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The Indonesian government recently issued a series of new investment and licensing guidelines for direct investment, replacing a set of similar regulations issued in 2021.
The new regulations provide more certainty for investors in identifying their required business licences and timelines. They also relax certain investment requirements (e.g. lower minimum paid-up capital for foreign investment) and enhance government supervision and enforcement measures.
Summary
The new regulations are Government Regulation No. 28 of 2025 on the Processing of Risk-based Business Licences (GR 28/2025) and Indonesia Investment Coordinating Board (BKPM) Regulation No. 5 of 2025 on Guidelines and Procedures for Processing Risk-Based Business Licences and Investment Facilities through the Online Single Submission System (BKPM Reg 5/2025) (together, the New Regulations).1
The New Regulations provide more clarity to investors on certain capital investment requirements and identify in more detail the licences required to conduct business, and the time required to obtain these licences. Highlights include:
- lower minimum paid-up share capital for foreign investment (PMA) companies at Rp.2.5 billion (US$150,000)
- relaxed minimum total investment value requirement for PMA companies in certain sectors including food and beverage (F&B), electric vehicle (EV) charging stations and property development
- more clarity on PMA investment holding companies
- obligation to update data in the Online Single Submission (OSS) system
- new monetary fines as administrative sanctions for non-compliance.
GR 28/2025 came into effect on 5 June 2025 while BKPM Reg 5/2025 came into effect on 2 October 2025. At the time of writing, some government departments had already amended their regulations to comply with the new licensing requirements under GR 28/2025, including the Ministries of Health, Industry, and Trade.
Key changes
The major changes under the New Regulations are set out below.
Reduced minimum paid-up share capital requirement for PMA companies and lock-up period for PMA property developers and managers
The minimum paid-up share capital of a PMA company is now Rp.2.5 billion (approximately US$150,000), being 75% lower than the previous Rp.10 billion requirement.
BKPM Reg 5/2025 introduces a new lock-up requirement for the paid-up capital of PMA property developers and managers, which cannot be transferred out of the PMA company's account for at least 12 months unless it is being used to purchase assets, construct buildings or fund business operations.
Minimum total investment value for PMA companies and relaxing of exemptions
The minimum overall investment (equity and debt) for a PMA company has been retained, being "more than Rp.10 billion [approximately US$600,000] (excluding land and buildings) for each 5-digit KBLI2 business line code for each project location."
Exemptions from this minimum investment will continue to apply in certain sectors, with some changes:
- For the F&B business, the minimum investment value applies for each regency/city (kabupaten/kota), rather than for each "point/coordinate."
- For public EV charging station businesses, the minimum investment value applies for each province.
- The calculation of the minimum investment value for the
following businesses includes land and buildings:
- property development, including development/construction (pembangunan), sale and leasing;
- short-term and long-term accommodation; and
- agriculture, plantations, livestock farming and aquaculture.
PMA holding companies now expressly permitted
GR 28/2025 suggests that PMA holding companies can be established and used in structuring Indonesian investments as their primary business line (permitted under KBLI 64200). Previously, the licensing of PMA holding companies was unclear.
Note that, although incorporated in Indonesia, PMA holding companies are themselves treated as being foreign investors for FDI purposes.
Prescribed business preparation period
To speed up investment realisation, BKPM has reintroduced a general one-year deadline for setting up a new business in most sectors, with increased supervision including site visits.
During the licence application process through the OSS system, companies will be required to input their estimated time to commence operations – which will determine the length of their business preparation stage.
Businesses that require construction or infrastructure for their operations and commercial activities are generally given a longer timeline, typically ranging between 18 months and five years.
Schedule 2 of BKPM Reg 5/2025 lists the expected time required for each business sector to commence operations/commercial activities. For instance, wholesalers and retailers are expected to commence operations within one year if infrastructure construction is not needed and within three years if infrastructure is needed.
Company conversion from Domestic Investment (PMDN) to Foreign Investment (PMA)
BKPM Reg 5/2025 retains a PMDN-PMA conversion requirement whereby a PMDN company must convert into a PMA company if any of its Indonesian shareholders are replaced by a foreign entity or person. Any PMDN company converting to PMA must also comply with the investment and licensing requirements under the New Regulations.
The previous regulations imposed a one-year deadline for a non-PMA subsidiary of a converted PMA company to also be converted to PMA company status. That deadline is absent from the New Regulations. Whilst this change appears to offer more flexibility in terms of timing, the enforcement risk should be carefully considered in structuring and planning the timeline for transactions requiring PMDN-PMA conversion.
Investment Activity Report (LKPM) due dates and extension of LKPM requirement to financial services and upstream oil and gas sectors
The date for filing the investment activity report (LKPM) has been extended so that each LKPM report is now due on the 15th of April, July, October or January, rather than the 10th of these months, as was previously the case.
Upstream oil and gas businesses and financial institutions (including banks and insurance companies) must now also submit investment activity reports to BKPM. These sectors were previously exempt from the reporting obligation.
