Frequently Asked Questions

Indonesia is standing at the crossroads of its energy journey. The release of RUPTL 2025–2034is not just a policy announcement; it is a bold declaration of how the country envisions powering its economy for the next decade. Unlike many previous roadmaps, this one comes at a time when the world is demanding faster transitions to clean energy, when investors are scrutinizing ESG commitments, and when communities are becoming more vocal about their environmental rights.

For business owners, companies, and investors, this roadmap is not something to ignore. It signals where capital will flow, what regulations will apply, and where risks might arise. Put simply, if you are considering investing in Indonesia’s power sector, you must understand RUPTL 2025–2034. Ignoring it would be like sailing without a compass in uncertain seas.

Understanding RUPTL 2025–2034

1. What is RUPTL?

RUPTL stands for Rencana Usaha Penyediaan Tenaga Listrik—the Electricity Supply Business Plan. Issued by PT PLN (Perusahaan Listrik Negara) with approval from the Ministry of Energy and Mineral Resources (MEMR), it serves as the country’s official energy roadmap for the next decade. Think of it as a blueprint, not just for PT PLN, but for the entire power sector including private and foreign investors.

It covers everything: projected demand growth, where new power plants will be built, how transmission lines will expand, and how Indonesia will diversify its energy mix. Without RUPTL, both investors and regulators would be left guessing.

2. The Significance of the 2025–2034 Roadmap

So, what makes this version different? The 2025–2034 RUPTL is often called the “greenest” roadmap in Indonesia’s history. For the first time, renewables take center stage, supported by commitments to reduce coal dependency and reach carbon neutrality. This shift is monumental; it reflects both Indonesia’s international climate commitments and its domestic push for sustainable growth.

For investors, it is a golden opportunity: clarity on policy direction, signals of government support, and alignment with global financing trends. Yet, it also raises the bar for compliance. Companies must now navigate stricter environmental rules, more complex community engagement, and legal scrutiny on sustainability.

Key Energy Targets in RUPTL 2025–2034

1. Renewable Energy Expansion

One of the most eye-catching features of RUPTL 2025–2034 is the bold renewable energy targets. Solar power, long underutilized in Indonesia, is projected to expand rapidly with large-scale solar farms. Wind power, particularly in Sulawesi and Nusa Tenggara, will also see significant growth. Hydropower and geothermal—where Indonesia has world-class potential—are expected to dominate new baseload energy sources.

This expansion, however, does not come without challenges. Land acquisition for solar farms, environmental licensing for hydropower, and contractual risks in geothermal projects are real legal hurdles. For investors, success will not only depend on financing but on how well they secure permits, comply with environmental law, and manage community relations.

2. Fossil Fuel Transition

Coal has long been king in Indonesia’s power sector, supplying more than half of the country’s electricity. But in this RUPTL, the writing is on the wall: coal will slowly but surely decline. The government plans early retirement of coal plants and replacement with cleaner alternatives such as gas and renewables.

This raises difficult legal and financial questions. What happens to existing Power Purchase Agreements (PPAs) signed with PT PLN? How will compensation be handled for early closures? Investors and contractors must be prepared to renegotiate contracts, manage force majeure risks, and deal with potential arbitration disputes.

3. Electrification & Grid Development

Indonesia also wants to achieve nearly 100% electrification by 2034. To make that happen, massive investments in transmission and distribution networks are planned, especially in remote and eastern regions. But transmission projects are often controversial—they involve extensive land acquisition, which is governed by Law No. 2/2012 on Land Procurement for Public Interest.

This is where legal complexity hits hardest: disputes with landowners, indigenous land claims, and environmental objections can delay or derail projects. For companies, it’s not enough to just build towers and cables—you need a robust legal strategy to secure land rights fairly and transparently.

READ MORE:

Indonesia Renewable Energy Law: Overview of Laws & Key Regulations (2025)

Legal Framework Behind RUPTL 2025–2034

1. The Electricity Law (Law No. 30/2009)

The Electricity Law remains the backbone of Indonesia’s energy legal regime. It regulates business permits (IUPTL), tariffs, and consumer protections. Any investor entering the market must engage with this framework. A failure to comply—say, by skipping a licensing step or underestimating local government requirements—could lead to costly delays or even revocation of permits.

2. Energy Mix Regulations & Government Commitments

Indonesia has committed under the Paris Agreement and National Energy Policy (KEN) to achieve a more balanced energy mix. To operationalize this, Presidential Regulation No. 112/2022 sets out renewable energy tariff mechanisms, phasing out coal subsidies, and mandating PT PLN to prioritize renewables in procurement.

For businesses, this regulation is both an opportunity and a warning. While tariffs are becoming more favorable for renewables, regulators are also watching closely. Non-compliance with technical or sustainability obligations can result in heavy penalties.

3. Investment Licensing and Land Acquisition Issues

The Omnibus Law (Law No. 6/2023) has simplified investment licensing, but energy projects remain under strict scrutiny. Land acquisition remains one of the most challenging aspects of infrastructure development. Disputes often arise under Law No. 5/1960 (Basic Agrarian Law), particularly when indigenous land rights are involved.

Investors must budget not just for land costs, but also for potential litigation and compensation negotiations. Too many projects in Indonesia have been delayed because investors underestimated the complexity of acquiring land legally and ethically.

Implications for Investors and Companies

1. Opportunities in Renewable Projects

With RUPTL 2025–2034, the Indonesian government is essentially opening the door for billions in renewable investment. Investors can join Independent Power Producer (IPP) projects, engage in EPC contracts, or explore Public-Private Partnership (PPP) models. Additionally, green financing instruments, such as sustainability-linked loans and green bonds, are increasingly being channeled into these projects.

The message is clear: the opportunity is massive, but only those who can align financial ambition with legal and environmental responsibility will succeed.

2. Challenges in Legal Compliance

At the same time, Indonesia remains a complex legal environment. Overlapping permits, local government discretion, and frequent regulatory changes pose real risks. A single missed compliance step—such as failing to complete an AMDAL (Environmental Impact Assessment)—can halt a project entirely. Companies must take compliance not as a burden, but as a risk management strategy to protect investments.

3. Public-Private Partnership (PPP) Models

PPP is a rising trend in Indonesia’s infrastructure. Under PPP, risks are shared between the government and private investors. But without careful legal drafting, PPP projects can quickly turn into disputes. Key issues include risk allocation, termination rights, dispute resolution mechanisms, and government guarantees. Companies need to negotiate contracts carefully, always with a legal advisor by their side.

READ MORE:

How to Set Up a Joint Venture Company in Indonesia

Environmental & Social Considerations

1. Environmental Law and ESG Obligations

Indonesia’s Law No. 32/2009 on Environmental Protection mandates strict environmental licensing, including AMDAL for large projects. Beyond legal obligations, the global business community is now demanding ESG compliance—environmental, social, and governance practices that go beyond the minimum law.

Failure to comply not only risks legal sanctions but also loss of investor confidence. Many global funds will not invest in projects that lack ESG safeguards. This makes compliance not just a legal necessity but also a business survival strategy.

2. Community Engagement & Land Rights

Perhaps the most sensitive issue in Indonesia’s energy projects is community engagement. Land acquisition can easily spark protests, lawsuits, and reputational crises if handled poorly. The Constitutional Court Decision No. 35/2012 recognized indigenous land rights, meaning companies must go beyond mere compensation—they must respect and engage communities genuinely.

For companies, this is not just about avoiding lawsuits; it’s about building long-term trust and project sustainability. A company that works with local communities will enjoy smoother operations and stronger social legitimacy.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners, we view RUPTL 2025–2034 as both a promise and a challenge. On one hand, it promises unprecedented growth in renewable investments, offering opportunities for foreign and domestic investors alike. On the other, it challenges businesses to navigate Indonesia’s complex legal and social environment.

Our practical insights:

• Never cut corners on legal due diligence. What looks like a small oversight today can turn into a multimillion-dollar dispute tomorrow.
• Negotiate contracts with foresight. Power projects span decades; contracts must anticipate future risks, not just today’s needs.
• Engage communities early. Waiting until conflict arises is too late. Proactive engagement prevents costly delays.
• Integrate ESG into your business. This is no longer optional; it is the standard for global investors.

The Future of Indonesia’s Energy Landscape

The RUPTL 2025–2034 marks the beginning of a new era. If implemented well, Indonesia will move from a coal-dependent economy to a sustainable energy leader in Southeast Asia. For companies, this is both a challenge and an invitation: a challenge to comply with complex legal frameworks, and an invitation to be part of Indonesia’s sustainable growth story.

The future is clear: those who adapt quickly, respect the law, and embrace sustainability will thrive. Those who resist change risk being left behind.

Conclusion

The journey of RUPTL 2025–2034 is more than just about electricity—it is about Indonesia’s economic future. Businesses that align with this vision can unlock opportunities, while those that ignore it may face risks.

How We Can Help

At Kusuma & Partners Law Firm, we help investors, companies, and entrepreneurs navigate the legal and regulatory complexities of Indonesia’s energy sector. With our deep expertise, you can secure your investment, minimize risks, and focus on building a sustainable future. Contact us today to discuss how we can support your project.

