Foreign investment in Indonesia provides access to one of Asia’s most significant consumer and business markets. However, the legal feasibility of an investment depends heavily on what the Indonesian business will actually do, how it will generate revenue, and which regulatory sector applies.
Before establishing or acquiring an Indonesian company, foreign investors should determine the applicable foreign ownership rules, KBLI 2025 classifications, investment and capital requirements, licensing pathway, governance structure, and ongoing compliance obligations.
These matters should ideally be assessed before capital is committed or binding transaction documents are signed. An unsuitable business classification, ownership structure, or licensing approach may restrict the company’s operations and create difficulties during banking onboarding, fundraising, regulatory review, expansion, or a future exit.
This guide provides a practical overview of the principal legal issues foreign investors should consider before establishing, acquiring, funding, or operating a business in Indonesia.
Key Takeaways
Before proceeding with an investment in Indonesia, a foreign investor should generally:
- define the proposed business activities and revenue model;
- identify the appropriate KBLI 2025 classifications;
- confirm whether the activities permit full or partial foreign ownership;
- select the appropriate investment or market-entry structure;
- verify the applicable investment and paid-up capital requirements;
- identify all OSS and sector-specific licensing requirements;
- establish appropriate governance and shareholder protections; and
- prepare an implementation and ongoing compliance plan.
1. Main Legal Framework for Foreign Investment
Foreign investment in Indonesia is principally governed by Law No. 25 of 2007 on Capital Investment, as amended by Law No. 6 of 2023, referred to in this guide as the "Investment Law".
Indonesian limited liability companies, including companies with foreign shareholding, are governed by Law No. 40 of 2007 on Limited Liability Companies, as amended, referred to as the "Company Law".
Foreign ownership and access to particular business fields are principally regulated by Presidential Regulation No. 10 of 2021 on Investment Business Fields, as amended by Presidential Regulation No. 49 of 2021. This framework is commonly referred to as the "Positive Investment List".
As a general principle, business fields are open to investment unless they are expressly closed to investment or reserved for activities that may only be conducted by the Central Government.
Certain open business fields may nevertheless be:
- subject to foreign ownership limitations;
- allocated to cooperatives or micro, small, and medium enterprises;
- subject to a mandatory partnership with such enterprises; or
- subject to other specific investment requirements.
Business licensing is administered principally through Indonesia’s Online Single Submission system, commonly known as "OSS".
The current risk-based business licensing framework is governed by Government Regulation No. 28 of 2025 and its implementing regulations, including Minister of Investment and Downstream Industry/Head of the Investment Coordinating Board Regulation No. 5 of 2025. The latter regulation has been effective since 2 October 2025 and replaced the previous principal BKPM regulations on OSS licensing, investment facilities, and supervision.
Sector-specific regulations may impose additional requirements relating to foreign ownership, capital, governance, personnel, technical standards, products, operational approvals, and regulatory supervision. Compliance with the general investment and OSS framework does not necessarily mean that the company may immediately commence operations.
2. Choosing the Right Investment Structure
Foreign investors commonly enter the Indonesian market through one or more of the following structures:
- establishing a foreign investment limited liability company, commonly known as a PT PMA;
- acquiring shares in an existing Indonesian company;
- establishing a joint venture with an Indonesian shareholder;
- appointing an Indonesian distributor, agent, licensee, or franchisee;
- opening a representative office, where permitted; or
- entering into licensing, manufacturing, management, or technical assistance arrangements.
The appropriate structure depends on the business model, applicable regulations, foreign ownership rules, tax treatment, funding plan, level of commercial control, liability exposure, and intended exit strategy.
For investors intending to conduct revenue-generating activities directly in Indonesia, a PT PMA is generally the most commonly used structure. A PT PMA may be wholly foreign-owned or established as a joint venture, depending on the relevant business activities and applicable sectoral restrictions.
A representative office is generally limited to liaison, promotion, market research, supervision, or other preparatory activities. It is not ordinarily permitted to conduct direct revenue-generating activities, although its permitted scope will depend on the type of representative office and the relevant sector.
