Foreign Investment in Indonesia FAQ 2026

Foreign investment is governed by a layered legal framework Law No. 25 of 2007 concerning Investment, enacted by the House of Representatives and the Government of the Republic of Indonesia, remains the umbrella statute applicable to both foreign and domestic investors. Law No. 6 of 2023 (the re-enacted Job Creation omnibus law, following the Constitutional Court's ruling on the original 2020 version) restructured numerous sectoral laws to streamline licensing. Presidential Regulation No. 10 of 2021, as amended by Presidential Regulation No. 49 of 2021, issued by the President of the Republic of Indonesia, sets out which business fields are open to foreign capital and on what terms. Day-to-day licensing is administered under Government Regulation No. 28 of 2025, and the mechanics of establishing a foreign-owned company, including capital requirements, are set out in BKPM Regulation No. 5 of 2025. 

The Ministry of Investment/Investment Coordinating Board (Kementerian Investasi/BKPM) is the lead authority, operating the OSS-RBA (“Online Single Submission Risk-Based Approach”) system at oss.go.id.

Other specific matters (e.g., financial services, mining, telecommunications) are co-regulated by the relevant technical ministries or the Financial Services Authority (OJK).

KBLI (“Klasifikasi Baku Lapangan Usaha Indonesia”) is Indonesia's standard business classification system. It serves as the official framework that determines: (i) foreign ownership limits (whether a sector is open, restricted, or closed); (ii) the OSS risk level and its corresponding licensing requirements; (iii) the mandatory minimum investment capital; and (iv) any additional sector-specific approvals.

Under the current regulatory framework, the type of business license required is determined by the risk level assigned to the business activities within the OSS RBA system. Business licensing in Indonesia is risk-based, managed through the Online Single Submission Risk-Based Approach (OSS RBA) system.

The specific license required depends directly on the risk level assigned to the company's business activities (KBLI):

• Low Risk: Requires only a Business Identification Number (NIB), which serves as the final license.
• Medium-Low / Medium-High Risk: Requires an NIB plus a standard certificate (self-declaration or verified by the relevant authority).
• High Risk: Requires an NIB and a full, verified business permit/approval from the government before operations can begin. 

Where a company holds multiple KBLI codes with different risk levels, the licensing burden of the highest-risk code applies across the relevant scope.

Yes, in many sectors, but not all. Since 2021, Indonesia has applied an "opt-out" approach: every business field is presumed open to investment (including up to 100% foreign ownership) unless expressly closed, restricted, or reserved for cooperatives and small enterprises. Under Presidential Regulation No. 10 of 2021 jo. No. 49 of 2021, business fields fall into four categories: priority fields eligible for incentives, fields open subject to conditions (such as an ownership cap, location requirement, or special license), fields reserved for small businesses and cooperatives, and fields open with no restriction.

Following this 2021 reform, most of the roughly 1,300 business classifications (KBLI) were opened to full foreign ownership, a significant departure from the former negative-list regime. However, several sectors still carry foreign ownership caps (commonly 49%, 67%, or 95%, depending on the sector, including certain construction and distribution activities), or require a mandatory local SME or cooperative partner. Sector regulators may also impose additional restrictions beyond the general list.

No direct commercial transactions are permitted: no invoicing, no contracts in the office's own name, and no Indonesian-source income. 

A representative office is not a legal entity and therefore cannot hold shares in another company or acquire business land rights available to a PT PMA. Licenses are time-limited and require periodic renewal.

Periodic LKPM filing remains required notwithstanding the absence of commercial trading (see question 26).

Conversion is required once the parent company is prepared to conduct direct commercial activity in Indonesia, including sales, invoicing, full-scale hiring, and the generation of local revenue. Even a KPPA established specifically to prepare for a future PT PMA is intended to be a temporary arrangement rather than a long-term operating structure.

Yes. Article 26 of BKPM Regulation No. 5 of 2025 reduced the minimum issued and paid-up capital for a PT PMA from IDR 10 billion to IDR 2.5 billion per company. However, this reduction applies only to the cash capital required at incorporation and does not reduce the overall investment commitment.