Fill in the form below to get our expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”

When global investors look at Southeast Asia, Indonesia always stands out as a powerhouse. With over 270 million people, a growing young workforce, and rapid digital transformation, the country represents a goldmine for long-term investments. For private equity firms, Indonesia is not just another emerging market; it is the beating heart of the region, combining scale, resilience, and untapped opportunities.

Yet, investing in Indonesia is not without its challenges. Beyond the promise of high returns lies a complex regulatory environment, cultural nuances, and governance risks that can make or break a deal. This is why understanding the Indonesia private equity landscape requires more than financial acumen — it demands legal clarity, cultural sensitivity, and strategic foresight.

Understanding Private Equity in Indonesia

1. Definition and Key Characteristics

Private equity is more than just injecting money into a business. At its core, it is about partnership, influence, and transformation. In Indonesia, private equity investors don’t merely provide capital; they become active partners in shaping strategy, strengthening governance, and driving growth. Typically, investments involve medium to long-term horizons, ranging from five to ten years, with the goal of scaling businesses or turning around underperforming assets.

What makes Indonesia private equity unique is the balance between risk and opportunity. Investors are attracted by double-digit growth potential but must also navigate uncertainties like regulatory reforms, tax exposure, and governance standards. This duality — high risk and high reward — is precisely what defines the private equity market in Indonesia today.

2. Private Equity vs Venture Capital

Although often used interchangeably, private equity and venture capital play distinct roles in Indonesia’s investment ecosystem. Venture capital tends to support early-stage startups, betting on disruptive innovations in technology, fintech, or creative industries. In contrast, private equity targets more mature businesses that already have revenue streams, market presence, and proven scalability.

For example, while a venture capitalist may fund a young fintech startup in Jakarta, a private equity firm might acquire a majority stake in a well-established healthcare group or renewable energy company. Both fuel Indonesia’s growth, but private equity’s involvement is deeper, often reshaping entire industries.

Indonesia’s Economic Landscape and Investment Potential

1. Growth Sectors Attracting Private Equity

Indonesia’s economy is a story of resilience. Even amidst global uncertainties, the country continues to attract private equity capital in key sectors:

• Infrastructure and Real Estate: Urbanization and government-backed megaprojects such as toll roads, airports, and seaports create vast opportunities for PE investors.
• Renewable Energy: With Indonesia’s commitment to net-zero emissions by 2060, the renewable sector — from solar farms to hydropower — is ripe for private equity involvement.
• Technology and Fintech: Indonesia’s digital economy is expected to surpass USD 130 billion by 2025. Private equity firms are increasingly funding growth-stage tech companies beyond the startup phase.
• Healthcare and Education: Rising middle-class demand for quality healthcare and education makes these sectors particularly attractive.

Each of these industries reflects Indonesia’s demographic advantage and government policy priorities. As investors seek stable yet high-growth opportunities, Indonesia private equity naturally gravitates toward these areas.

2. Government Support and Investment Climate

The government has made deliberate efforts to transform Indonesia into a more investment-friendly environment. Through reforms such as the Omnibus Law on Job Creation and the Positive Investment List, foreign investors now face fewer restrictions. This shift reflects Indonesia’s recognition that sustainable growth cannot rely solely on domestic capital — private equity is needed to bridge the gap.

Moreover, the creation of the Indonesia Investment Authority (INA), a sovereign wealth fund, further strengthens investor confidence. INA often partners with global PE firms in infrastructure and digital sectors, sending a clear signal that Indonesia is open for business. In this evolving landscape, private equity investors find not just opportunity, but also government alignment.

READ MORE:

Leveraging Convertible Note for Business Growth in Indonesia

Legal Framework Governing Private Equity in Indonesia

1. Indonesian Company Law and OJK Regulations

At the heart of every investment lies the legal framework. In Indonesia, private equity is primarily governed by Law No. 40 of 2007 on Limited Liability Companies (Company Law). This legislation dictates shareholder rights, board duties, and corporate governance structures. Investors need to understand that while Indonesian law provides flexibility, it also imposes fiduciary obligations on directors and commissioners that cannot be overlooked.

Additionally, the Otoritas Jasa Keuangan (OJK) — Indonesia’s Financial Services Authority — regulates fund management, disclosure, and financial reporting standards. OJK’s oversight ensures transparency but also requires compliance, which can be challenging for foreign investors unfamiliar with local reporting obligations.

2. Foreign Direct Investment Rules and the Positive Investment List

Foreign ownership is no longer as restricted as it once was, thanks to the Positive Investment List under Presidential Regulation No. 10 of 2021. Unlike the old Negative Investment List, this regulation liberalized many sectors, opening them to 100% foreign ownership.

However, sensitive industries — such as broadcasting, alcohol production, and certain education sectors — still impose foreign ownership caps. For PE firms, this means careful structuring through joint ventures or nominee arrangements to comply with the law. In practice, navigating this regulation often requires the assistance of experienced local counsel.

3. Taxation and Regulatory Compliance

Private equity deals in Indonesia are not just about valuations and negotiations — taxation is often the hidden factor that determines success or failure. Common tax considerations include:

• Corporate Income Tax at 22%.
• Capital Gains Tax, especially on share disposals.
• Withholding Taxes on dividends, interest, and royalties.
• Double Tax Treaties, which can significantly reduce cross-border tax exposure.

Failure to plan tax structures from the outset can result in costly disputes later. That’s why tax due diligence is inseparable from legal due diligence in Indonesia private equity transactions.

Structuring Private Equity Deals in Indonesia

1. Common Deal Structures

Private equity investors in Indonesia typically use three primary structures:

1. Share Purchase Agreements (SPA) — direct acquisition of company shares.
2. Joint Ventures (JV) — combining foreign capital with local expertise.
3. Convertible Instruments — debt that converts to equity, providing flexibility and risk management.

Each structure has advantages. SPAs provide control, JVs mitigate regulatory risks, and convertibles offer an exit if equity ownership becomes too restrictive. The right choice depends on sector, ownership restrictions, and long-term strategy.

2. Due Diligence Considerations

Due diligence in Indonesia is not just a checklist — it’s a risk prevention mechanism. Key areas include:

• Corporate Documents: Verifying shareholder structure and Articles of Association.
• Licensing: Ensuring business permits are valid and sector-appropriate.
• Tax Health Check: Identifying hidden liabilities.
• Employment Issues: Compliance with labor laws, including severance obligations.
• Environmental Risks: Especially critical in natural-resource sectors.

In our experience at Kusuma & Partners, skipping thorough due diligence is one of the biggest mistakes foreign investors make. It’s like entering a marathon without checking your shoes — costly surprises are almost guaranteed.

Key Challenges in Indonesia Private Equity

1. Regulatory Hurdles and Licensing

While Indonesia has made progress in simplifying regulations, the reality on the ground can be complex. Multiple ministries, overlapping rules, and evolving requirements create uncertainty. For private equity firms, this means that timelines may extend, costs may rise, and deal certainty may be challenged.

2. Cultural and Corporate Governance Issues

Beyond regulations, culture plays a crucial role. Many Indonesian businesses are family-owned, where decisions are often influenced by relationships rather than corporate logic. Private equity firms may encounter resistance to governance changes or transparency requirements. Navigating this requires patience, respect for local traditions, and clear communication.

3. Exit Strategies in Indonesia

An investment is only as good as its exit. In Indonesia, exits are still limited compared to mature markets. While trade sales and secondary sales are common, IPO exits remain relatively rare due to market constraints. Investors must therefore plan exit routes early, aligning with the target company’s long-term trajectory.

READ MORE:

How to Set Up a Joint Venture Company in Indonesia

Practical Commentary from Kusuma & Partners

1. Common Mistakes Investors Make

At Kusuma & Partners, we frequently see investors underestimate:

• The complexity of licensing in highly regulated sectors.
• The tax impact of poor structuring.
• The cultural nuances of negotiation with local stakeholders.

2. Strategic Legal Advice for Smooth Transactions

Our approach is simple yet strategic:

• Start with Legal Clarity: Identify potential red flags early.
• Design for Flexibility: Anticipate regulatory changes.
• Prioritize Governance: Introduce structures that balance control and trust.
• Plan the Exit Early: Don’t wait until year five to think about leaving.

By combining legal expertise with local insight, we help investors avoid pitfalls and maximize returns in Indonesia private equity transactions.

Future Outlook of Private Equity in Indonesia

Looking ahead, the private equity market in Indonesia is expected to flourish. The combination of demographic strength, digital transformation, and government reforms creates an ideal investment environment. Global funds are already increasing exposure to Indonesia, signalling confidence in its trajectory.

As the country pushes for sustainable development, renewable energy and ESG (Environmental, Social, and Governance) investments will likely dominate the next wave of private equity deals. For investors willing to navigate complexity with the right legal partner, the future in Indonesia looks exceptionally bright.

Conclusion

Indonesia private equity is not just an investment strategy; it is a gateway into one of the fastest-growing economies in the world. With careful planning, robust due diligence, and strong legal support, investors can turn opportunities into long-term success.

How We Can Help

At Kusuma & Partners Law Firm, we pride ourselves on guiding investors through the complexities of Indonesia’s private equity market. Whether you are considering your first investment or expanding your portfolio, our team is ready to protect your interests and unlock opportunities.

Fill in the form below to get our expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”

If you are a business owner, investor, or company looking to expand into Southeast Asia, one of the first questions you might ask is: “What incentives can Indonesia offer to support my investment?” The answer often leads to one powerful policy: Tax Holiday Indonesia.

