Frequently Asked Questions

Thinking of building a business in Indonesia? Indonesia’s rapidly growing economy, rich resources, and strategic location make it a magnet for foreign and local investors. But here’s the kicker: establishing a company in Indonesia isn’t just about having capital or a solid business idea. There are common — and often costly — mistakes that even seasoned investors make.

This article unpacks the key mistakes to avoid when establishing a company in Indonesia, based on legal insight, on-ground practice, and real-world experience. Whether you’re a startup founder, a corporate investor, or an overseas entrepreneur, this guide is your legal playbook for building a compliant and successful business in Indonesia.

Key Takeaways

• Choosing the correct legal structure is crucial to your company’s success in Indonesia.
• Foreign investors must meet strict capital and licensing rules.
• Legal due diligence and proper permits are non-negotiable.
• Ignoring labor, tax, and social security obligations can result in heavy penalties.
• Working with a legal expert can prevent major regulatory and operational risks.

Understanding Indonesia’s Business Landscape

Indonesia ranks among Southeast Asia’s top destinations for investment. With over 270 million people and a government open to foreign direct investment (FDI), the potential is massive. But it also comes with a complex legal and regulatory framework.

New investors often underestimate the bureaucratic intricacies involved. Indonesian business regulations are governed by the Investment Law (Law No. 25 of 2007), the Omnibus Law (Law No. 6 of 2023), and sectoral regulations.

Here’s the truth: success in Indonesia starts with understanding the law — and avoiding costly missteps from day one.

Choosing the Wrong Business Entity

Choosing the right legal structure is the foundation of your operations. Many investors go wrong right here.

PT PMA vs. PT PMDN: Know the Difference

• PT PMA (Foreign Investment Company): For companies with any foreign shareholding.
• PT PMDN (Local Investment Company): For 100% locally owned businesses.

Some foreign investors try to register a PT PMDN by using nominee Indonesian shareholders to get around restrictions. That’s risky and illegal under Indonesian law. The government is cracking down on such structures.

Always align your business type with your actual ownership structure to avoid being flagged by BKPM (Indonesian Investment Coordinating Board).

READ MORE:

• PT PMA vs PT PMDN in Indonesia: Key Differences, Legal Framework, and Setup Guide
• How to Set Up PT PMA in Indonesia

Ignoring Minimum Capital Requirements

This is one of the top key mistakes to avoid when establishing a company in Indonesia. The minimum paid-up capital for a PT PMA is IDR 10 billion (approx. USD 650,000).

Some investors attempt to “simulate” this capital without really injecting it:

• Proof of capital must be shown through a bank statement and notarized documentation.
• BKPM can revoke business licenses for failure to meet this requirement.

Failing to Understand Foreign Ownership Restrictions

Indonesia’s Positive Investment List (Presidential Regulation No. 10 of 2021) specifies which sectors are open to foreign ownership.

Mistakes often happen when investors start operations in a sector that is:

• Fully closed to foreign investors.
• Open but with ownership limitations (e.g., 49%, 67%, etc.).

Conduct a legal review of the investment list or consult a law firm before deciding your business sector.

Skipping Legal and Tax Due Diligence

Whether you’re setting up from scratch or acquiring an existing business, failure to perform due diligence can lead to:

• Hidden debts or tax liabilities.
• Illegal operations.
• Disqualified licenses.

Engage a legal expert to perform a tax and legal diagnostic review before you proceed.

Neglecting Proper Licensing and Permits

Indonesia operates under the Online Single Submission (OSS) system. Yet, many companies:

• Fail to get the correct business classification (KBLI).
• Operate without industry-specific permits.
• Misclassify their activities.

This leads to revoked NIBs (Business Identification Numbers) or heavy fines from the Ministry of Trade, BKPM, or regional governments.

Thus, it is advisable to match your KBLI code with the actual business you intend to run. One wrong code could invalidate your business license.

READ MORE:

• Profit Repatriation for Foreign Investors in Indonesia

Misunderstanding Local Content Requirements

Certain industries — especially in construction, mining, manufacturing, and telecommunications — require compliance with local content requirements (TKDN).

Failure to comply leads to:

• Ineligibility for government projects.
• Loss of tax incentives.
• Legal penalties under Presidential Regulation No. 16/2018.

Underestimating the Importance of a Local Nominee (if needed)

In restricted sectors, foreign investors may consider using an Indonesian nominee. But this is very risky if not structured properly.

Thus, it is advisable that a nominee structure must involve legal safeguards:

• Shareholder loan agreements.
• Voting rights restrictions.
• Binding legal contracts.

Always consult a professional law firm. Illegal nominee arrangements may be declared null and void.

Overlooking Employment and Labor Law Compliance

Indonesia has a rigid labor framework under Law No. 13 of 2003, as revised by the Omnibus Law.

