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Benefits and Considerations of a Nominee Structure (PT Local) vs. a Foreign Held Entity (PT PMA)

Nominee Structure (PT Local)

Benefits

Considerations

No 2.5bn IDR paid up capital requirement during formation

The nominee structure is not legally recognized in Indonesia, therefore:

  • The beneficial owner has no claim to the assets of the company and may not legally direct the operations of the company
  • In the event of a conflict between the nominee owners and the beneficial owners the courts will side with the nominee holders

Can have multiple business licenses without needing to commit additional paid up capital

Nominee structure is costly to maintain (incurs recurring annual fees)

Allows foreign entities to participate in business sectors which are otherwise closed, albeit in a way that is at present legally ambiguous

Hard to transfer funds from a nominee held business to the beneficial owner in a tax efficient manner

In the future the laws prohibiting nominee ownership may become stricter

Foreign Held Structure (PT PMA)

Benefits

Considerations

Provides maximum legal protection for the asset

Requires 2.5bn IDR in committed paid up capital to set up, and each subsequent business line registration requires an additional 2.5bn IDR commitment

Simple process to transfer funds between legal entities

Greater reporting requirements (quarterly reporting with BKPM)

Structure is cheaper to maintain (no annual fees)

Many business lines are limited or closed to foreign entities

Safeguard against any future change in PMA legislation through grandfather provisions

Simpler legal structure to transact with or recapitalize with foreign shareholders

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