This incentive, introduced by the Indonesian government, is designed to reduce or even eliminate corporate income tax for a certain number of years. Imagine being able to channel what you would normally pay in taxes back into your company—whether for reinvestment, scaling production, or strengthening your working capital. That is precisely the opportunity a tax holiday creates.

Transitioning from theory to reality, however, requires understanding the legal framework, eligibility, and application process. And while the benefits are highly attractive, the process involves compliance, strategy, and foresight. Let’s explore what makes Tax Holiday Indonesia a game-changer and why investors cannot afford to ignore it.

Understanding the Concept of Tax Holiday

1. Definition under Indonesian Tax Law

At its core, a tax holiday is a temporary exemption from corporate income tax granted by the government to new investors. Under Indonesian tax law, it applies to companies classified as operating in pioneer industries sectors that drive economic transformation. Unlike tax allowances, which provide partial deductions, Tax Holiday Indonesia offers full or near-total relief, making it one of the most generous incentives in the region.

From a legal standpoint, this program is not a loophole, but a legitimate policy tool designed to balance national interests with private sector profitability.

2. Objectives of Tax Holiday Indonesia

Why does Indonesia offer such a generous incentive? The objectives are both strategic and forward-looking:

• Attracting large-scale investments that can stimulate job creation and technology transfer.
• Strengthening Indonesia’s industrial base to move beyond raw commodity exports.
• Encouraging sustainable growth by prioritizing green and renewable industries.

In other words, Tax Holiday Indonesia is not just about reducing taxes, it is a carefully designed mechanism to position the country as a global investment hub.

Legal Framework Governing Tax Holiday Indonesia

1. Laws and Regulations

Legal certainty is crucial for investors, and Indonesia’s tax holiday framework is firmly rooted in law. The main instruments include:

• Income Tax Law (UU PPh), which forms the legal backbone.
• Law No. 25 of 2007 on Investment, which guarantees equal treatment for foreign investors.
• Minister of Finance Regulations (PMK), which define specific industries, investment thresholds, and technical procedures.
• BKPM (Investment Coordinating Board) rules, ensuring integration between licensing and tax incentives.

By anchoring the program in statute and ministerial regulations, Indonesia assures investors that Tax Holiday Indonesia is not an arbitrary incentive, but a consistent national policy.

2. Government Policies and Updates

Indonesia’s tax landscape is dynamic. The government frequently updates tax holiday rules to reflect national priorities. For example, while earlier versions focused heavily on base industries like oil refining and metals, recent updates include digital economy, healthcare, and green energy.

This flexibility shows the government’s responsiveness to global trends. It also signals to investors that Indonesia is not standing still—it is adapting its tax policy to ensure competitiveness in a rapidly changing global economy.

READ MORE:

Global Minimum Tax Implementation in Indonesia: What Businesses Should Know

Eligibility Criteria for Tax Holiday Indonesia

1. Qualifying Sectors and Industries

Not every business can enjoy Tax Holiday Indonesia. Only sectors considered “pioneer industries” qualify. These typically include:

• Natural resource downstreaming (metals, petrochemicals, refineries).
• Renewable energy and green technology.
• Infrastructure and transportation (toll roads, airports, seaports).
• Information technology and digital services.
• High-tech industries such as aerospace or pharmaceuticals.

By focusing on these industries, Indonesia ensures that tax incentives align with long-term development goals.

2. Investment Thresholds and Requirements

The government sets a minimum capital investment, commonly starting at IDR 500 billion. Beyond that, investors must prove their projects bring tangible benefits: job opportunities, knowledge transfer, environmental responsibility, and value-added production.

Another key requirement is that applicants must be new taxpayers. Expansions of existing companies do not qualify. This ensures the incentive attracts fresh investment, not merely restructured operations seeking tax breaks.

Application Process for Tax Holiday Indonesia

1. Procedures

The application process may seem complex, but it can be simplified into four stages:

• Pre-consultation with BKPM and the Ministry of Finance – early discussions clarify whether your project aligns with government priorities.
• Submission of Application – this includes an investment plan, corporate documents, and feasibility studies.
• Evaluation and Recommendation – BKPM reviews and, if satisfied, submits a recommendation to the Ministry of Finance.
• Ministerial Approval – the Ministry of Finance issues a formal decree granting the tax holiday.

By following these steps, investors demonstrate seriousness and compliance with Indonesian law.

2. Required Documents and Approvals

Applicants must prepare:

• Articles of association and incorporation deeds.
• Business identification number through OSS (Online Single Submission).
• Environmental approvals (AMDAL).
• Financial projections demonstrating economic contribution.

This rigorous documentation requirement ensures only credible investors benefit from Tax Holiday Indonesia.

Duration and Scope of Tax Holiday Benefits

1. Tax Exemptions and Reductions

Depending on investment size, companies can enjoy corporate income tax exemptions for:

• 5 years up to 20 years for qualifying industries.
• Post-exemption, a 50% reduction for another two years may apply.

This structure is designed to provide both immediate relief and long-term benefits, ensuring businesses remain competitive beyond the holiday period.

2. Possible Extensions and Conditions

While extensions are rare, they may be granted for projects of exceptional national importance. However, strict compliance with reporting requirements is non-negotiable. Failure to meet obligations may result in withdrawal of benefits.

This balance ensures the government rewards investors who genuinely contribute to the economy while protecting against misuse.

Challenges and Common Pitfalls in Tax Holiday Applications

1. Legal and Compliance Issues

Regulations around Tax Holiday Indonesia are frequently updated. Investors often stumble due to:

• Misinterpreting eligibility criteria.
• Weak environmental or labor compliance.
• Delayed reporting obligations.

To mitigate these risks, investors should engage legal experts from the start.

2. Practical Barriers for Foreign Investors

Foreign businesses often face hurdles such as:

• Lengthy bureaucratic procedures.
• Difficulty navigating Indonesian legal terminology.
• Confusion between tax holiday and other schemes like tax allowance or super deduction R&D.

These challenges highlight why local legal and tax advisors are indispensable.

READ MORE:

New Tax Audit Procedures in Indonesia : Key Updates and Implications for Taxpayers

Comparative Analysis: Tax Holiday in Indonesia vs Other Countries

1. Regional Tax Incentives

Indonesia competes with countries like Vietnam, Malaysia, and Thailand. Each offers its own form of tax incentives. For instance, Vietnam often emphasizes shorter but simpler tax holidays, while Malaysia targets technology startups.

2. Indonesia’s Competitive Edge

What sets Tax Holiday Indonesia apart is its combination of long exemption periods, a huge domestic market, and abundant natural resources. For investors, this means tax incentives are not isolated perks, they are part of a larger ecosystem of growth opportunities.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners Law Firm, we have seen firsthand how powerful Tax Holiday Indonesia can be for clients. However, we also know that the path to approval is full of legal and procedural hurdles.

In our practice, we recommend three strategies:

1. Early Due Diligence – ensuring compliance with environmental, corporate, and tax laws before applying.
2. Strategic Structuring – designing investments to clearly meet the criteria for pioneer industries.
3. Ongoing Compliance – maintaining proper documentation and reporting to avoid revocation.

Our advice is simple: while the benefits are real, success depends on preparation, compliance, and expert legal guidance.

Conclusion

The Tax Holiday Indonesia program is more than just a tax break—it is a gateway to unlocking Indonesia’s vast economic potential. For investors willing to commit to strategic sectors and follow compliance rules, it offers one of the most rewarding fiscal incentives in Asia.

How We Can Help

If you are planning to invest in Indonesia and want to explore how to secure Tax Holiday Indonesia, contact us today, our expertise will help you maximize benefits, reduce risks, and achieve long-term business success.

Fill in the form below to get our expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”

Cryptocurrencies have evolved from being niche digital assets to becoming mainstream investment instruments across the globe. In Indonesia, millions of individuals and businesses now actively trade Bitcoin, Ethereum, and other digital tokens. Yet, with great opportunities come significant responsibilities. As trading volumes surged, so too did the government’s interest in ensuring fairness, transparency, and accountability in the market.

This is where MOF Regulation No. 50/2025 plays a pivotal role. By establishing clear rules for crypto taxation in Indonesia, the Ministry of Finance aims to create certainty for both investors and regulators. This regulation is not just another piece of bureaucracy—it is a foundation to integrate crypto into Indonesia’s formal financial and tax systems. For business owners, companies, and investors, understanding its provisions is the key to staying compliant and avoiding unnecessary legal pitfalls.

Overview of MOF Regulation No. 50/2025

1. Background and Purpose of the Regulation

Before MOF Regulation No. 50/2025, crypto taxation in Indonesia was clouded with ambiguity. Traders often wondered whether profits were subject to income tax, and businesses were unsure about VAT implications. This uncertainty led to inconsistent reporting and, in some cases, deliberate non-compliance.

The new regulation eliminates these grey areas. It provides a structured framework that balances the government’s need for revenue with the market’s need for clarity. Importantly, the regulation aligns with Indonesia’s broader digital economy strategy, ensuring that cryptocurrencies are treated on par with other taxable goods and services.

2. Scope of Application (Who Is Affected?)

The regulation has a wide reach. It covers:

• Individual traders who buy and sell crypto for personal investment.
• Business entities such as exchanges, wallet providers, and mining operators.
• Foreign companies with substantial economic interaction with Indonesian users.