Common labor-related mistakes include:

• Hiring without employment agreements.
• Not paying religious holiday bonuses (THR).
• Not registering employees with BPJS Kesehatan and BPJS Ketenagakerjaan (mandatory social security).

This can lead to labor disputes, lawsuits, or government sanctions.

Not Registering for Tax Obligations Properly

Every company in Indonesia must:

• Obtain a NPWP (Taxpayer Identification Number).
• Register for VAT (PPN) if applicable.
• File monthly and annual tax returns.

Failure to do so may lead to tax audits, fines, and even business closure.

Ensure you engage a tax consultant to assist with your setup and monthly reporting.

READ MORE:

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

Poor Documentation and Articles of Association

Your Articles of Association (AoA) define your business operations and must be:

• Clear, legally compliant, and approved by the Ministry of Law and Human Rights.
• Include correct company objectives, capital, shareholding structure, and director authority.

Many businesses fail to update their AoA when changes occur — like capital increase or director replacement — which leads to legal invalidity.

Delaying BPJS, OSS, and NIB Registrations

Once incorporated, don’t forget these must-have registrations:

1. OSS System – For Business Licensing.
2. NIB (Business ID Number) – Like a business passport.
3. BPJS – Social Security for employees.

Delays here can prevent you from opening bank accounts, hiring staff, or securing operational permits.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners, we’ve helped our clients — from startups to multinationals — navigate Indonesia’s legal maze. We’ve seen million-dollar investments nearly collapse over simple legal oversights.

Our advice?

• Engage local counsel early.
• Structure your shareholding and licenses based on long-term plans, not just short-term access.
• Do not compromise compliance to save time.

We provide end-to-end services: incorporation, tax advisory, legal opinion, licensing, corporate structuring — all under one roof.

READ MORE:

• Key Post-Incorporation Compliance for Company in Indonesia

How We Can Help

Establishing a company in Indonesia is exciting — but it comes with real risks if you’re unaware of the legal terrain. From choosing the wrong business entity to ignoring tax and labor obligations, each step matters. Avoiding these key mistakes when establishing a company in Indonesia can save you from penalties, revoked licenses, and legal battles.

Ready to start your business in Indonesia with confidence? Contact us today.

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.”

Closing a company in Indonesia is not just a matter of ceasing operations. Whether you’re a business owner, investor, or a corporate executive, understanding how to liquidate a company in Indonesia is crucial to ensure compliance with legal and tax obligations. From a corporate law standpoint, liquidation is a formal, regulated process that must follow specific procedures under Indonesian law. In this article, we’ll walk you through the legal and tax implications of winding up a company in Indonesia.

Key Takeaways

• Liquidation is a formal process that permanently closes a company and settles its legal obligations.
• Indonesian law distinguishes between voluntary and court-ordered liquidation.
• The liquidation process must follow strict legal steps, including appointing a liquidator and notifying stakeholders.
• Liquidation has important tax consequences, including final tax filing and asset transfers.
• Legal advice is crucial to avoid liabilities and ensure compliance with Indonesian corporate law.

Understanding Company Liquidation in Indonesia

What is Company Liquidation?

Liquidation is a formal legal process where a company ceases its operations permanently, settles its financial obligations, distributes any remaining assets to shareholders, and is removed from the company register. The core function of liquidation is to legally dissolve the company and ensure that no stakeholders are left behind, especially creditors and employees.

In practice, liquidation involves several legal actions including the appointment of a liquidator, public notification, debt settlement, and eventual deregistration with the Ministry of Law and Human Rights. It’s important to distinguish liquidation from dormancy—where the company remains legally active but ceases trading. In liquidation, the company ceases to exist entirely.

When is Liquidation Necessary?

The need to liquidate can arise in various scenarios:

• The company has completed its project or business objective (common in SPVs or joint ventures).
• The shareholders voluntarily decide to cease business operations.
• The company is facing prolonged financial losses and can no longer meet its obligations.
• The company loses its licenses or fails to comply with legal regulations.
• There’s a court or government decision to shut down the business.

Liquidation is not a sign of failure—it’s often a strategic decision to mitigate loss, preserve reputation, or shift capital to more profitable ventures.

Legal Grounds for Liquidation Under Indonesian Law

Indonesia’s Company Law (UU Perseroan Terbatas) recognizes several legal grounds for company liquidation:

1. Expiration of Duration – Some companies are incorporated for a specific period. Upon expiration, unless renewed, liquidation is mandatory.
2. Shareholders’ Resolution – The General Meeting of Shareholders (GMS) can decide to voluntarily liquidate the company.
3. Court Ruling – If a company is in breach of laws or its operations harm public interest, a court may order liquidation.
4. Bankruptcy Decision – Declared by the Commercial Court under Indonesia’s Bankruptcy Law.
5. Revocation of Business License – Regulatory non-compliance may lead to license revocation, triggering automatic liquidation.

