Understanding Indonesia's investment regulations, foreign ownership limits, and compliance obligations — essential knowledge for every foreign investor.
Foreign investment in Indonesia is primarily governed by Law No. 25 of 2007 on Investment (UU Penanaman Modal), along with implementing regulations issued by the Indonesian Investment Coordinating Board (BKPM) and the Online Single Submission (OSS) system operated under the Ministry of Investment.
The 2020 Job Creation Law (Omnibus Law — Law No. 11 of 2020) significantly reformed Indonesia's investment framework, opening previously restricted sectors to greater foreign participation and simplifying the business licensing process through the revised OSS system.
For foreign investors, understanding which sectors are open, what ownership percentages are permitted, and what compliance obligations apply is essential before committing to any business structure or investment in Indonesia. Regulatory non-compliance can result in licence revocation, fines, and legal disputes.
The following regulatory requirements apply to most foreign investors establishing or operating a business in Indonesia through a PT PMA structure.
All businesses in Indonesia, including PT PMA companies, must be registered through the Online Single Submission (OSS) system to obtain a Business Identity Number (NIB — Nomor Induk Berusaha). The NIB is the primary business registration document and prerequisite for all further licences.
PT PMA companies are required to submit the LKPM (Laporan Kegiatan Penanaman Modal — Investment Activity Report) to BKPM/OSS on a quarterly and annual basis. Failure to submit results in administrative sanctions and may affect the company's investment registration status.
Foreign investment companies (PT PMA) must have a minimum investment plan of IDR 10 billion per business field (KBLI code) registered with OSS. Additionally, a minimum paid-up capital of IDR 2.5 billion must be injected and evidenced in the company's Indonesian bank account.
Certain investment activities and changes to the company (share transfers, capital increases, change of business activity) require formal notification or approval from BKPM. Our office monitors regulatory requirements and manages BKPM notifications on behalf of clients.
PT PMA companies that wish to employ foreign workers must obtain approval for a Foreign Worker Utilisation Plan (RPTKA) from the Ministry of Manpower. Each foreign worker must then obtain a Work Permit (IMTA) before beginning employment.
PT PMA companies are subject to Indonesian corporate income tax (25%), Value Added Tax (VAT — 11%), and withholding tax obligations. Annual tax returns must be filed with the Directorate General of Taxation. We advise on tax structure optimisation within the legal framework.
Under Government Regulation No. 10 of 2021 (implementing the Omnibus Law), Indonesia uses a Positive Investment List approach — sectors not specifically listed as restricted are generally open to foreign investment. The following provides a general overview of how ownership limits work.
| Ownership Category | Foreign Ownership % | Examples | Notes |
|---|---|---|---|
| Fully Open | Up to 100% | Most manufacturing, certain technology, tourism, e-commerce, industrial services | Subject to sector-specific conditions in the Positive Investment List |
| Partially Open | 67% – 95% | Retail trade (certain categories), freight forwarding, certain financial services | Indonesian co-investor required for remaining percentage |
| Limited Foreign Participation | Up to 49% | Certain media, construction consultancy, certain healthcare services | Majority must be held by Indonesian nationals or entities |
| Reserved for SMEs / Cooperatives | 0% (Foreign not permitted) | Small-scale retail, traditional markets, certain artisan activities | Reserved exclusively for Indonesian SMEs and cooperatives (UMK) |
| Closed to Foreign Investment | 0% | Certain defence industries, narcotics manufacturing, gambling/casino operations | Prohibited by law regardless of structure |
Once a PT PMA is established, foreign investors have ongoing legal and regulatory obligations that must be maintained to keep the company in good standing.
Investment activity reports (LKPM) must be submitted through the OSS system every quarter (January, April, July, October). Reports cover investment realization, employment, and production activity.
Deadline: End of each quarterAn annual investment activity report is required in addition to quarterly reports. This provides a full-year summary of investment, workforce, and operational data to BKPM.
Deadline: January of each yearPT PMA companies must file an annual corporate income tax return (SPT Badan) with the Directorate General of Taxation (DJP). Monthly tax payments may also be required depending on revenue activity.
Deadline: April 30 each yearIndonesian company law requires PT PMA companies to hold an Annual General Meeting of Shareholders (RUPS Tahunan) to approve financial statements, ratify director actions, and make key corporate decisions.
Required annually within 6 months of fiscal year endCertain sector-specific business licences obtained through OSS may have validity periods and renewal requirements. Failure to renew on time may result in licence lapse and operational disruption.
Varies by licence typeThe progress of capital injection (paid-up capital) must be reported to BKPM as part of the LKPM reporting. Failure to show progress on capital injection may result in queries from BKPM and suspension of investment registration.
Via quarterly LKPM reportsLaw No. 25 of 2007 on Investment provides specific legal protections and rights for foreign investors in Indonesia.
Foreign investors are entitled to legal protection against nationalisation and expropriation without fair compensation, consistent with international investment protection principles.
Foreign investors have the right to repatriate capital, profits, dividends, and other proceeds from their investment in Indonesia, subject to applicable tax obligations being fulfilled.
Foreign investors are entitled to equal treatment under Indonesian law as domestic investors, except where specific restrictions apply under the Positive Investment List or sectoral regulations.
Foreign investors may choose Indonesian courts, BANI arbitration, or international arbitration (e.g., SIAC, ICC) for resolving business disputes, subject to agreement in contracts.
These are the most common legal pitfalls that cost foreign investors their businesses in Indonesia. Understanding them prevents costly mistakes.
Using an Indonesian national as a "nominee" shareholder to hold shares on behalf of a foreign investor is illegal under Indonesian law. The nominee can legally take control of the company, transfer shares, or dissolve the business. Foreign investors have no legal recourse in such cases.
Legal Risk Details →A foreign director can be removed from their position by a shareholder resolution if the Articles of Association or shareholder agreement do not include adequate protective provisions. This can effectively lock a foreign investor out of their own company.
Legal Risk Details →Operating in a sector that is restricted or closed to foreign investment, or exceeding the permitted foreign ownership percentage, can result in licence revocation, forced divestment, and penalties. Always verify sector eligibility before investment.
Get Legal Advice →Failure to file LKPM reports results in administrative warnings and may lead to investment registration suspension. PT PMA companies that fail LKPM compliance may face difficulties renewing business licences and Investor KITAS.
Compliance Support →A PT PMA operating without a comprehensive shareholder agreement leaves the foreign investor's rights (dividend rights, voting rights, exit rights) unprotected. Disputes become far more difficult to resolve without this document.
Contract Drafting →Failure to properly inject and document the minimum paid-up capital creates compliance issues with BKPM and may trigger a review of the company's investment registration — potentially affecting all licences and permits linked to the PT PMA.
PT PMA Setup Details →Our licensed Indonesian lawyer advises foreign investors on ownership structure, sector regulations, compliance obligations, and investment risk management in Indonesia.