funding the PT PMA?
Under the current foreign investment framework, a PT PMA generally requires at least IDR 2.5 billion (USD 150,000) in issued and paid-up capital per company, unless another statutory requirement applies.
Both individual and corporate shareholders can subscribe for additional shares. If shareholders contribute different amounts, a capital increase can change their respective ownership percentages.
Determining how to capitalize an Indonesian subsidiary? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com to assess the proposed shareholder and funding structure
Funding provided as a shareholder loan is different from an equity contribution. A loan creates debt owed by the PT PMA rather than increasing the lender’s shareholding and can introduce separate Indonesian tax considerations.
Corporate ownership can make it possible for equity or shareholder debt to be provided directly by an overseas group entity. Individual ownership instead means any shareholder-level equity contributed by the individual comes from that shareholder in their personal capacity.
Does Individual or Corporate Ownership Change Dividend Tax?
Dividends paid by an Indonesian company to a non-resident shareholder are generally subject to 20% Article 26 withholding tax under Indonesia’s domestic rules. An applicable tax treaty can reduce that rate when the recipient satisfies the requirements for treaty relief.
This applies whether the foreign shareholder is an individual or a company, but the treaty outcome can differ.
For an individual shareholder, the applicable treaty position generally depends on the individual’s tax residence and the terms of Indonesia’s treaty with that jurisdiction.
For a corporate shareholder, some treaties provide different dividend withholding rates depending on factors such as the company’s ownership percentage in the Indonesian payer. The shareholder must still satisfy the relevant treaty and Indonesian requirements; establishing a holding company in a treaty jurisdiction does not by itself guarantee a reduced rate.
The shareholder receiving the dividend can consequently affect the tax cost of distributing profits from the PT PMA.
What Happens If the Ownership Structure Needs to Change Later?
Changing from individual to corporate ownership can require a transfer or other restructuring of the PT PMA shares. That transaction must comply with Indonesian company law, the company’s articles of association, applicable foreign ownership restrictions, and the required corporate documentation.
Corporate ownership creates a different restructuring route because some ownership changes can occur above the immediate shareholder. For example, ownership of a foreign company holding the PT PMA may change while that foreign company remains the registered shareholder of the Indonesian subsidiary.
Restructuring or transferring an existing PT PMA shareholding? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com to review the Indonesian implications of the transaction
This does not mean that a sale higher in the overseas ownership chain is automatically outside Indonesian tax. Indonesian tax consequences can arise for certain indirect transfers, depending on the structure of the transaction and the applicable tax treaty.
On exit, a corporate investor may consider either selling the PT PMA shares directly or completing a transaction higher in the ownership chain, with potentially different Indonesian tax consequences.
Individual or Corporate Shareholder: Which Structure Fits the Investment?
Individual ownership is more relevant where the investor intends to own the Indonesian company personally and does not need the PT PMA to sit within an overseas corporate ownership chain.
Corporate ownership is more relevant where the PT PMA is intended to operate as a subsidiary of an overseas company or group. The foreign company then owns the Indonesian investment directly, receives dividends in its capacity as shareholder, and remains the immediate shareholder if ownership changes occur further up the corporate chain.
Structure PT PMA Ownership with MAP Resources Indonesia
MAP Resources Indonesia assists foreign investors with PT PMA shareholder structures and ownership changes in Indonesia. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com to determine whether individual or corporate ownership fits your Indonesian investment.