Understanding the cause of liquidation is essential, as it determines the procedure, timeline, and legal strategy required.

READ MORE:

• The Differences Between PKPU and Bankruptcy in Indonesia

Types of Liquidation: Voluntary vs. Court-Ordered

1. Voluntary Liquidation

This type of liquidation is initiated by shareholders via a GMS resolution. It is often pursued when the company is still solvent and the closure is strategic or pre-agreed. In this case, the shareholders have full control over the timing, liquidator appointment, and asset distribution process.

Voluntary liquidation is more predictable and cost-efficient than court-ordered alternatives, especially if all stakeholders are in agreement. This route is commonly used by foreign companies closing subsidiaries in Indonesia.

2. Court-Ordered Liquidation

A court-ordered liquidation arises when:

• The company is declared bankrupt.
• There is a dispute among shareholders.
• There is a legal violation or regulatory breach.
• Creditors petition the court due to unpaid debts.

In these cases, the Commercial Court will appoint a receiver or liquidator, and court oversight governs the process. This is generally more time-consuming and less flexible.

Steps on How to Liquidate a Company in Indonesia

Step 1: Shareholders’ Resolution

The liquidation process begins with a General Meeting of Shareholders (GMS). The shareholders must pass a formal resolution to:

• Dissolve the company.
• Appoint a liquidator.
• Authorize the distribution of assets.

The resolution must be notarized and filed with the Ministry of Law and Human Rights through the SABH (Sistem Administrasi Badan Hukum) portal.

Step 2: Appointment of a Liquidator

The liquidator assumes full control over the company from the board of directors. The liquidator’s responsibilities include:

• Notifying creditors.
• Managing asset valuations.
• Paying outstanding liabilities.
• Reporting to the shareholders and regulators.

A licensed public accountant, law firm, or independent consultant typically serves as liquidator. Shareholders may also appoint themselves, but this is discouraged for complex dissolutions.

Step 3: Announcement and Public Notification

As per Article 147 of the Company Law, the liquidation must be announced publicly:

• In at least 1 national newspaper.
• In the State Gazette (Berita Negara Republik Indonesia).

Creditors are given 60 days to file claims. This period is critical; skipping this step can invalidate the liquidation process.

Step 4: Settlement of Debts and Claims

The liquidator must settle:

• Employee salaries and severance pay (as mandated by the Labor Law).
• Outstanding vendor and supplier invoices.
• Tax obligations, including VAT and corporate income tax.

If liabilities exceed assets, liquidation shifts into bankruptcy territory, requiring court involvement.

Step 5: Final Shareholders’ Meeting

Once debts are settled and assets are distributed, the liquidator convenes a final GMS to:

• Approve the liquidation report.
• Release the liquidator from liability.
• Confirm distribution to shareholders.

This meeting marks the completion of the liquidation phase.

Step 6: Submission to the Ministry of Law and Human Rights

All relevant documents, including:

• Liquidation report,
• GMS approvals,
• Public announcements,
• Tax clearance,

must be submitted to the Ministry for final deregistration. The Ministry will then issue an official deletion from the Company Registry (Daftar Perseroan).

READ MORE:

• PKPU in Indonesia: A Legal Guide for Debtors

Timeline and Estimated Costs of Liquidation

A simple voluntary liquidation takes 6–12 months, while court-ordered cases may exceed 18 months. Key cost items include:

• Liquidator professional fees
• Legal and notarial fees
• Public announcement costs
• Final audit and tax advisory fees

Advance planning helps minimize unnecessary costs, especially tax penalties.

Tax Implications of Company Liquidation in Indonesia

1. Final Corporate Income Tax Obligations

The company must file a final Annual Tax Return (SPT Tahunan Badan) and pay all outstanding taxes. The DGT (Directorate General of Taxes) may audit the company before issuing a Tax Clearance Letter (Surat Keterangan Fiskal).

2. VAT and Other Withholding Tax Considerations

All VAT (Value Added Tax) from prior sales must be reported and paid. PPh 21 (employee), PPh 23 (services), and PPh 4(2) (rental income) must also be settled. Non-compliance may block deregistration.

3. Transfer of Assets During Liquidation

If the company transfers or sells assets during liquidation, capital gains tax may apply. Moreover, in-kind distributions to shareholders may be subject to VAT or income tax depending on asset type.

Compliance with the Indonesian Financial Services Authority (OJK)

If your company is regulated by OJK, such as insurance firms, securities companies, or publicly listed entities, then:

• You must notify OJK before liquidation.
• You may need to obtain special approvals.
• Additional public disclosures may be required.

Failure to comply may result in sanctions, blacklisting, or litigation.