Under Government Regulation No. 28 of 2025 and Article 26(2) of BKPM Regulation No. 5 of 2025, each PT PMA business activity must still maintain a total investment value exceeding IDR 10 billion per five-digit KBLI code per project location, excluding land and buildings. The IDR 2.5 billion paid-up capital is therefore distinct from the IDR 10 billion investment threshold. The remaining investment may be realized progressively through capital expenditure, such as machinery, equipment, feasibility studies, and construction, and reported through LKPM. Failure to demonstrate adequate investment realization may result in the suspension of the relevant license through OSS-RBA.

The IDR 2.5 billion capital must be deposited into an account in the company's own name, rather than a shareholder's personal account. In principle, the funds should remain available to the company and may be used for legitimate working capital or investment costs. Restrictions apply to withdrawals or transfers during approximately the first twelve months to prevent the capital from being deposited merely to satisfy the incorporation requirement and then withdrawn. The company's account movements may also be reviewed through LKPM reporting or a BKPM audit.

A limited number of exceptions apply. Large-scale trading is measured at the four-digit KBLI level; food and beverage services at the two-digit level per location; and construction services at the four-digit level within a single activity. Manufacturers operating several five-digit KBLI product lines on a single production line may combine them into a single calculation. Additional relief applies to technology start-ups within Special Economic Zones and to fields aligned with the Government's down streaming priorities; regulated sectors such as banking and finance are subject to separate, generally higher, capital thresholds.

OSS-RBA (Online Single Submission, Risk-Based Approach) is the single official portal for obtaining an NIB, standard certificates, business licenses, and derivative permits. Since 2 October 2025, it has operated under Government Regulation No. 28 of 2025, which replaced the 2021 licensing regulation. Licensing requirements scale with the applicable risk classification, low, medium-low, medium-high, or high, such that higher-risk activities are subject to more extensive requirements and additional processing stages.

KBLI 2025 is Indonesia's revised standard classification of business fields, issued through Statistics Indonesia (BPS) Regulation No. 7 of 2025, replacing KBLI 2020 and aligning more closely with the International Standard Industrial Classification (ISIC) Revision 5. It is now the reference standard for licensing, risk assessment, and investment reporting within OSS, and introduces new categories for platform-based and digital-economy activity not previously captured.

A change in classification does not automatically require re-filing of existing licenses; an NIB or license issued prior to the transition generally remains valid. Updating the applicable code is required at the next corporate action, including a new business line, a change in capital, a change of directors or commissioners, or a license renewal.

A failure to update may result in a mismatch between the NIB, the articles of association, and OSS records, which can delay applications for business-data changes, new business lines, sectoral licensing, expansion, or bank financing, and in some cases may result in a license being treated as invalid.

As certain former codes have been split into multiple new codes, or merged with others, the full set of codes on file should be reviewed rather than simply carrying forward the previous number.

The NIB constitutes the company's core business identity and also functions as a basic business license, an importer identification number where relevant, and the company's customs access point. It is issued automatically through OSS-RBA upon submission of activity data and selection of the applicable KBLI codes and is a prerequisite for most derivative licenses and third-party relationships, including with banks, customs authorities, and business partners.

In principle, yes. Government Regulation No. 28 of 2025 provides for Service Level Agreements together with a positive-silence mechanism, under which an application is deemed approved by operation of law if the relevant authority does not process it within the prescribed timeframe. Notwithstanding this mechanism, applicants are advised to monitor application status and retain proof of filing.

As an Indonesian legal entity, a PT PMA may hold HGU (Right to Cultivate, applicable to agriculture, plantation, and fisheries activities), HGB (Right to Build), and Hak Pakai (Right to Use), though not freehold title, which is reserved for Indonesian citizens. Tenure periods are comparatively long: HGU may run for up to 95 years across the initial grant and renewal cycles, HGB up to 80 years, and Hak Pakai up to 80 years, subject to fulfilment of investment realization conditions and consistency with zoning rules and the public interest.