In other words, if you earn money, provide services, or trade crypto within Indonesian jurisdiction, this regulation applies to you. The inclusiveness of its scope signals the government’s seriousness in ensuring equal treatment of digital assets compared to traditional financial instruments.

Tax Obligations for Crypto Transactions

1. VAT (Value Added Tax) on Digital Asset Transactions

One of the most striking aspects of crypto taxation in Indonesia under MOF Regulation No. 50/2025 is the imposition of VAT. Crypto assets are classified as intangible taxable goods, meaning that every exchange, purchase, or sale can attract VAT.

This rule places crypto alongside other digital commodities, ensuring that the government secures revenue from rapidly growing online markets. For example, if you purchase Bitcoin through an Indonesian exchange, part of that transaction may include VAT—just like when you buy other taxable services online. The rationale is simple: if digital assets are part of everyday commerce, then they should contribute to national revenue just like any other product.

2. Income Tax (PPh) for Individuals and Businesses

In addition to VAT, crypto profits are also subject to Income Tax (PPh). The regulation distinguishes between individuals and corporations:

• Individuals pay tax based on progressive rates that apply to personal income.
• Corporations pay tax under standard corporate income tax rules, including on revenue earned from transaction fees, commissions, or mining activities.

Consider a scenario: if an individual earns IDR 500 million annually from crypto trading, this income must be reported and taxed. Likewise, a crypto exchange charging service fees must declare those fees as revenue for taxation purposes. By clarifying these obligations, MOF Regulation No. 50/2025 ensures fairness while aligning crypto with Indonesia’s existing tax structure.

READ MORE:

Crypto Regulation in Indonesia – A Guide for Businesses

Compliance Procedures Under MOF Regulation No. 50/2025

1. Reporting Mechanisms

Tax compliance is not only about paying; it is about reporting accurately and transparently. The regulation requires taxpayers to declare their crypto-related activities in periodic tax returns. This covers VAT obligations, income earned, and any related financial activities.

Failing to file reports or underreporting can result in significant consequences, from administrative fines to tax audits. In severe cases, deliberate concealment may lead to criminal liability. Thus, the message is clear: transparency is non-negotiable.

2. Record-Keeping Requirements

To ensure accurate reporting, taxpayers must also keep detailed transaction records. This includes dates, amounts, counterparties, and fair market values converted into Indonesian Rupiah (IDR). Exchanges and service providers are further expected to issue invoices that reflect VAT charges.

The law mandates storing these records for at least 10 years, reflecting Indonesia’s broader tax framework. This requirement may feel burdensome to small traders, but it is essential for protecting both taxpayers and regulators in case of future disputes or audits.

Implications for Foreign Investors and Businesses

1. Permanent Establishment (BUT) Considerations

Foreign crypto companies cannot assume that they are beyond Indonesia’s tax reach simply because they lack a physical office. Under the Permanent Establishment (BUT) principle, a foreign company can be deemed taxable if it maintains a significant economic presence in Indonesia.

For instance, a foreign exchange that consistently serves Indonesian traders or markets its services locally may fall under the BUT rule. This means such a company could owe Indonesian corporate tax, regardless of where its headquarters are located.

2. Cross-Border Crypto Transactions

Cross-border crypto transactions bring another layer of complexity. If a foreign entity sells tokens to Indonesian buyers, withholding tax rules might apply. This prevents revenue from escaping taxation simply because the counterparty is outside Indonesia.

For international investors, this underscores the importance of tax planning. Double taxation treaties between Indonesia and other countries can help reduce risks, but only if structured correctly.

READ MORE:

Global Minimum Tax Implementation in Indonesia: What Businesses Should Know

Legal and Practical Challenges in Implementation

1. Ambiguities in Definitions

Despite its strengths, MOF Regulation No. 50/2025 still leaves room for interpretation. Terms like “crypto asset,” “mining,” and “DeFi activity” are evolving concepts globally. Without harmonized definitions, taxpayers may face uncertainty about what is taxable and what is exempt.

2. Risks of Non-Compliance

The risks of ignoring compliance are real. Beyond financial penalties, companies risk reputational damage in an industry built on trust. For individuals, tax evasion could mean not just fines but potential imprisonment.

Transitioning into compliance may feel daunting, but with proper guidance, businesses and individuals can avoid these risks while securing peace of mind.

Practical Commentary from Kusuma & Partners

From our experience advising clients on crypto taxation in Indonesia, many underestimate the regulatory scope. A common misconception is that crypto exists “outside” government regulation. MOF Regulation No. 50/2025 proves otherwise.

Our practical advice includes:

• Proactively assess your activities. Don’t wait for a tax audit—map your crypto exposure now.
• Review your business structure. If you are a foreign operator, analyze whether you risk creating a BUT in Indonesia.
• Invest in compliance systems. Automated record-keeping and professional tax review are far cheaper than penalties.

At Kusuma & Partners, we bridge the gap between regulatory complexity and business needs. We help clients not just comply but strategically position themselves to minimize tax burdens while maintaining legal safety.

Comparative Insights: Indonesia vs Other Jurisdictions

When compared to other jurisdictions, Indonesia’s stance is relatively balanced. For instance, Singapore exempts long-term investment gains but taxes income from crypto trading. Meanwhile, the United States applies strict and complex reporting standards.

Indonesia, through MOF Regulation No. 50/2025, has chosen a middle path. The system captures fair revenue through VAT and income tax but avoids excessive complexity that could discourage innovation. This balance makes Indonesia a competitive yet responsible jurisdiction for crypto business development.

READ MORE:

Tax Obligations for Permanent Establishment (PE) in Indonesia

Future Outlook: Evolving Crypto Regulations in Indonesia

The world of crypto evolves rapidly, and Indonesia’s regulatory response will continue to develop. Future updates may address NFTs, DeFi protocols, and stablecoins, which are currently less regulated. Moreover, as the government integrates blockchain into public services, stricter compliance systems will likely emerge.

For businesses, this means that flexibility and adaptability will be key. Staying informed and seeking professional advice are no longer optional—they are survival strategies in an evolving landscape.

Conclusion

The issuance of MOF Regulation No. 50/2025 represents a turning point in how Indonesia manages digital assets. By imposing VAT, income tax, and robust compliance procedures, the government ensures fairness while recognizing crypto’s role in the economy.

For businesses, investors, and individuals, the choice is clear: adapt now or face legal and financial consequences later.

How We Can Help

At Kusuma & Partners Law Firm, we specialize in guiding clients through these challenges with tailored strategies that protect their interests. Contact us today to navigate crypto taxation in Indonesia confidently and secure your investments with expert legal guidance.

Fill in the form below to get our expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”

In the ever-evolving business landscape of Indonesia, ensuring workplace compliance is no longer just a legal formality—it’s a necessity. Whether you’re a local entrepreneur, foreign investor, HR director, or startup founder, understanding and implementing workplace compliance in Indonesia protects your business from regulatory pitfalls, costly disputes, and reputational damage. The real cost is not just about fines, it’s also about reputation loss, productivity dips, and jeopardized investment. In Indonesia’s robust and evolving economy, workplace compliance in Indonesia is more than a checkbox; it’s your ticket to sustainable business growth and trust, both with employees and regulators.

Legal Framework: Indonesian Workplace Compliance at a Glance

• Law No. 13 of 2003 concerning Manpower, as amended by Law No. 6 of 2023 concerning Job Creation Law.

Employment relationships, contracts, wages, hours, leave, termination.

• Government Regulations No. 35 & 36 of 2021, No. 51 of 2023

Overtime, fixed employment, wage calculation, breaks, termination.

• Law No. 1 of 1970 & related OHS Regulations

Occupational health and safety.

• Law No. 12 of 2022

Protection against workplace sexual harassment.

• Ministerial Decree No. 88 of 2023

Preventive mechanisms against sexual violence in the workplace through policies, task forces, and education.

• Social Security Law No. 24 of 2011 concerning BPJS.

Social security for workers, healthcare, pension.

Indonesia’s legal landscape for workplace compliance evolves frequently. Businesses must stay up to date and implement changes swiftly to avoid non-compliance risks.

Why Workplace Compliance Matters in Indonesia

Running a business in Indonesia involves more than just growth targets and marketing strategies. Behind every successful enterprise lies a strong foundation of regulatory compliance especially regarding employment laws.

Failure to comply with manpower regulations can result in severe penalties, ranging from fines, revoked permits, and bans from public tenders to criminal sanctions in extreme cases. More than that, it can erode employee trust and tarnish your brand image.

Key Areas of Compliance Every Business Must Address

1. Occupational Health & Safety (SMK3)

If your business employs at least 100 workers or operates in a hazardous sector, you are legally required to implement the SMK3 system. This means:

• Conducting periodic risk assessments
• Forming an Occupational Safety and Health Committee (P2K3)
• Documenting safety procedures
• Providing safety training and personal protective equipment (PPE)

The Ministry of Manpower has been increasingly active in auditing safety compliance—particularly in manufacturing, construction, and logistics sectors. Nothing matters more than a safe workplace. Law No. 1 of 1970 and supporting regulations obligate companies to:

• Provide personal protective equipment (PPE)
• Conduct regular risk assessments and safety training
• Establish a Workplace Health and Safety Committee (P2K3) for 100+ employee companies
• Document and investigate all workplace incidents

OHS compliance cuts accident risk, reduces business interruption, and lowers insurance costs. Failure here can result in criminal charges for top management—especially if negligence leads to serious injury or death.