Legal Risks and Common Pitfalls in Liquidation

Some frequent errors include:

• Ignoring creditor rights or incomplete announcements.
• Failing to obtain proper tax clearance.
• Using unlicensed liquidators.
• Omitting employee severance settlements.
• Conflicts of interest among shareholders and liquidators.

Legal risks can extend to personal liability for directors, especially if there is fraud or negligence in asset distribution.

Post-Liquidation: Deregistration and Closure

After liquidation, the following closures must be executed:

• Deletion of Tax ID (NPWP).
• Bank account closure and balance zeroing.
• Cancellation of Business Identification Number (NIB).
• Final employment reports to Manpower Office.

This marks the final legal and administrative end of the company’s existence.

READ MORE:

• Buying Property in Indonesia: A Legal Guide for Foreigners

Practical Commentary from Kusuma & Partners

Liquidating a company is not just a paperwork exercise—it’s a multidimensional legal and tax process. We advise our clients to begin with comprehensive due diligence, especially tax positioning and creditor status. As Indonesia modernizes its compliance systems, authorities are stricter about documentation, tax clearance, and regulatory notifications. Our team has successfully assisted clients—from local SMEs to multinational corporations—in closing down operations efficiently and legally, while mitigating exposure. Always appoint an experienced legal and tax advisor to navigate this process smoothly.

Conclusion

As we’ve explored, understanding how to liquidate a company in Indonesia requires navigating a maze of corporate law, tax compliance, regulatory filings, and practical execution. Whether you’re a foreign investor winding down an Indonesian subsidiary, or a local business owner closing shop, proper liquidation ensures compliance, reputation protection, and cost savings. Ignoring the legal and tax intricacies can be a costly mistake.

How We Can Help

Planning to liquidate your business in Indonesia? Let Kusuma & Partners Law Firm guide you from start to finish—legally, and tax-efficiently. Contact us today for professional legal assistance.

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.”

Foreign investors enter the Indonesian market with a key objective: to gain sustainable returns and eventually repatriate profits. As Southeast Asia’s largest economy, Indonesia attracts capital across various sectors, from manufacturing and infrastructure to digital technology and natural resources. However, the ability to move capital out of the country—especially profits—is subject to multiple regulatory, legal, and tax considerations.

In this guide, we explore the legal framework and strategic approaches to profit repatriation for foreign investors in Indonesia, including risks, compliance tips, and expert insights from our legal practice.

Key Takeaways

• Foreign investors can legally repatriate profits such as dividends, interest, and capital gains.
• Compliance with reporting requirements and tax laws is crucial.
• Using DTAA can significantly reduce tax burdens.
• Professional legal and tax guidance ensures smooth profit repatriation.

Legal Basis of Profit Repatriation

Indonesian Investment Law

The primary legal source governing profit repatriation is Law No. 25/2007 on Investment. This law assures foreign investors the right to:

• Repatriate profits and dividends.
• Transfer funds related to loan repayments.
• Repatriate proceeds from asset sales or liquidation.

Under Article 8, this right is guaranteed as long as the investor complies with applicable tax and regulatory obligations.

Foreign Exchange Regulations

Foreign exchange activities are regulated by Law No. 24/1999 on Foreign Exchange Flow and Exchange Rate System, further enforced by Bank Indonesia Regulation No. 21/2/PBI/2019. This law liberalizes the movement of foreign currency but imposes reporting requirements for prudential oversight. Importantly, Bank Indonesia does not restrict the amount of funds repatriated but focuses on reporting and transparency.

Types of Repatriable Profits

Dividends

Dividends distributed by Indonesian companies to foreign shareholders are the most common form of repatriated profit. However, dividends are subject to a 20% withholding tax unless reduced by a Double Taxation Avoidance Agreement (DTAA).

Capital Gains

Capital gains from the sale of shares, assets, or investments are also repatriable. Such gains are considered part of taxable income and taxed accordingly. Tax planning is essential here to avoid double taxation.

Interest, Royalties, and Fees

Interest earned on loans to Indonesian entities, royalties for intellectual property, and technical service fees are all repatriable. Each category is subject to specific tax treatment, typically involving withholding tax ranging from 10% to 20%.

READ MORE:

• Global Minimum Tax Implementation in Indonesia: What Businesses Should Know

Repatriation Mechanisms and Procedures

Bank Indonesia Reporting Requirements

Under Bank Indonesia Regulation No. 17/3/PBI/2015, companies must report:

• Foreign loan inflows.
• Debt service payments.
• Repatriation transactions.

Reports are submitted through the Bank Indonesia Integrated Reporting System (BI-IRIS).

Role of Custodian and Escrow Accounts

Funds awaiting repatriation may be held in custodial or escrow accounts, especially in transactions involving share sales or project completion. Proper documentation ensures tax clearance and prevents delays.