Where a foreign investor acquires shares in an existing Indonesian-owned company, the transaction may cause the company to become a PT PMA. Foreign ownership, capital, licensing, corporate approval, employment, competition, and sectoral implications should therefore be assessed before completion.
For tailored advice on establishing a PT PMA in Indonesia, please contact WARUWU & PARTNERS to discuss the proposed business structure, ownership, capital, and licensing requirements.
3. Foreign Ownership Rules and KBLI 2025
Before establishing or acquiring an Indonesian company, investors should identify the relevant Klasifikasi Baku Lapangan Usaha Indonesia, commonly referred to as the "KBLI".
KBLI is Indonesia’s official classification system for economic and business activities. It is used to determine the company’s registered activities, risk classifications, licensing requirements, and relevant regulatory authorities.
The current classification is KBLI 2025. It was released by Indonesia’s Central Statistics Agency in December 2025 and has been implemented in the OSS system, together with a conversion process for businesses previously registered under KBLI 2020.
Each proposed activity should be mapped to the most accurate five-digit KBLI code based on:
- what the Indonesian company will actually do;
- how the company will generate revenue;
- the products or services it will provide;
- the customers or counterparties it will serve; and
- the operational process through which the activities will be conducted.
An inaccurate or incomplete KBLI selection may:
- prevent the company from lawfully conducting its intended activities;
- delay the OSS or sectoral licensing process;
- create difficulties with banking and counterparty onboarding;
- cause inconsistencies between licences, contracts, and invoices; or
- affect future investment, financing, restructuring, or M&A transactions.
A KBLI assessment should not be based solely on the description preferred by the investor. The selected codes should be consistent with the company’s business model, articles of association, OSS records, operations, commercial contracts, and sector-specific approvals.
The relevant KBLI codes must then be reviewed against the Positive Investment List and applicable sectoral regulations to determine whether the proposed activities:
- permit 100% foreign ownership;
- are subject to a foreign ownership limitation;
- require an Indonesian partner;
- are reserved for particular categories of Indonesian businesses; or
- are subject to additional conditions.
This review is particularly important for regulated sectors such as financial services, payment systems, healthcare, mining, energy, telecommunications, construction, education, distribution, importation, franchising, and hospitality.
4. Business Licensing Through OSS
Indonesia applies a risk-based business licensing system. The licences required by a company depend on the risk level assigned to each registered business activity.
The principal business identity is the Business Identification Number, or Nomor Induk Berusaha, commonly known as the "NIB".
In general:
- low-risk activities require an NIB;
- medium-low-risk activities require an NIB and a Standard Certificate based on the company’s statement of compliance;
- medium-high-risk activities require an NIB and a verified Standard Certificate; and
- high-risk activities require an NIB and the applicable business licence.
Certain activities may also require a Business Licence to Support Business Activities, known as Perizinan Berusaha untuk Menunjang Kegiatan Usaha or "PB UMKU". The risk-based licensing regime and the obligation to hold the relevant business licences are governed by Government Regulation No. 28 of 2025.
Investors should not treat the issuance of an NIB as the end of the licensing process. Depending on the business, the company may also need to obtain or fulfil:
- spatial-utilisation and location requirements;
- environmental approvals;
- building approvals;
- product registrations and certifications;
- import and customs registrations;
- technical or professional licences;
- operational Standard Certificates; and
- approvals from the relevant sectoral regulator.
An NIB does not automatically mean that every registered activity may immediately commence commercial operations. The company should confirm that all relevant Standard Certificates, business licences, PB UMKU, basic requirements, and sectoral approvals have been issued and have become effective.
A company may have an NIB but still be unable to lawfully commence all of its intended operations. The licence status of each individual KBLI activity should be reviewed separately.
5. PT PMA Capital and Investment Requirements
A PT PMA is generally classified as a large-scale business and must satisfy the applicable minimum investment and capital requirements.
Under the current general framework, the total investment value of a PT PMA must generally exceed IDR 10 billion, excluding land and buildings, for each five-digit KBLI code at each project location.