2. Employment Contracts, Working Hours, and Termination

Contracts must be aligned with the Job Creation Law and the implementing regulation PP No. 35 of 2021. Misusing fixed-term contracts (PKWT) or failing to provide legally required severance packages can lead to labor disputes.

Also, employers must:

• Observe maximum working hours (7 hours/day or 40 hours/week)
• Pay overtime for excess hours
• Grant statutory leave and rest periods
• Follow legal termination procedures with due severance pay based on updated formulas

Outdated contracts and vague termination clauses are among the top causes of labor litigation in Indonesia.

READ MORE:

Employment in Indonesia: Types and Regulations

3. Anti-Discrimination and Anti-Harassment

Indonesian law prohibits discrimination based on gender, religion, ethnicity, disability, or political orientation. However, Ministerial of Manpower Decree No. 88 of 2023 has gone further by specifically targeting sexual violence in the workplace.

Companies must:

• Have a written anti-harassment policy
• Conduct awareness training
• Establish a Workplace Sexual Violence (WSV) Task Force
• Create clear complaint mechanisms

Indonesia prohibits workplace discrimination based on gender, religion, ethnicity, disability, and other protected status. The new Law No. 12 of 2022 further strengthens workplace protection against sexual harassment. Every company must:

• Establish anti-harassment policies and reporting mechanism
• Conduct regular employee awareness training
• Take prompt and appropriate remedial action

A culture of respect is more than a legal obligation—it’s a strategic business advantage in talent retention and productivity. The failure to comply doesn’t just risk penalties—it signals to employees and clients that your workplace culture is not safe or inclusive.

4. BPJS Kesehatan and Ketenagakerjaan Compliance

It is mandatory for all employers to register their employees with BPJS programs and make monthly contributions. The standard contribution rates are:

• BPJS Kesehatan: 5% of salary (4% employer, 1% employee)
• BPJS Ketenagakerjaan: varies depending on risk and benefit types, covering accident insurance (JKK), death benefit (JKM), pension (JP), and old-age security (JHT)

Non-compliance may result in:

• 2% penalty on overdue contributions
• Criminal sanctions
• Ineligibility for government tenders
• Difficulty in acquiring business permits

5. Data Protection and Employee Privacy

Even though Indonesia’s data protection regime is still evolving, companies are expected to respect and safeguard employee privacy. Personal data must only be processed for legitimate, disclosed purposes. Businesses processing employee data electronically must abide by Government Regulation No.71/2019.

READ MORE:

The Hidden Legal Traps of Outsourcing in Indonesia: Compliance, Challenges, and Companies Tips

Common Pitfalls in Indonesian Workplace Compliance

Many companies, especially startups or foreign-invested firms, fall into these traps:

• Delayed or no BPJS registration, especially for contract or part-time employees.
• Old contract templates that don’t reflect the latest Job Creation Law amendments.
• Inadequate SMK3 implementation, such as lacking safety manuals or untrained supervisors.
• Absence of anti-sexual harassment policies, which is now mandatory under Decree 88/2023.

Avoiding these mistakes requires active monitoring and a compliance-first mindset.

Best Practices for Workplace Compliance in Indonesia

• Draft clear, legally compliant contracts.
• Ensure robust payroll records and timely social security payments.
• Regularly review company handbooks, policies, and SOPs.
• Conduct periodic compliance audits.
• Train HR and management teams in updated regulations.
• Provide safe, fair, and inclusive work environments.
• Document everything, if it’s not documented, it doesn’t exist in the eyes of the law.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners, we’ve advised many of local and multinational businesses on Indonesian workplace compliance. Our key insight: compliance isn’t just a legal necessity-it’s your business’s competitive edge. Early investment in compliance saves you from headaches, fines, and reputational risks. Don’t wait for an audit to start doing the right thing; build compliance into your daily business.

If you feel overwhelmed by Indonesia’s vast labor law landscape, ask for professional advice before making employment decisions. This proactive approach could save your business millions.

Conclusion

Workplace compliance in Indonesia is more than ticking boxes. It’s about aligning your business practices with legal mandates while building a safe, fair, and professional work environment. With laws evolving and enforcement increasing, companies must stay proactive, not reactive. Workplace compliance in Indonesia is an ongoing journey, not a one-off project. Laws and regulations are dynamic, enforcement is real, and the benefits of proactive compliance trust, productivity, and reputational growth cannot be overstated.

Business owners, investors, HR, and managers: make compliance your company’s success engine. Empower your teams with up-to-date knowledge, transparent processes, and professional legal guidance.

How We Can Help

We stand ready to guide you step by step, contact us to ensure full compliance, strategic planning, and secure workplace in Indonesia.

Fill in the form below to get our expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”

Raising capital is a pivotal moment for any business, regardless of its size or stage. Whether it’s to fund a new project, expand operations, or simply to bridge a gap in cash flow, securing investment can be a complex and time-consuming process. A major hurdle often lies in the valuation of the company. Determining a fair and mutually agreeable value can lead to protracted negotiations and delays, potentially causing you to miss critical opportunities. If the valuation is too high, it might deter potential investors; if it’s too low, it can result in significant dilution for existing shareholders. This dilemma often creates a bottleneck that slows down a company’s momentum.

What is a Convertible Note? The Flexible Funding Solution

This is where the convertible note emerges as a flexible and strategic solution. So, what exactly is a convertible note? In essence, it’s a short-term debt instrument that a company issues to an investor. The key difference from a conventional loan is that this debt is not repaid in cash. Instead, it is designed to convert into company equity (shares) at a later date. This conversion typically happens when the company secures a subsequent, larger funding round, often called a “Next Equity Financing.” Think of it as a financial bridge: you secure the funds you need today with the promise to settle the debt with company ownership in the future, once the company’s valuation is more clearly defined. The convertible note elegantly solves the problem of premature valuation, allowing funding to proceed quickly and offering benefits to both the company and the investor.

The Anatomy of a Convertible Note in Indonesia: Key Components

1. Key Features Beyond a Standard Loan

While a convertible note is fundamentally a form of debt, it includes several distinctive features that differentiate it from a traditional loan. These components are structured to balance the interests of the company and its investors.

• Maturity Date: A convertible note has a set maturity date, typically ranging from 12 to 24 months. If a qualifying equity funding round has not taken place by this date, the note holder can choose to either demand repayment of the principal and accrued interest or, in some cases, convert the debt into equity based on a pre-agreed formula.
• Interest Rate: A convertible note accrues interest, which serves as a form of compensation for the investor’s risk. This interest is usually not paid in cash but is added to the principal amount. When the note converts, the investor’s total investment (principal plus accrued interest) is used to calculate the number of shares they receive.
• Valuation Cap: This is a critical protective feature for the investor. A valuation cap sets a maximum valuation for the company at which the conversion can occur. For instance, if the cap is set at $10 million, and the company later raises a funding round at a $50 million valuation, the convertible note investor will still receive shares as if the company were valued at only $10 million. This protects early investors from significant dilution if the company’s value grows rapidly.
• Discount Rate: Another incentive for early investors is the discount rate, which typically falls between 15% and 25%. This discount is applied to the share price paid by new investors in the subsequent funding round. For example, if new investors buy shares for $10 each, the convertible note holder would get them at a discounted price of $7.50-$8.50. At the time of conversion, the investor receives the more favorable of the two terms: the valuation cap or the discounted price.

2. How a Convertible Note Operates

Imagine a medium-sized company needs IDR 10 billion to launch a new product line but is hesitant to undergo a formal valuation. An investor is willing to provide the capital. Instead of a drawn-out valuation debate, both parties agree on a convertible note with a principal of IDR 10 billion, a 5% annual interest rate, a 2-year maturity date, a valuation cap of IDR 50 billion, and a 20% discount rate.

Eighteen months later, the company’s new product is a huge success, attracting a private equity firm that invests at a post-money valuation of IDR 200 billion. The convertible note now converts into equity. The investor’s total investment becomes IDR 10 billion plus accrued interest. The conversion price will be based on whichever is lower: the price per share at a IDR 50 billion valuation (the cap) or the price per share with a 20% discount on the IDR 200 billion valuation. The investor benefits from their early commitment, and the company secures vital funding without the initial valuation hassle.

Advantages and Risks

1. Advantages for Businesses: Flexibility and Efficiency

Using a convertible note offers significant benefits for companies:

• Valuation Deferral: It allows you to raise capital without the difficult and often subjective process of setting a company valuation at an early or uncertain stage. This saves time and minimizes potential conflicts.
• Expedited Process: The legal documentation for a convertible note is typically simpler and faster to prepare than a full-fledged equity investment agreement, leading to quicker access to funds.
• Control and Ownership: The company’s existing shareholders maintain their ownership percentage until the note converts. This is crucial for maintaining control during the initial growth phases.
• Bridge Funding: It serves as an excellent tool for securing interim funding to cover operational costs or specific projects, providing stability while you prepare for a larger financing round.