Documentation and Approvals

Repatriation must be supported by:

• Tax clearance certificates (SKB PPh Pasal 26 where applicable).
• Dividend approval from GMS (General Meeting of Shareholders).
• Financial audit reports (when required).
• BI and BKPM reporting evidence.

READ MORE:

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

Tax Implications of Profit Repatriation

Withholding Tax on Dividends

The default withholding tax rate is 20% for dividends to non-resident shareholders. This rate can be lowered to 10%, 5%, or even 0% under applicable DTAAs, such as those with Singapore, the Netherlands, and Japan.

Double Tax Avoidance Agreement (DTAA) Relief

Indonesia has over 70 DTAAs. To claim relief:

• Submit a Certificate of Domicile (COD) from the foreign tax authority.
• Ensure compliance with Minister of Finance Regulation No. 213/PMK.03/2016.

Tax Planning Strategies

Professional tax planning can optimize:

• Timing of dividend distribution.
• Group structuring to route through DTAA-friendly jurisdictions.
• Use of intercompany loans vs equity to manage tax burdens.

Compliance under the Indonesian Investment Coordinating Board (BKPM)

BKPM, now integrated under the Ministry of Investment, requires foreign investors to report their investment activities, including profit repatriation. Reports are submitted quarterly and annually through the OSS system (Online Single Submission).

Failure to comply can result in penalties, including restriction on future investment licenses or even suspension of operations.

Currency Control and Foreign Exchange Regulation by Bank Indonesia

All foreign currency transactions, including repatriation, must go through Indonesian banks. These banks report to Bank Indonesia and ensure compliance with prudential principles. Notably, Bank Indonesia requires certain corporations to maintain hedging and liquidity ratios when engaging in foreign loan-related repatriations.

Repatriation under Special Economic Zones (SEZs) and Tax Holidays

Companies operating in SEZs or those receiving tax holidays/tax allowances enjoy relaxed or zero withholding tax on profit repatriation.

These incentives are granted under GR 78/2019 and MoF Regulation No. 130/PMK.010/2020. Legal support is essential to ensure eligibility and compliance with post-incentive reporting.

READ MORE:

• New Beneficial Ownership Regulation in Indonesia 2025: What Businesses Must Know

Case Study: Repatriation Pitfalls and How to Avoid Them

A Singapore-owned manufacturing company attempted to repatriate dividends without obtaining a tax clearance certificate. The result? A 20% penalty and delayed payment of 9 months. With proper legal guidance, this could have been prevented by structuring the dividend distribution through a DTAA jurisdiction and fulfilling documentation requirements in advance.

Practical Commentary from Kusuma & Partners

• Ensure advance planning of dividend declaration and repatriation schedules.
• Use holding companies in DTAA jurisdictions to reduce tax burdens.
• Always consult tax and legal advisors before initiating profit transfers.
• Maintain accurate and up-to-date corporate documents.
• Leverage SEZs or tax incentive schemes when applicable.

We’ve helped foreign investors repatriate their profits legally and tax-efficiently. Whether it’s structuring holding companies or securing tax clearance, our firm ensures you avoid costly pitfalls.

Common Challenges and How to Overcome Them

Conclusion

Navigating profit repatriation for foreign investors in Indonesia requires a blend of legal acumen, tax strategy, and regulatory compliance. With the right planning and expert guidance, repatriating profits can be seamless and cost-effective.

How We Can Help

Need help repatriating your profits from Indonesia? Let Kusuma & Partners Law Firm guide you through the process—securely, legally, and profitably. Contact us today for a consultation.

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.”

As Southeast Asia’s largest economy, Indonesia is strategically positioning itself as a global investment magnet, especially through its priority business sectors for foreign investment in 2025.

This article will walk you through the key sectors Indonesia is opening up, the legal framework supporting foreign direct investment (FDI), and how you can strategically enter the Indonesian market backed by incentives and legal certainty.

Overview of Foreign Investment in Indonesia

Indonesia has consistently attracted strong FDI flows thanks to its vast consumer market, abundant natural resources, and supportive government policies. In recent years, the country has taken bold steps through the Omnibus Law and Presidential Regulation No. 10 of 2021 to further liberalize and modernize its investment climate.

In 2025, Indonesia’s focus is on sectors that drive sustainability, digital transformation, infrastructure, and local economic empowerment.

Legal Framework Governing Foreign Investment in Indonesia

Foreign investment in Indonesia is governed by:

• Law No. 25 of 2007 on Investment (Investment Law),
• Omnibus Law (Law No. 6 of 2023) on Job Creation,
• Presidential Regulation No. 10 of 2021, and
• BKPM regulations under the Ministry of Investment.

Investment Coordinating Board (BKPM)

The Investment Coordinating Board (BKPM) or now known as the Ministry of Investment, is the main authority responsible for regulating and facilitating investments.