Updated risk level assessment and licensing requirements for each business sector
GR 28/2025 updates the comprehensive list of business sectors (by reference to KBLI codes) including the corresponding risk assessment level (low/medium-low/medium-high/high), business licensing requirements, obligations and timing for licence issuance. Some examples follow.
- A holding company under KBLI 64200 is now categorised as a business line in the "investment" sector with a low risk level, requiring only a Business Identification Number (Nomor Induk Berusaha or NIB).
- General e-commerce providers and intermediary service providers under KBLI 63122 (web portals and/or digital platforms with commercial purposes) in the trading sector that are categorised as small-scale businesses are now considered to have a high risk level (previously low), requiring them to obtain a specific licence in addition to the NIB. Meanwhile, medium and large-scale businesses remain high risk.
- Management consultancy businesses under KBLI 70209 have been recategorised as "investment" business instead of "industrial" business, as previously. Their risk level is now deemed low (requiring only an NIB), rather than medium-high (requiring a verified standard certificate).
OSS system updating – transitional provisions
Companies registered in the OSS system are in principle required to update their data on the OSS system in line with the licensing principles under the New Regulations. To date, we understand that this has not yet been implemented in practice by the BKPM. Companies should monitor implementation of this regulatory requirement.
Existing business licences that have not expired will in general continue to remain in force, with licence holders required to register for risk-based licences on the OSS system for verification purposes. If the business licence has expired, the holder must make a new licence application in accordance with the New Regulations.
Companies with active OSS system access may need to revisit and update their information and supporting documents in the OSS system to ensure that their licences issued prior to GR 28/2025 and BKPM Reg 5/2025 continue to be valid.
Business scale determination
The OSS system will now determine the business scale of a business entity for regulatory purposes. Previously, each entity could determine its own business scale on the OSS system. The business scale of an entity will affect their business licensing requirements and obligations, per the table below.
| Business scale |
Capital required (excluding land and buildings) |
Annual sales (new criteria) |
| Micro | ≤Rp1 billion | ≤Rp2 billion |
| Small | Rp.1,000,000,001 up to Rp.5 billion |
Rp.2,000,000,001 up to Rp.15 billion |
| Medium | Rp.5,000,000,001 up to Rp.10 billion |
Rp.15,000,000,001 up to Rp.50 billion |
| Large (including PMA companies) | >Rp10 billion | Not specified |
Revenue from supporting business activities now permitted
Supporting business activities may now generate separate revenue or profits. In such cases, the company concerned must include the KBLI business codes of the supporting business in their articles of association and comply with the minimum investment and capital requirements for the supporting business.
It remains unclear whether BKPM will introduce any policy on assessing the amount of revenue or profits from supporting business activities making them subject to this requirement.
Partnership obligation
Large-scale enterprises (including PMAs) in certain business activities are subject to a mandatory partnership obligation with cooperatives, micro, small and medium enterprises (CMSMEs). BKPM Reg 5/2025 no longer contains a one-year deadline for a mandatory partnership arrangement to be entered into between a large-scale business and CMSMEs. This seems to offer more flexibility in terms of timing, but large-scale businesses should also consider potential enforcement risks when planning CMSME partnerships.
The specific business activities that this requirement applies to are set out in the Investment List3 and include, for example, the manufacturing of automotive parts, and clinical laboratories.
New administrative fines and enforcement action
The New Regulations strengthen government agency supervision by including new administrative fines and enhancing the policing enforcement actions (daya paksa polisional) introduced in 2021. These new fines and actions supplement existing administrative sanctions such as warning letters, temporary business suspension, and licence cancellation/revocation.
The amounts of the new administrative fines will be further regulated by Indonesia's Ministry of Finance.
Policing enforcement actions include suspension of public services, confiscation of goods or equipment responsible for a violation, product withdrawal, prohibition to operate, location closure, and construction dismantling. BKPM may involve other law enforcement authorities such as the police when enforcing these actions.
Whilst BKPM in general imposes sanctions on a staged/escalating basis, the New Regulations give BKPM authority to impose sanctions for non-compliance immediately in certain cases.
Grandfathering principle
The general grandfathering principle for existing investments and licensing is still recognised under the New Regulations. Businesses holding valid licences issued prior to enactment of the New Regulations are generally exempt from the new requirements until their current licence expires unless the new requirements are more beneficial.
Conclusion
The new regulations are essential for investors planning to enter Indonesia for the first time. All existing Indonesian businesses with OSS system access should also verify their information and supporting documents held there and update them as required to ensure their current business licences remain valid.
(Trainee Kenley Wijaya assisted the authors in preparing this legal update.)
Footnotes
1. GR 28/2025 revoked Government Regulation No. 5 of 2021 on the same subject matter. BKPM Reg 5/2025 revoked BKPM Regulations No. 3, 4 and 5 of 2021 on similar subject matters.
2. Klasifikasi Baku Lapangan Usaha Indonesia (KBLI), Indonesia's standard classification of business fields, using a five-digit code
3. Presidential Regulation No. 10 of 2021 as amended by Presidential Regulation No. 49 of 2021 on the Investment List
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