Beyond dividend approvals and the annual accounts, Indonesian company law reserves certain matters to the general meeting regardless of what the articles of association say. These fall into three buckets: structural changes (including amendment of the articles of association, increasing or decreasing share capital, approving a merger or other reorganization); personnel decisions (appointing or removing Directors and Commissioners); and major corporate transactions (such as disposing of or encumbering more than half the company's total assets in a single transaction or a series of related transactions). Each category carries its own quorum threshold under the articles, so the practical approval bar can differ significantly between, say, a director’s appointment and a major asset disposal.

Indonesian company law splits accountability rather than simply splitting titles. The Board of Directors carries the fiduciary duty of day-to-day management and the authority to bind the company with third parties and can face personal liability where a director acts in bad faith or lets the company's assets fall short of its debts. The Board of Commissioners carries oversight role instead. It does not manage, but the articles of association can be drafted to require its consent before the Directors take specified actions, effectively giving the Commissioners a veto based on the structure of the Articles of Association rather than just an advisory role.

Yes, shares can be engineered for two distinct purposes. On the control side, a class of shares can carry no voting rights at all or can carry a right to nominate a specific number of Directors or Commissioners regardless of the shareholder's overall percentage stake. On the economic side, shares can carry priority in dividend distributions or in liquidation proceeds ahead of ordinary shares or can be structured to convert into a different class after a defined milestone or holding period – a mechanism commonly used to build vesting or exit terms directly into the capital structure rather than relying solely on a separate shareholders' agreement.

The Annual General Meeting of Shareholders (AGMS) is an annual corporate organ of a PT that is responsible for approving the annual financial statements and annual report, ratifying the performance of the Board of Directors (BoD) and Board of Commissioners (BoC), declaring dividends, and approving material corporate decisions. Following the procedural overhaul enacted through the Ministry of Law Regulation No. 49 of 2025 (MOL 49/2025), AGMS resolutions approving the annual report must be notarized and electronically reported to the Minister of Law through the SABH Online system. The AGMS must be held within six months after the end of the financial year, and the notarized resolution must be filed within 30 calendar days from the date of the notarial deed, together with the full annual report and financial statements.

The Annual Report is a mandatory yearly document containing the company’s financial statements, operational activities, corporate social and environmental responsibility activities, material issues affecting the business, the BoC’s supervisory report, details of the Directors and Commissioners, and their remuneration for the preceding financial year. The draft Annual Report must be made available to shareholders before the AGMS. Following approval at the AGMS, the Annual Report and the relevant notarized resolution must be electronically filed through SABH/AHU within the applicable six-month and 30-day deadlines.

Failure to comply with the AGMS, Annual Report, or filing requirements may result in administrative sanctions imposed by the Minister of Law through the Director General. This may include a written warning, giving the company 30 days to remedy the noncompliance, followed by the blocking of SABH/AHU access if the issue remains unresolved. Blocking may prevent the company from processing important corporate actions, such as amendments to its articles of association, changes to its board, and capital increases.

LKPM is a report on the progress of investment realization and the challenges faced, submitted periodically to the Ministry of Investment/BKPM through the OSS system. It is regulated under GR 28/2025, which strengthens ongoing compliance. 

Reporting Frequency:

• Micro & Small Enterprises (UMK): every 6 months periods Jan-Jun & Jul-Dec.
• Medium & Large Enterprises: every 3 months Quarter I, II, III, IV.
• Non-compliance leads to graduated sanctions: guidance, then warning, then NIB (business license) suspension, and revocation as a last resort.

For Medium & Large Enterprises, LKPM has two phases: Construction Phase (company hasn't started commercial operations yet, still in preparation) and Production Phase (company has obtained its business license and started commercial operations). The reporting materials in the LKPM differ depending on which phase the company is in.

In general, a PMA company may be required to submit various reports to the relevant government authorities in connection with its business activities in Indonesia. These may include:

• Monthly and annual tax filings;
• Manpower and employee welfare reporting;
• Reporting relating to company loans or borrowings; and
• Foreign exchange and prudential principles reporting.