Presidential Regulation No. 10 of 2021 on Investment Business Fields

This regulation introduced the Positive Investment List (DPI), replacing the Negative List. It classifies business fields into:

• Priority sectors (eligible for incentives),
• Open sectors (no restrictions),
• Partnership-required sectors, and
• Closed sectors (prohibited for foreign investment).

What Are Priority Business Sectors in Indonesia?

Priority sectors are business areas that receive special treatment by the government due to their strategic importance in supporting:

• National economic growth,
• Environmental sustainability,
• Technology transfer, and
• Job creation.

These sectors are not only open to foreign ownership (often up to 100%), but they also enjoy incentives like tax holidays, investment allowances, and streamlined licensing processes.

Top 10 Priority Sectors for Foreign Investment in Indonesia 2025

1. Renewable Energy and Green Technology

With Indonesia aiming for net-zero emissions by 2060, the renewable energy sector is booming. Investment in solar, geothermal, hydropower, and biomass energy is highly encouraged, with government-backed power purchase guarantees and carbon credits.

2. Digital Economy and IT Infrastructure

Indonesia’s digital economy is projected to reach USD 146 billion by 2025. Investment opportunities include:

• Cloud computing,
• Data centers,
• Cybersecurity, and
• E-commerce infrastructure.

This is a key focus keyword sector for foreign investors due to its scalability and regulatory openness.

3. Electric Vehicles (EV) and Battery Industry

Indonesia holds the world’s largest nickel reserves, a core component of EV batteries. The government offers zero import duties, tax holidays, and industrial zone access for investors in:

• Battery manufacturing,
• EV assembly,
• Charging infrastructure.

4. Tourism and Creative Economy

Post-COVID recovery has boosted the demand for high-quality tourism and creative sector investments. The focus includes:

• Eco-tourism,
• Digital creative industries (film, music, design),
• MICE (Meetings, Incentives, Conventions, Exhibitions).

Tourism is a labor-intensive sector, hence a top priority.

5. Healthcare and Pharmaceuticals

Indonesia aims to reduce reliance on imported drugs and equipment. Priority sub-sectors include:

• Vaccine and biotechnology,
• Medical device production,
• Health-tech platforms (telemedicine, AI diagnostics).

6. Agriculture and Food Processing

Food security remains a government priority. Sectors open for investment include:

• Smart farming,
• Organic fertilizers,
• Food processing and logistics.

Foreign companies with innovative agri-tech solutions are especially welcomed.

7. Infrastructure and Transportation

To support economic growth, massive infrastructure projects are underway, including:

• Toll roads and railways,
• Smart cities,
• Seaports and logistics hubs.

Foreign investors can tap into PPP schemes and government guarantees.

8. Education and EdTech

Digital learning has become essential post-pandemic. Investment is open in:

• E-learning platforms,
• Vocational training centers,
• STEM-based curriculum development.

Indonesia encourages foreign universities and institutions to establish campuses under local joint ventures.

9. Manufacturing and Downstream Mining

Indonesia pushes for value-added production, especially in:

• Petrochemicals,
• Steel,
• Bauxite to alumina processing.

The downstream policy prohibits raw material exports, ensuring long-term investment prospects.

10. Financial Services and Fintech

The fintech sector is booming with innovations in:

• Digital banking,
• Insurtech,
• P2P lending.

With Bank Indonesia and OJK modernizing regulations, foreign participation is welcomed under strict compliance.

READ MORE:

• How to Set Up PT PMA in Indonesia
• Key Post-Incorporation Compliance for Company in Indonesia

Benefits of Investing in Priority Sectors

Foreign investors in priority sectors enjoy:

• Up to 100% foreign ownership in most sectors,
• 10-20 years tax holidays or reductions,
• Import duty exemptions for capital goods,
• Access to Special Economic Zones (SEZs) and industrial parks,
• Simplified licensing via OSS RBA.

Investment Incentives and Facilities Offered

The Indonesian government offers a range of incentives, including:

• Tax Holidays (10 to 20 years depending on investment size),
• Investment Allowances,
• Accelerated Depreciation,
• VAT exemptions, and
• Training and R&D support.

Investors in Priority Business Sectors for Foreign Investment in Indonesia are given preferential treatment.

Key Considerations Before Investing in Indonesia

Local Partnerships

Some sectors still require joint ventures with local entities. Selecting a reliable local partner is crucial to navigate bureaucracy and maintain compliance.

Licensing and Compliance

Despite reforms, understanding licensing classifications, sectoral requirements, and local permits remains essential. Legal due diligence is highly recommended.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners Law Firm, we have guided numerous foreign investors through the legal maze of Indonesian regulations. From establishing PT PMA (foreign-owned companies) to securing licenses, our clients appreciate our deep-rooted expertise, personal approach, and practical solutions. Investing in Indonesia is highly rewarding — but must be done right.

