Note: As of October 2025, Regulation No. 5/2025 reduced the minimum paid-up capital for foreign companies to IDR 2.5 billion, with the IDR 10 billion investment plan requirement remaining in place.
Foreign investors must understand Indonesia’s regulatory landscape before starting a business. The country imposes specific rules on foreign ownership, capital requirements, and investment structures.
One of the most important requirements is the minimum capital threshold, which is set at IDR 2.5 billion (USD 160,000) for foreign-owned companies (PT PMAs). Certain sectors may have higher or lower requirements depending on the Positive Investment List, which dictates foreign ownership limitations across industries.
Another key factor is the shareholder structure. A PT PMA must have at least two shareholders, who can be individuals or corporate entities. Investors should also note that Indonesia prohibits nominee arrangements, where an Indonesian citizen holds shares on behalf of a foreign investor. This practice is illegal and could lead to legal penalties or business dissolution.
Before registration, investors should also prepare essential legal documentation, such as business plans, shareholder identification, and investment records, to ensure a smooth approval process.
Choosing the Right Business Structure
Indonesia offers multiple business structures for foreign investors, each with different levels of operational control and regulatory obligations.
A PT PMA is the most common structure, granting full operational rights and the ability to generate revenue. For businesses that do not require direct revenue generation, a representative office is an option, though it is limited to research and promotional activities. Some industries, such as banking, allow branch offices, though these are subject to stricter regulations. Joint ventures with local partners are also common in industries with foreign ownership restrictions, providing an alternative when full foreign ownership is not permitted.
When choosing a structure, investors should consider factors such as industry restrictions, operational scope, and long-term investment goals.
Step-by-Step Process for Business Registration
Registering a business as a foreign investor in Indonesia involves a structured process to ensure compliance with local regulations.
Step 1: Reserve a Company Name
The first step is to reserve a company name through the Ministry of Law and Human Rights. The name must:
- Be unique and not already registered.
- Contain at least three words.
- Avoid restricted or misleading terms.
Once approved, the name reservation remains valid for 60 days, allowing time for the next steps.
Step 2: Draft the Articles of Association
A notary must draft and notarize the company’s Articles of Association (AoA), which outlines:
- The company’s purpose and scope of business.
- Shareholder structure and capital distribution.
- Board of Directors and Board of Commissioners’ roles.
This document is then submitted to the Ministry of Law and Human Rights for approval.
Step 3: Obtain a Principal License from BKPM
PT PMAs must obtain a Principal License (Investment Registration) from the Investment Coordinating Board (BKPM). This step confirms the company’s eligibility to operate under Indonesia’s foreign investment regulations.
Step 4: Register the Company Through the OSS System
The Online Single Submission (OSS) system is the government’s central platform for business registration. Investors must:
- Create an OSS account.
- Submit the required company details.
- Obtain a Business Identification Number (NIB), which serves as a company registration number.
The NIB functions as both a business license and an import-export license, depending on the business sector.
Step 5: Obtain Taxpayer Identification Number (NPWP)
Every business in Indonesia must register with the Tax Office (DJP) to obtain a Taxpayer Identification Number (NPWP). The NPWP is required for:
- Corporate tax reporting.
- Opening a business bank account.
- Hiring employees and paying taxes.
If the company meets the criteria, it must also register for Value Added Tax.
Step 6: Deposit Paid-Up Capital into a Corporate Bank Account
Foreign investors must deposit the minimum paid-up capital (typically IDR 2.5 billion or higher) into a corporate bank account. The bank will issue a capital deposit statement, which is required for further registration steps.
Step 7: Obtain Business Licenses and Sectoral Permits
After securing the NIB, businesses may need additional sector-specific permits, depending on the industry. Examples include:
- Manufacturing: Environmental and industrial permits.
- Finance & Banking: OJK (Financial Services Authority) approval.
- Healthcare & Pharmaceuticals: BPOM (Drug and Food Authority) certification.
Without the proper licenses, businesses may face operational restrictions or penalties.
Step 8: Register Employees and Work Permits (If Hiring Foreigners)
If the company plans to hire expatriate employees, it must:
- Obtain a Foreign Worker Utilization Plan (RPTKA) from the Ministry of Manpower.
- Apply for a Work Permit (IMTA) and Stay Permit (KITAS) for foreign employees.
- Register local employees with BPJS (Social Security and Health Insurance).
Indonesia encourages local hiring, so companies must comply with local workforce quotas in certain industries.
Compliance Obligations After Registration
Once a business is registered, ongoing compliance is required to maintain legal status in Indonesia. Companies must submit financial reports, tax filings, and investment activity reports to BKPM and other relevant agencies. Annual audits and shareholder meetings are also mandatory for PT PMAs.
Certain industries require periodic business license renewals, and all foreign-owned companies must adhere to corporate governance standards. Investors should also prepare for exit strategies, including asset repatriation, liquidation, or company dissolution, ensuring compliance with Indonesian laws when closing operations.
Work with Experienced Consultants at MAP Resources Indonesia
Navigating Indonesia’s business registration process can be complex, especially for foreign investors unfamiliar with local regulations. Partnering with MAP Resources Indonesia can help streamline the process, ensuring compliance and avoiding common pitfalls.
Our team assists with:
- Business structure selection
- Legal documentation and licensing
- Tax and banking registration
- Workforce and employment regulations
- Compliance and reporting obligations
Contact us today at info@mapresourcesindonesia.com and start your business in Indonesia with confidence.