Additional reporting requirements may apply depending on the nature and classification of the company’s business activities. For example, companies operating in the financial services sector may have obligations reporting to the OJK etc.

An audit is required only where the company falls within a specific category, for instance raising funds from the public (including banks and insurers), issuing debt instruments, being publicly listed, being state-owned, or holding assets and/or turnover of at least IDR 50 billion. A significant proportion of PT PMA companies reach this threshold once they operate at moderate scale.

Companies that are not subject to mandatory audit requirements must nevertheless prepare proper financial statements, which must be formally approved and signed by the BoD and BoC as part of the AGMS reporting requirements referred to in point A in this paragraph.

Yes. Beneficial ownership disclosure has been mandatory since Presidential Regulation No. 13 of 2018, but Ministry of Law Regulation No. 2 of 2025 significantly tightened the regime. It broadens the definition of a beneficial owner and clarifies the 25% direct-or-indirect ownership or control threshold; introduces a risk-based verification process referencing national and sectoral money laundering risk assessments; and, for the first time, imposes a mandatory annual re-verification obligation even where no change has occurred in which previously many companies only filed once and did not revisit the data.

As of current practice, any change to ownership, shareholding, or management control must also be reported promptly and non-compliance can result in a written warning, blocking of AHU access (which in turn prevents share transfers, director changes, and other corporate filings), and the company being publicly flagged as non-compliant on the AHU system.

Given the pace of change described above, we would suggest treating compliance as a standing calendar rather than a one-off exercise: track the recurring statutory deadlines (quarterly or semi-annual LKPM, the six-month-plus-30-day AGMS/SABH filing cycle, and the new annual beneficial ownership re-verification); assign clear internal ownership for each filing rather than leaving it to whoever last handled it; confirm KBLI code alignment at every corporate action (new business line, capital change, board change, or license renewal) rather than only at the original KBLI 2025 transition.

Engaging local counsel or a company secretarial provider to track the pending Manpower Law (statutory deadline 31 October 2026) is also advisable given its potential effect on existing PKWT and outsourcing arrangements.

Looking ahead, we would flag at least three items:

• To pay attention on the consolidated Manpower Law, which must be enacted by 31 October 2026 under the Constitutional Court's own deadline, and which is expected to further reshape PKWT and outsourcing rules;
• Continued enforcement activity following the close of the KBLI 2025 transition window; and
• A likely increase in AHU audit activity around beneficial ownership compliance during 2026, as the Ministry of Law prioritises enforcement of Regulation No. 2 of 2025;

A PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a limited liability company that allows foreign individuals or entities to conduct business and invest in Indonesia. It is the primary legal vehicle for foreign direct investment.

To register a PT PMA, investors must determine the business activities, prepare incorporation documents, establish the company before a notary, obtain approval from the Ministry of Law and Human Rights, and secure the required business licenses through the OSS (Online Single Submission) system.

The incorporation process usually takes 10 to 12 weeks, depending on the business sector, completeness of documentation, licensing requirements, and regulatory approvals.

Commonly required documents include shareholder identification documents, corporate documents of foreign shareholders (if applicable), proposed company name, business activity details, registered office address, and information on directors and commissioners.

The incorporation process usually takes 10 to 12 weeks, depending on the business sector, completeness of documentation, licensing requirements, and regulatory approvals.

The incorporation process usually takes 10 to 12 weeks, depending on the business sector, completeness of documentation, licensing requirements, and regulatory approvals.

A representative office may conduct non-commercial activities such as market research, promotion, and liaison functions, but cannot generate revenue in Indonesia. A PT PMA is a fully operational legal entity that can engage in commercial activities and earn income.

Yes. A PT PMA can sponsor foreign employees, provided it complies with manpower regulations, obtains the necessary work permits and approvals, and fulfills applicable reporting and employment obligations.

The incorporation process usually takes 10 to 12 weeks, depending on the business sector, completeness of documentation, licensing requirements, and regulatory approvals.