READ MORE:

• Indonesia KITAS vs. Business Visa – Which Path is Right for You?
• Merger in Indonesia: A General Overview for Businesses

Conclusion

Indonesia’s bold reforms and sectoral priorities for 2025 mark a golden opportunity for foreign investors. With a clear legal framework, digitalized systems, and strong government backing, the priority sectors for foreign investment in Indonesia are more accessible and lucrative than ever.

How We Can Help

Are you ready to explore start your foreign investment in Indonesia? Make informed decisions with confidence, and let us guide your journey into Indonesia’s dynamic market.

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.”

Indonesia stands as Southeast Asia’s largest economy—boasting over 270 million consumers, a digital revolution, and a government committed to deregulation and foreign investment. From manufacturing to fintech, the opportunities are vast.

For foreign investors, the best way to establish a long-term business presence is through a PT PMA (Foreign-Owned Company). Setting up a PT PMA in Indonesia is the most secure, fully recognized business vehicle under local law, allowing you to control operations, generate profit, and grow your business sustainably.

Key Takeaways

• PT PMA allows foreign investors to own and operate companies in Indonesia.
• Foreign investors must align their business with the Positive Investment List.
• Certain sectors require joint ventures with local entities or specific permits.
• Legal structuring, tax planning, and compliance monitoring are critical to long-term success.

What is a PT PMA? Key Legal Understanding for Foreign Investors

1. Legal Definition and Characteristics

Under Law No. 25 of 2007 (Investment Law), a PT PMA is a limited liability company incorporated in Indonesia in which shares are partially or wholly owned by foreign individuals or legal entities.

Key characteristics:

• Established under Indonesian law
• Registered with the Ministry of Law and Human Rights
• Licensed by the Investment Coordinating Board (BKPM)
• Subject to minimum capital and compliance obligations

2. Why PT PMA is the Preferred Vehicle for FDI

Unlike representative offices or local partnerships, a PT PMA offers operational independence, direct revenue generation, and asset ownership rights (through HGB land titles or asset licensing). It is a commercial entity capable of full-scale operations.

Regulatory and Legal Framework for Setting Up a PT PMA in Indonesia

1. Core Legal Instruments

• Investment Law (Law No. 25 of 2007)
• Company Law (Law No. 40 of 2007)
• Presidential Regulation No. 10 of 2021 (Positive Investment List)
• OSS Law and BKPM Regulations

These legal tools govern ownership limits, licensing structures, capital requirements, and corporate responsibilities.

2. OSS (Online Single Submission) and BKPM’s Central Role

All licensing is centralized via OSS-RBA, a risk-based platform under BKPM’s supervision. Every PT PMA must be registered and monitored through OSS, which also issues the NIB and risk-assesses your business sector.

Indonesia’s Positive Investment List: What Foreign Investors Need to Know

Understanding Priority vs. Restricted Sectors

Indonesia’s 2021 reform opened up 100+ sectors, especially:

• Renewable energy
• Infrastructure
• E-commerce and IT
• Export-oriented industries

Priority sectors may receive tax holidays, customs facilities, or simplified land access.

Sectors Open with Conditions or Partnerships

Some sectors (e.g., construction, distribution, media) require local partnerships or are subject to ownership caps (e.g., 67%, 49%).

Always verify your KBLI against the latest Positive List, as sector classification directly affects licensing.

READ MORE:

• Key Post-Incorporation Compliance for Company in Indonesia
• Merger in Indonesia: A General Overview for Businesses

Detailed Process to Set Up PT PMA in Indonesia

Step 1: Business Activity and KBLI Classification

Choose your KBLI code—this determines the nature of your business, foreign ownership allowance, and licensing path. Misclassification here could block your NIB.

Step 2: Name Reservation via AHU System

Reserve your company name with the Ministry of Law and Human Rights (AHU system). Names must be unique, non-offensive, and comply with Indonesian syntax rules.

Step 3: Deed of Establishment and Legalization

A notary drafts the Deed of Establishment in Bahasa Indonesia, listing shareholders, business objectives, structure, and capital. It is legalized by the AHU.

Step 4: NIB and Licensing through OSS-RBA

Apply for a Business Identification Number (NIB) via OSS. This acts as your general license, import license, and tax ID number.

Step 5: Capital Investment Reporting (LKPM)

You must submit Investment Activity Reports (LKPM) periodically to BKPM—even if the company is pre-operational.

Step 6: Sectoral Licensing (If Applicable)

Industries like finance, mining, logistics, and healthcare require specific operational licenses from respective ministries (e.g., OJK, Ministry of Transport).