2. Advantages for Investors: Protection and Upside Potential

Investors also have strong reasons to favor a convertible note:

• Downside Protection: As a debt instrument, a convertible note grants investors a senior claim over equity holders in the event of liquidation. This offers a higher chance of recovering their investment if the company fails.
• Upside Potential: The valuation cap and discount rate ensure that early investors receive a better price per share, giving them a larger ownership stake for the same amount of capital, which is a reward for their early commitment and risk.
• Accrued Interest: The interest that accumulates adds to the total value of their investment upon conversion, further increasing their potential return.

3. Risks to Consider: A Balanced Perspective

A convertible note also carries risks that you must carefully manage despite its advantages:

• Maturity Risk: If the company fails to secure a subsequent funding round by the maturity date, the debt could become a financial burden. The investor may demand repayment in cash, which the company might not be able to provide, potentially leading to financial distress.
• Dilution Impact: If the valuation cap is set too low, the conversion could result in significant and unforeseen dilution for existing shareholders, including the founders. It’s crucial to set the terms thoughtfully.
• Complexity: While simpler than a full equity round, the terms of a convertible note can be complex, and a poorly drafted agreement can lead to future disputes over conversion mechanics and shareholder rights.

READ MORE:

• Personal Guarantee in Indonesia: Legal Framework, Risks, and Enforcement

Understanding the Legal Landscape in Indonesia

1. The Legal Framework

Indonesia primarily governs a convertible note under the legal framework for debt instruments. A convertible note agreement is a legally binding debt contract. Relevant regulations include the Indonesian Civil Code (Kitab Undang-Undang Hukum Perdata) and Law No. 40 of 2007 on Limited Liability Companies (UU PT). The UU PT outlines the procedures for capital increases and share issuance, which are vital for the conversion process. You must ensure that the company’s articles of association permit such transactions and obtain the necessary approvals, such as from a General Meeting of Shareholders (RUPS).

2. Key Legal Aspects of the Agreement

A robust convertible note agreement must clearly define all terms to be legally sound and protect all parties. Key elements include:

• Identification of Parties: Clear details of the company and the investor.
• Principal and Terms: The amount of the investment, interest rate, and maturity date.
• Conversion Mechanics: The conditions under which conversion will be triggered (e.g., a qualifying financing round), along with the specific conversion formula, including the valuation cap and discount rate.
• Rights and Obligations: Outlining the rights of the investor (e.g., information rights) and the company’s obligations.
• Governing Law and Jurisdiction: Stating that the agreement is subject to Indonesian law and specifying the competent court for any disputes.

3. The Importance of Due Diligence

Before signing a convertible note, both the company and the investor must conduct thorough due diligence.

• For the Investor: This includes verifying the company’s legal status, financial records, assets, and existing contracts. They must also assess the business plan and the management team’s capabilities.
• For the Company: It’s equally important to vet the investor. Does the investor have a solid reputation? Can they provide strategic value beyond just capital? Are their proposed terms reasonable and aligned with your long-term vision?

READ MORE:

• How to Buy Back Shares from Local Partners in PT PMA

Practical Commentary from Kusuma & Partners

At Kusuma & Partners Law Firm, we see the convertible note as a powerful tool for business growth, but one that requires expert guidance. Many companies, whether established or growing, fall into the trap of using generic templates or overlooking critical legal details. A poorly structured convertible note can lead to significant problems down the line, from disputes over valuation to unexpected dilution.

Our approach is to serve as your strategic legal partner. We work with you to understand your business objectives and draft an agreement that is not only legally sound but also aligned with your strategic goals. We simplify complex legal language, guide you through negotiations, and ensure that every clause of the convertible note protects your interests. With our experienced team of corporate lawyers, you can focus on executing your business plan with the confidence that your legal foundation is secure.

Conclusion

The convertible note is an invaluable financing tool in the Indonesian market, offering a flexible and efficient way to raise capital while deferring the complexities of valuation. It provides a strategic advantage for companies seeking to grow and for investors looking for an early entry with built-in protections. However, its effective use depends on a deep understanding of its mechanics and the underlying legal framework.

How We Can Help

Don’t let legal complexities or a rushed process undermine your business’s potential. Take a proactive step to secure your company’s future. Contact us today for a comprehensive legal consultation and customized legal solutions for your financing needs. Let us help you build a solid and secure legal foundation for your business’s success.

Fill in the form below to get our expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”

In the world of business and finance, deals are rarely secured on trust alone. Lenders, suppliers, and business partners often seek an additional layer of protection, and this is where a Personal Guarantee in Indonesia comes into play. On the surface, it might look like just another signature at the end of a contract. Yet in reality, signing a personal guarantee is like opening the doors of your personal financial life to a creditor.

In Indonesia, personal guarantees are widely used in corporate loans, SME financing, supplier agreements, and even tenancy contracts. They are often presented as a “standard requirement,” leaving many people feeling they have no choice but to sign. However, before you put pen to paper, it’s essential to understand that this is not a trivial commitment. The moment you agree, you take on the legal responsibility to repay someone else’s debt if they fail to do so and that responsibility can reach into your bank accounts, properties, and other assets.

What is a Personal Guarantee?

1. Legal Definition under Indonesian Law

The Indonesian Civil Code (KUHPerdata), particularly Articles 1820–1850, defines a personal guarantee (penanggungan) as a legal agreement in which one party — the guarantor — commits to fulfilling another party’s debt obligations if that party defaults. Unlike collateral, which is tied to a specific asset such as land or a vehicle, a personal guarantee puts your entire wealth at stake. This means that if the debtor fails to pay, the creditor can pursue almost any of your assets to recover the debt.

2. Common Uses in Business and Finance

In practice, Personal Guarantee in Indonesia arrangements are not limited to banks. They are also common in:

• Bank loans for both SMEs and large corporations
• Supplier or vendor credit lines where goods are delivered before payment
• Leasing and tenancy contracts, especially for high-value properties or equipment
• Joint venture and shareholder financing

The main reason creditors demand a personal guarantee is simple: it gives them a more secure and direct path to recovery if things go wrong. For them, it’s a safety net. For you as the guarantor, it’s a high-stakes promise.

Types of Personal Guarantees in Indonesia

1. Unlimited vs. Limited Guarantees

One of the first distinctions you must understand is whether your guarantee is unlimited or limited. An unlimited guarantee covers all current and future debts of the debtor without a cap. This can be dangerous because your liability could grow far beyond the original loan amount. By contrast, a limited guarantee sets a maximum amount or limits liability to a specific time frame. Negotiating a limited guarantee is one of the most effective ways to protect yourself.

2. Corporate vs. Individual Guarantees

Another key distinction lies in who is giving the guarantee. A corporate guarantee is given by a company — often a parent company guaranteeing a subsidiary’s debt. An individual guarantee is given by a natural person, often a company director, shareholder, or even a relative of the debtor. The stakes are especially high for individual guarantors because the line between business and personal finances can disappear overnight.

READ MORE:

• Legal Process to Sue for Debt When Warning Letter Fails

Key Legal Provisions Governing Personal Guarantees

Understanding the legal foundation of Personal Guarantee in Indonesia is crucial, especially if you’re negotiating one.

1. Indonesian Civil Code (KUHPerdata)

Articles 1820–1850 lay out the basic rules for guarantees, including how they are formed, the obligations of the guarantor, and the rights you may have. They also outline situations where a guarantee may be void, such as if it was signed without consent or under duress.

2. OJK and Banking Regulations

When the guarantee is tied to a banking transaction, OJK (Otoritas Jasa Keuangan) regulations require transparency in explaining the terms to guarantors. Banks are also expected to ensure guarantors understand the risks before signing.

3. Court Precedents

Indonesian courts have repeatedly upheld guarantees when they are clear, specific, and voluntarily executed. In some cases, courts have rejected enforcement if the guarantee was ambiguous or if there was evidence of fraud or coercion.

Essential Elements of a Valid Personal Guarantee

A guarantee’s strength lies in its clarity and legality. If you’re giving one or accepting one as a creditor, make sure these elements are present.

1. Written Form and Notarial Deed

While a simple written contract can be enforceable, using a notarial deed adds weight, legal certainty, and easier enforcement through Indonesian courts.

2. Clear Identification

The names, addresses, and identification details of both guarantor and debtor must be accurate and leave no room for dispute.

3. Specificity of Obligations

The guarantee should clearly describe which debt it covers, the maximum amount, and the time frame. A vague guarantee is a legal minefield.

Risks and Liabilities for Guarantors

Signing a Personal Guarantee in Indonesia can have life-changing consequences if the debtor defaults.

1. Joint and Several Liability (Tanggung Renteng)

Most guarantees in Indonesia use the “joint and several liability” principle. This means the creditor can come after you directly without even attempting to collect from the debtor first.

2. Asset Seizure and Bankruptcy

Your personal assets, can be seized through court orders. In larger debts, creditors may push for your bankruptcy, which could destroy your financial standing for years.

3. Impact on Creditworthiness

Even if you eventually settle the debt, your record as a guarantor can affect your ability to obtain future loans or conduct certain business activities.

READ MORE:

• Legal Process for Director Change in Indonesian Companies

How to Enforce a Personal Guarantee in Indonesia

From a creditor’s perspective, enforcement can follow several paths.

1. Pre-Enforcement Demand

Most begin with a formal demand letter outlining the breach and demanding payment. This often triggers negotiation or settlement.

2. Civil Lawsuit

If the guarantor refuses or cannot pay, the creditor can file a civil lawsuit at the District Court to obtain a judgment.