A PT PMA is generally required to have an investment plan exceeding IDR 10 billion per business activity, excluding land and buildings. Specific requirements may vary depending on the industry and business scale.

Not necessarily. Many business sectors allow up to 100% foreign ownership. However, some sectors remain subject to foreign ownership restrictions or partnership requirements.

Yes. A foreign shareholder may serve as a Director of a PT PMA, subject to corporate, manpower, immigration and work authorization requirements.

A foreign company generally cannot open a local operational bank account without an Indonesian legal presence. A PT PMA or other approved Indonesian entity can open corporate bank accounts upon satisfying the bank's requirements.

Certain sectors are either fully closed or subject to foreign ownership limits and special requirements. Foreign ownership levels depend on the applicable KBLI classification and prevailing investment regulations.

A PT PMA must have a minimum of two shareholders at the time of incorporation. These shareholders may be foreign individuals, foreign companies, Indonesian individuals, or Indonesian companies, subject to the applicable investment regulations.

A registered business address is required. Depending on the company's activities and licensing requirements, a virtual office may be sufficient, or a physical office may be mandatory.

A representative office cannot generally be converted directly into a PT PMA. Instead, a new PT PMA must be established, after which the representative office may be closed if no longer required.

Foreign shareholders may use different visa categories depending on the purpose of their visit, such as business visas for meetings and investment-related activities. Foreigners who work or hold executive roles may require the appropriate stay permit and work authorization.

Companies may be required to maintain corporate records, submit tax filings, prepare annual financial reports where applicable, and comply with investment and other sector-specific reporting obligations.

Changes to directors, commissioners, shareholders, company address, or other corporate information should be reported promptly through the appropriate corporate and regulatory filings to ensure records remain up to date.

Failure to meet compliance obligations may result in administrative sanctions, fines, licensing restrictions, difficulties with corporate transactions, or other regulatory consequences.

Failure to meet compliance obligations may result in administrative sanctions, fines, licensing restrictions, difficulties with corporate transactions, or other regulatory consequences.

Indonesia no longer imposes a fixed expatriate-to-local employee ratio across all sectors. However, employers are generally expected to support knowledge transfer and local workforce development in accordance with manpower regulations.

Yes. Indonesia's Personal Data Protection Law (PDP Law) establishes requirements for the collection, processing, storage, transfer, and protection of personal data, and applies to organizations handling personal information.

Yes. A PT PMA may import goods into Indonesia, provided it obtains the required business licenses and import-related registrations through the OSS-RBA system and complies with applicable customs and trade regulations. Additional sector-specific approvals may be required depending on the type of goods being imported.

Company ownership alone does not automatically grant residency rights in Indonesia. However, foreign investors may be eligible to obtain the appropriate visa or stay permit, subject to meeting the applicable immigration and investment requirements.

The information contained in this FAQ is provided for general informational purposes only and is intended to provide a high-level overview of selected Indonesian tax matters as at the date of publication. 

This FAQ does not constitute legal, tax, accounting, regulatory, investment or other professional advice, nor should it be relied upon as a substitute for obtaining specific professional advice tailored to the facts and circumstances of a particular situation. 

Tax laws, regulations, administrative practices and interpretations may change over time and may vary depending on the taxpayer's specific circumstances. The application of Indonesian tax laws can be complex and may require consideration of domestic legislation, tax treaties, regulatory guidance, judicial decisions and administrative practice.

Accordingly, readers should not act, refrain from acting, or make business, investment or tax decisions based solely on the information contained in this FAQ. Professional advice should be obtained before taking any action or entering into any transaction.

While every effort has been made to ensure the accuracy of the information at the time of publication, no representation or warranty, express or implied, is given as to its completeness, accuracy or ongoing validity. To the fullest extent permitted by law, neither the Firm nor any of its partners, directors, employees or affiliates accept any liability for any loss arising from reliance on the information contained in this FAQ.

For advice relating to a specific transaction, investment, dispute, tax audit, transfer pricing matter or business operation, please contact a qualified professional adviser.