Different calculation methods and exceptions apply to certain sectors, activities, and project structures. The applicable requirement should therefore be confirmed based on the company’s actual KBLI classifications, locations, and business model.
In addition, a PT PMA must generally have issued and paid-up capital of at least IDR 2.5 billion per company, unless a higher or different requirement is imposed by sector-specific regulations.
The minimum total investment value and minimum paid-up capital are separate requirements and should not be treated as interchangeable. These requirements are addressed under Minister of Investment and Downstream Industry/Head of BKPM Regulation No. 5 of 2025.
The funding structure should be considered before the company is incorporated or binding investment documents are signed. Relevant matters include:
- shareholder equity;
- shareholder or intercompany loans;
- interest and repayment arrangements;
- convertible instruments;
- future fundraising;
- foreign-exchange and reporting requirements;
- withholding tax and transfer pricing; and
- corporate approvals for future capital increases or reductions.
Higher capital, governance, and licensing requirements may apply in regulated sectors such as banking, insurance, financial services, payment systems, and certain technology-based financial services.
6. Corporate Governance and Shareholder Protection
A PT PMA is subject to the Company Law and generally has three principal corporate organs:
- the General Meeting of Shareholders;
- the Board of Directors, which manages and represents the company; and
- the Board of Commissioners, which supervises and advises the Board of Directors.
Foreign investors should carefully consider:
- shareholder composition and control;
- appointment and removal of directors and commissioners;
- reserved matters and approval thresholds;
- shareholder funding obligations;
- share-transfer restrictions;
- pre-emptive, tag-along, and drag-along rights;
- minority shareholder protection;
- deadlock procedures;
- dividend policy;
- related-party transactions;
- default remedies;
- dispute resolution; and
- exit rights.
In a joint venture, a properly drafted shareholders’ agreement is particularly important. Many shareholder disputes arise not because the underlying business has failed, but because control, funding, transfer, deadlock, default, and exit arrangements were not clearly agreed at the outset.
The shareholders’ agreement and articles of association should be reviewed together. Where legally possible and appropriate, significant shareholder rights should be reflected in the articles of association so that the company’s constitutional and contractual arrangements remain consistent.
7. Other Legal and Compliance Considerations
Tax and Funding Structure
The legal structure should be coordinated with Indonesian and home-jurisdiction tax advice.
Relevant considerations may include:
- the holding jurisdiction;
- equity and debt funding;
- withholding tax;
- transfer pricing;
- beneficial ownership;
- service and royalty arrangements;
- dividend distributions;
- profit repatriation; and
- the proposed exit structure.
The investment should not be structured solely on the basis of treaty access or perceived tax efficiency. Commercial substance and the actual functions, assets, and risks of each group entity should also be considered.
Ongoing Corporate and Investment Compliance
Obtaining the initial licences is not the end of the market-entry process. A PT PMA should maintain a compliance calendar covering corporate, investment, licensing, employment, tax, environmental, product, and sector-specific requirements.
As a large-scale business, a PT PMA is generally required to submit an Investment Activity Report, known as a Laporan Kegiatan Penanaman Modal or "LKPM", every quarter through OSS, subject to the applicable exemptions and reporting requirements under the current investment framework.
The company should also:
- maintain its corporate registers and records;
- hold the required shareholder meetings;
- maintain and report beneficial ownership information;
- monitor the validity and status of its licences;
- satisfy licence commitments and operational requirements; and
- update its Ministry of Law and OSS records following relevant corporate or operational changes.
Employment and Immigration
Foreign directors, commissioners, employees, and technical experts may require appropriate immigration and work authorisation.
Where foreign workers are employed, the company may need to address:
- approval of a foreign manpower utilisation plan, or "RPTKA";
- payment of the applicable foreign-worker compensation fund;
- appointment and training of Indonesian counterpart employees;
- immigration and stay permits;
- permitted positions and periods of employment; and
- manpower reporting.
The applicable requirements depend on the individual’s position, shareholding, activities, and duration of stay. The use of foreign workers is governed principally by Government Regulation No. 34 of 2021 and its implementing regulations.