3. Bankruptcy Proceedings

In large debts or strategic cases, creditors can apply for the guarantor’s bankruptcy under Indonesian Bankruptcy Law, often as a way to speed up recovery.

Defenses Available to Guarantors

If you are on the receiving end of enforcement, it is important to remember that not all hope is lost. Several legal defenses may be available to challenge the claim against you, including the following:

1. Improper Execution

If the guarantee was not properly executed (e.g., missing signatures, lack of authority), you can challenge its validity.

2. Extinguishment of Principal Debt

Furthermore, if the principal debt has already been paid, written off, or declared void, the guarantee is automatically extinguished along with it.

3. Fraud or Duress

If you were misled, deceived, or compelled to sign the guarantee under pressure, this may serve as a valid defense and could lead the court to set aside the obligation.

Best Practices Before Signing a Personal Guarantee

Protecting yourself begins well before the ink dries on the document. By taking the right precautions in advance, you can significantly reduce your exposure to unnecessary risk. Consider the following best practices:

1. Legal Review

First and foremost, always have a qualified lawyer review the guarantee’s terms. During this process, potential red flags such as clauses that substantially increase your liability can be identified and addressed before you commit.

2. Limiting Scope

In addition, negotiate to limit the guarantee’s scope. This may include setting a maximum liability cap, establishing a clear expiry date, or restricting the guarantee to cover only specific debts.

3. Alternative Security

Finally, explore alternative forms of security. Options such as a mortgage, pledge, or bank guarantee can provide the lender with assurance while avoiding the need to put your entire personal wealth at stake.

READ MORE:

• Navigating Financial Distress in Indonesia: Legal Remedies and Strategic Insights

Practical Commentary from Kusuma & Partners

Over the years, we’ve seen countless business owners and individuals suffer devastating losses because they underestimated the weight of a Personal Guarantee in Indonesia. One client, a successful SME owner, signed a guarantee for his company’s expansion loan. When the business faced unexpected market shocks, the bank moved to seize not only company assets but also his family home. It was a painful lesson and one that could have been avoided with proper legal advice and well-negotiated terms.
Our recommendation: never sign a guarantee without knowing exactly what you’re risking. We can help you review, negotiate, and if necessary, restructure the arrangement to protect your financial future.

Conclusion

A Personal Guarantee in Indonesia is more than a contractual formality it’s a binding promise with real consequences. Whether you are a business owner trying to secure financing, an investor protecting your capital, or a creditor seeking enforceability, understanding the legal and practical aspects is critical.

How We Can Help

If you are preparing to sign or enforce a personal guarantee, please contact us today. Our firm offers legal expertise and strategic insight to safeguard your interests and navigate the complexities of Indonesia’s legal framework.

Fill in the form below to get our expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”

Entering Indonesia’s dynamic market can be a game-changer for foreign businesses. However, as thrilling as the opportunity may be, it comes with a set of regulatory hurdles, particularly when it comes to importing goods. Understanding Import Licenses and Customs Regulation for Foreign Businesses in Indonesia is not just a regulatory requirement, it’s a critical step to ensuring your operations are efficient, compliant, and profitable. This guide breaks down everything you need to know with clarity, legal accuracy, and actionable insight.

Why Foreign Businesses Must Understand Import Regulations in Indonesia

Navigating import laws in a foreign country can be overwhelming. But in Indonesia, it’s not optional. Without the right import licenses, your goods could be delayed at customs, or worse seized and destroyed.

Indonesia enforces a strict import regulatory regime to protect local industries, ensure product safety, control national revenue through tariffs, and manage the inflow of foreign goods. If you are a foreign business, whether you’re bringing in raw materials, machinery, or finished products, you need to play by the rules or risk serious consequences.

In addition to legal compliance, having the proper licenses also boosts your credibility with partners, investors, and regulators. It shows you’re serious, professional, and committed to playing by the rules.

Legal Framework Governing Imports in Indonesia

To operate confidently in Indonesia, it’s essential to understand the laws and institutions that form the backbone of the country’s import system.

1. Overview of Indonesian Customs Law (UU Kepabeanan)

At the heart of Indonesia’s customs framework lies Law No. 17 of 2006, which amended Law No. 10 of 1995 on Customs (Undang-Undang Kepabeanan). This law covers everything from customs valuation and classification to enforcement and sanctions.

Importantly, the law defines both administrative and criminal consequences for violations ranging from penalties of up to 10 times the customs value to potential imprisonment. It’s serious business, and foreign companies must operate within this legal corridor.

2. Key Government Institutions Involved

Several institutions have overlapping authority over imports:

• Ministry of Trade (Kemendag): Issues import licenses (API-U and API-P).
• Directorate General of Customs and Excise: Manages customs clearance, valuation, and enforcement.
• Indonesia Investment Coordinating Board (BKPM): Oversees foreign investment activity including permitted import scopes.
• Indonesia National Single Window (INSW): A digital portal that integrates all import-related submissions and approvals.

By understanding who does what, you can streamline your process and reduce costly errors.

READ MORE:

• How to Set Up a Joint Venture Company in Indonesia

Types of Import Licenses Required for Foreign Companies

One of the most common pain points for foreign companies is selecting the right type of import license. There isn’t a one-size-fits-all. Here’s what you need to know:

1. General Importer Identification Number (API-U)

If your company intends to import goods for commercial resale, you’ll need an API-U (Angka Pengenal Importir Umum). This license is suitable for distributors, wholesalers, and retail businesses. Without an API-U, your shipments may be held indefinitely.

What’s more, many Indonesian banks require this license before facilitating import-related transactions. So having an API-U isn’t just about customs, it’s about access to the financial system too.

2. Producer Importer Identification Number (API-P)

Planning to import raw materials, machinery, or production equipment for your own manufacturing facility? Then API-P (Producer) is your license.

It’s important to note that goods imported under API-P cannot be sold in the market, they must be used internally. Many foreign manufacturing companies mistakenly assume API-U is suitable for industrial use, which leads to compliance issues later on.

3. Limited Import License (Lartas)

Now here’s where things get tricky. “Lartas” refers to restricted or controlled goods items like electronics, medical equipment, pharmaceuticals, or agricultural products. These imports require additional approvals, permits, and often undergo pre-shipment inspection.

Importing Lartas goods without clearance is a surefire way to invite penalties. Our advice? Always check the Lartas list maintained by the Ministry of Trade before you ship.

How to Apply for an Import License in Indonesia

Applying for an import license in Indonesia involves multiple steps, and doing it right the first time can save weeks if not months of delays.

Here’s how it typically works:

1. Establish a legal entity (usually PT PMA) through the Ministry of Law and Human Rights.
2. Register with OSS (Online Single Submission) and obtain a Business Identification Number (NIB).
3. Select the correct license type (API-U or API-P) within OSS.
4. Provide supporting documents such as business plan, financial forecast, and facility layout (if applicable).
5. Wait for system and human verification before license issuance.

Many applications get stuck due to vague business activities or mismatched documents. Having legal guidance helps avoid bureaucratic bottlenecks.

READ MORE:

• Indonesia Renewable Energy Law: Overview of Laws & Key Regulations (2025)

Customs Clearance Procedures

Once your goods arrive at a port, the real test begins. Customs clearance in Indonesia involves six main steps:

1. Pre-Notification: Notify INSW of your shipment in advance.
2. Documentation: Prepare your packing list, invoice, bill of lading, import declaration (PIB), and proof of API.
3. HS Code Classification: Ensure your products are correctly classified. Errors here can result in excessive taxes or confiscation.
4. Inspection: Your goods may undergo document-based or physical inspection depending on risk level.
5. Tax and Duty Payments: Includes Import Duty (Bea Masuk), VAT (PPN), Income Tax (PPh 22), and possibly Excise (if applicable).
6. Release of Goods: Once cleared, your products are free to be distributed or processed.

Please note that even a small mistake like an incorrectly declared CIF value can trigger audits or penalties.

Prohibited and Restricted Goods: What You Cannot Import

Some items are simply not allowed into Indonesia, while others come with strings attached.

• Prohibited Goods include narcotics, explosives, certain chemicals, toxic waste, and counterfeits.
• Restricted Goods (Lartas) require additional compliance layers such as:
  • Product certifications (e.g., SNI)
  • Technical approvals (e.g., BPOM for pharmaceuticals)
  • Import quotas (e.g., sugar, rice)

Before initiating shipment, always run a compliance check through INSW and verify sector-specific regulations. This is where many foreign companies trip up, assuming what’s allowed in one country is fair game in another.

READ MORE:

• Tax Dispute Resolution in Indonesia: Mechanisms, Legal Process, and Practical Insights

Common Pitfalls for Foreign Companies and How to Avoid Them

Many foreign investors, despite good intentions, fall into the same traps:

• Assuming customs brokers will handle everything, not all brokers are licensed or reputable.
• Using generic HS codes, misclassification can trigger red alerts.
• Under-declaring value to cut taxes, a short-term win that invites long-term trouble.
• Skipping Lartas checks, some licenses require up to 2–3 months to obtain.
• Filing incomplete documents, a simple oversight can cause a 2-week delay.

How to avoid these? Engage a local legal and customs expert from day one. Prevention is better than resolution.

Legal and Tax Implications of Non-Compliance

Non-compliance in Indonesia isn’t taken lightly. If your import license is invalid or your documentation is fraudulent, expect serious consequences:

• Fines: Up to 10 times the declared customs value.
• Criminal Charges: In some cases, especially with dangerous or illegal goods.
• License Revocation: Repeat offenders may be blacklisted.
• Tax Sanctions: Incorrect customs valuation can trigger retrospective audits by the Tax Directorate General.

Legal disputes, once escalated, can take months (or years) to resolve and can paralyze your Indonesian operations. So, investing in compliance is not a cost, it’s protection.

Practical Commentary from Kusuma & Partners

From our experience at Kusuma & Partners Law Firm, most issues we resolve could’ve been avoided with better preparation. One client, for example, had goods worth over USD 400,000 stuck at port simply because the HS Code declared was outdated

That’s why we always emphasize early legal involvement. Whether you’re launching an import business, expanding production, or navigating a customs investigation, our firm can help you:

• Prepare and review your OSS & licensing documentation
• Vet your local partners and customs brokers
• Conduct risk assessments for restricted items
• Represent you in customs disputes or audits

Our mission is to make your Indonesian venture legally secure, operationally smooth, and financially efficient.

Conclusion

Indonesia’s import process may be complex, but it’s far from impossible. With the right guidance, your business can flourish in one of Asia’s most exciting markets. But that journey starts with a single, crucial step getting your import licenses and customs compliance right from the beginning.

How We Can Help

Let Kusuma & Partners Law Firm help you navigate the maze of Indonesian import law. We bring clarity to complexity and empower your business to trade with confidence. Contact us today to ensure your import plans are legally solid and commercially sound.

Fill in the form below to get our expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”

In Indonesia, many foreign investors initially set up a PT PMA (foreign-owned company) with local partners, often due to regulatory requirements or strategic partnerships. However, as business goals evolve, foreign shareholders may seek to regain full or majority ownership by buying back shares from local partners. While this can be a smart strategic move to consolidate control and streamline decision-making, the process is far from simple. It must adhere to Indonesia’s corporate, investment, and tax regulations, and any misstep could result in legal complications or penalties.

Understanding PT PMA and Shareholding Structure

In the Indonesian business landscape, foreign investors are required to establish a PT PMA (Perseroan Terbatas Penanaman Modal Asing) when they want to operate directly in the country. This type of company is specifically designed for foreign capital participation. Typically, a PT PMA is structured with both foreign and local shareholders, especially when the business operates in a sector that is partially open to foreign ownership under the Positive Investment List (Presidential Regulation No. 49 of 2021).

While this partnership model is often necessary at the inception phase, over time, foreign investors may seek to increase control over the business. One of the most common and effective strategies to achieve this is by buying back shares from local partners in PT PMA. However, this process must follow strict legal procedures under Indonesian law and comply with investment regulations.

Why Foreign Investors Consider Buying Back Shares from Local Partners

There are several compelling reasons why foreign investors might wish to buy back shares from their local counterparts. Sometimes, local partners initially enter the joint venture to satisfy regulatory requirements, and their role becomes less active over time. In other cases, business growth may require tighter governance and faster decision-making processes, which are easier to manage with fewer shareholders.

Moreover, when a local partner no longer wishes to be involved, whether due to strategic realignment, retirement, or cashing out their investment, a share buy-back becomes a natural and necessary step. For the foreign investor, this provides an opportunity to simplify ownership, enhance operational efficiency, and exercise greater control over the company’s strategic direction.

But here’s the catch: buying back shares from local partners in PT PMA is not just a commercial decision, it’s a legal process with compliance implications. Knowing how to handle it properly is essential to avoid disputes or sanctions later.

Legal Grounds for Share Buy-Back Under Indonesian Law

Legally, share buy-back and transfer in Indonesia is governed by Law No. 40 of 2007 concerning Limited Liability Companies (Company Law), Law No. 25 of 2007 on Investment, and various implementing regulations issued by the Ministry of Law and Human Rights, and BKPM (Indonesia Investment Coordinating Board), now under OSS (Online Single Submission) supervision.

Under these laws, shareholders are free to transfer their shares, provided they follow the procedures outlined in the Articles of Association and relevant shareholder agreements. If the PT PMA operates in a restricted sector, the transfer must also comply with the applicable foreign ownership cap. Furthermore, every share transfer must be approved through a General Meeting of Shareholders (GMS) and documented in a Notarial Deed, which must be reported to the Ministry of Law and Human Rights.

So, while the legal framework is well-established, it’s the execution and compliance details that make or break the deal.

READ MROE:

• Understanding Capital Gains Tax in Indonesia

Key Regulatory Authorities and Compliance

When foreign investors initiate a buy-back, they must engage with several authorities:

• Ministry of Law and Human Rights – For changes in company structure and legal recognition of share ownership.
• BKPM / OSS System – For updating the company’s investment license and fulfilling reporting obligations.
• Tax Office – To ensure that tax obligations related to the transaction, particularly Capital Gains Tax (CGT), are properly addressed.

In addition, depending on the sector and size of investment, other government agencies may also be involved. Thus, having professional guidance is a necessity.

Process to Buy Back Shares from Local Partners in PT PMA

1. Internal Agreement and Due Diligence

Before any legal action is taken, both parties must revisit the Articles of Association (AoA) and Shareholders’ Agreement. These documents may contain restrictions or pre-emptive rights that could affect the buy-back. For instance, other shareholders may have the first right of refusal.

Next, conduct legal due diligence; tax due diligence; and financial due diligence. This involves reviewing the company’s liabilities, outstanding contracts, disputes (if any), and regulatory compliance. Think of it as your “health check” before the deal.

2. Valuation and Share Purchase Price

After due diligence, the next step is to agree on a fair price for the shares. While parties can negotiate privately, using a licensed appraiser or auditor to perform a professional valuation adds credibility and minimizes tax disputes.

The agreed price must be clearly documented. It will serve as the basis for calculating the Capital Gains Tax on the local seller, which is typically borne by the seller but sometimes negotiated otherwise.

3. Shareholders’ Resolution (GMS)

The next legal milestone is a General Meeting of Shareholders (GMS). Here, all shareholders must agree on the share transfer. The minutes of the meeting must be drafted, signed, and included in the notarial documentation.

The GMS resolution must clearly state:

• Approval of the share transfer
• The identity of the buyer and seller
• Number and value of shares
• Amendment to Articles of Association, if needed

4. Execution of Share Transfer Deed

A Notarial Deed of Share Transfer must be executed before a licensed Indonesian notary. This is a mandatory step, as oral or informal agreements are not recognized under company law.

This deed becomes the legal proof of transfer and forms the basis for reporting to relevant authorities.

5. Notification to Ministry of Law and Human Rights

Once the deed is signed, the notary will submit the documentation electronically through the Ministry’s AHU system. This ensures that the change in shareholding is recorded in the government’s official company registry.

Without this registration, the transfer will have no legal standing against third parties.

6. BKPM and OSS System Reporting

Finally, the PT PMA must log in to the OSS system and update its LKPM (Investment Activity Report) and corporate data. This is critical to ensure that your PT PMA remains compliant and that future business licenses or incentives are not jeopardized.

Failing to update this information can lead to administrative sanctions and other legal complications.

READ MORE:

• Export Commodities in Indonesia: Opportunities and Legal Insights

Common Legal and Tax Pitfalls

Unfortunately, we’ve seen many cases where foreign investors jump into a share buy-back without proper guidance, only to regret it later. Here are a few traps you should watch out for:

• Unregistered Transfers – Without AHU or OSS updates, your shareholding will not be legally recognized.
• Nominee Agreements – While tempting, they are risky and unenforceable under Indonesian law.
• Undisclosed Liabilities – Buying shares without due diligence can lead to inheriting hidden debts or legal disputes.
• Improper Tax Handling – Both buyer and seller can face penalties if CGT is not properly paid.

The golden rule? If it’s not in writing, registered, and tax-cleared, so it’s not safe.

Practical Tips for Foreign Investors

• Always consult the legal advisor and tax advisor.
• Ensure the share valuation is done by a certified third party.
• Avoid informal or handshake deals, only written and notarized transfers are enforceable.
• Review the updated Positive Investment List to confirm eligibility.
• Prepare to negotiate CGT responsibility upfront.
• Update OSS and AHU immediately after the transaction.

If your goal is to buy back shares to gain full ownership or restructure your PT PMA, these tips will help you stay compliant and avoid setbacks.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners Law Firm, we have represented both foreign and domestic clients in complex share buy-back transactions. Our experience tells us one thing: behind every successful deal is a clear legal strategy.

Too often, investors focus solely on price and neglect structure. We help our clients not just buy shares, but do so smartly. From evaluating tax impact, drafting bulletproof contracts, to registering changes with OSS and AHU.

And because we understand the emotional aspect of dissolving partnerships or navigating joint venture exits, we act as your strategic partner, not just your lawyer.

Conclusion

Buying back shares from a local partner in PT PMA is more than just a business step, it’s a strategic legal move. With the right approach, it can bring clarity, control, and growth. But without proper legal guidance, it can lead to costly mistakes.

How We Can Help

If you are planning to buy back shares from local partners in PT PMA, let our team at Kusuma & Partners Law Firm assist you. We combine legal expertise with business acumen to deliver solutions that work.

Fill in the form below to get our expert guidance.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”