A corporate appointment, business visa, limited-stay permit, and work authorisation should not be treated as interchangeable.
For further information, see Work Permits and KITAS in Indonesia.
Contracting and Dispute Planning
Investment documents and operational contracts should be prepared with potential enforcement in mind.
Investors should consider:
- governing law;
- court or arbitration jurisdiction;
- the seat and rules of arbitration;
- contractual language;
- service of process;
- interim relief;
- enforcement of judgments or arbitral awards; and
- the location of assets against which enforcement may be sought.
In acquisitions and joint ventures, risks may be allocated through representations, warranties, indemnities, price adjustments, conditions precedent, escrow arrangements, and post-completion obligations.
Contracts involving Indonesian parties should also be reviewed for applicable Indonesian-language requirements. Where bilingual agreements are used, the documents should address consistency and interpretation between the language versions.
Further considerations are discussed in Commercial Disputes in Indonesia.
8. Common Legal Mistakes by Foreign Investors
Common legal and regulatory mistakes include:
- selecting an inaccurate or incomplete KBLI classification;
- assuming that all business sectors permit 100% foreign ownership;
- selecting the entity before analysing the proposed business activities;
- commencing operations before all required licences are effective;
- treating the NIB as the only required licence;
- ignoring environmental, product, technical, or sectoral approvals;
- acquiring a local company without assessing its conversion into a PT PMA;
- failing to conduct appropriate legal due diligence;
- using generic joint-venture or shareholders’ agreement templates;
- failing to align the legal, tax, accounting, and funding structures;
- ignoring LKPM and other post-licensing obligations; and
- failing to plan for deadlock, default, termination, and dispute enforcement.
9. Practical Pre-Investment Checklist
Before establishing a PT PMA, acquiring an Indonesian company, or signing a joint-venture agreement, a foreign investor should ordinarily:
- define the proposed products, services, customers, revenue model, and operational flow;
- map each proposed activity to the appropriate KBLI 2025 code;
- confirm foreign ownership eligibility and sector-specific conditions;
- select the appropriate investment or market-entry structure;
- confirm the applicable minimum investment and paid-up capital requirements;
- identify all OSS, environmental, technical, product, and sectoral licences;
- review the proposed funding and tax structure;
- conduct legal due diligence on any target company or joint-venture partner;
- agree on governance, funding, transfer, deadlock, default, and exit arrangements;
- confirm employment and immigration requirements for foreign personnel; and
- prepare an implementation and ongoing compliance plan.
10. Conclusion
Foreign investment in Indonesia offers significant opportunities, but the investment and operational structure should be planned carefully from the outset.
The appropriate structure should be determined before capital is committed, binding transaction documents are signed, or operations commence. Early coordination between legal, regulatory, tax, accounting, and commercial advisers can reduce implementation delays, avoid licensing mismatches, protect shareholder rights, and establish a clearer pathway for future financing, expansion, restructuring, or exit.
Legal structuring should therefore be treated not merely as an incorporation formality, but as a strategic foundation for doing business in Indonesia.
How WARUWU & PARTNERS Can Assist
WARUWU & PARTNERS advises foreign investors, multinational companies, founders, family offices, private equity investors, and foreign-owned businesses on structuring and implementing investments in Indonesia.
Our work typically begins with a legal feasibility and structuring review before the investor commits capital or enters into binding transaction documents. This allows the applicable ownership, KBLI, licensing, capital, governance, and implementation requirements to be identified at an early stage.
- foreign ownership and KBLI analysis;
- Indonesia market-entry and investment structuring;
- establishment and restructuring of PT PMA companies;
- joint ventures and shareholders’ agreements;
- legal due diligence and M&A transactions;
- OSS and sector-specific business licensing;
- investment funding and corporate documentation;
- employment and immigration coordination;
- post-licensing and corporate compliance; and
- commercial contracting and dispute strategy.
Foreign investors considering an Indonesian market entry, acquisition, or joint venture may contact WARUWU & PARTNERS for an initial legal feasibility and structuring discussion.