Minimum Capital Requirement

1. Working vs. Paid-Up Capital: Legal Definitions

• Minimum Investment: IDR 10 billion (including fixed + working capital)
• Paid-up Capital: Usually IDR 2.5 billion, must be injected into an Indonesian bank account
• Statement Letter: Must be signed confirming the intention to fulfill capital obligations

2. Timing and Proof of Capital Injection

While OSS does not demand immediate capital proof, BKPM may audit and request bank statements, invoices, and contracts to confirm the IDR 10 billion investment.

Corporate Structure and Governance of a PT PMA

1. Shareholders, Directors, and Commissioners

• Minimum 2 shareholders
• Minimum 1 director and 1 commissioner
• Foreigners can serve in these roles (but require a KITAS work permit)
• A local NPWP (Tax ID) is mandatory for all directors

2. Legal Responsibilities and Liabilities

Directors are responsible for day-to-day operations and are personally liable for fraud, negligence, or non-compliance. Commissioners oversee the board and must review annual reports.

Office Address, Domicile, and Virtual Office Regulation

• A commercial address is required for all PT PMA
• Virtual offices are accepted in some sectors for early-stage operations
• Address must be verifiable and comply with regional zoning rules (especially in Jakarta, Bali, and Surabaya)

Taxation and Fiscal Compliance for PT PMA

1. Tax Identification Number (NPWP), PPh, and VAT

• Corporate Tax: 22%
• VAT: 11%
• Withholding Tax: 10–20% on dividends, interest, royalties

2. Monthly, Annual Reporting and Transfer Pricing

• Must file monthly PPh 21, 23, VAT, and annual CIT
• If dealing with affiliated entities abroad, a transfer pricing document is mandatory

Common Compliance Risks and Legal Pitfalls

• Wrong KBLI classification
• Delayed capital injection
• Improper licensing (sectoral permits)
• Non-submission of LKPM
• Late tax filings

These mistakes can lead to administrative sanctions, fines, or license revocation. Legal assistance ensures compliance and continuity.

READ MORE:

• Indonesia KITAS vs. Business Visa – Which Path is Right for You?
• Buying Property in Indonesia: A Legal Guide for Foreigners

Comparative Insights: PT PMA vs. Representative Office vs. Local PT

Practical Commentary from Kusuma & Partners

At Kusuma & Partners, we’ve helped foreign investors set up PT PMA in Indonesia across a wide range of industries. We’ve seen how a well-prepared strategy combined with timely execution makes the difference between success and delay.

Our advice: Don’t underestimate the importance of compliance. The investment process might seem standardized, but nuances in the Positive Investment List, legal & tax planning, and sectoral licensing can derail even seasoned investors.

Conclusion

Setting up a PT PMA in Indonesia is more than filling out forms—it’s a strategic legal journey. By understanding the legal landscape, aligning with investment priorities, and complying with regulations, you’re preparing your business for sustainable success in Indonesia’s vibrant economy.

How We Can Help

Thinking of entering the Indonesian market? Contact us today, we assist you set up, to compliance, we ensure your PT PMA is built on a solid foundation.

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’s robust yet tightly regulated market, capital injection is a fundamental financial and legal mechanism for sustaining and scaling companies. Whether you’re launching a startup, expanding a multinational entity, or restructuring equity ownership, injecting capital can help meet statutory minimums, fund operations, or bring in strategic investors.

But many companies and investors overlook how Capital Injection Procedures in Indonesia are governed by complex legal and administrative processes. Mistakes or delays in compliance can result in regulatory sanctions, invalid corporate actions, or investor disputes. This guide is designed to help business leaders, investors, and foreign entrants navigate every step—confidently and legally.

Key Takeaways

• Capital injection is vital for company growth and legal compliance in Indonesia.
• Procedures vary based on the type of capital (cash, debt, or assets) injected.
• Both domestic and foreign investors may inject capital, with specific steps involved.
• Proper documentation and OSS/BKPM reporting are crucial to avoid penalties.
• Legal counsel ensures protection, compliance, and long-term strategic benefits.

Indonesian Legal Framework Governing Capital Injection

a) Primary Regulations: Company Law, Investment Law, and OSS-BKPM

The primary regulations covering capital injection include:

• Law No. 40 of 2007 (Company Law): Governs share issuance, shareholder rights, and amendments to the company’s capital.
• Law No. 25 of 2007 (Investment Law): Applies particularly to foreign investments and capital inflows.
• Presidential Regulation No. 10/2021 (Positive Investment List): Replaces the old Negative List, setting limits or incentives based on sector.
• Government Regulation No. 5/2021 and BKPM Reg. No. 4/2021: Outline risk-based business licensing procedures under OSS.

b) Key Regulatory Bodies: BKPM, OJK, Ministry of Law and Human Rights

• BKPM/OSS-RBA: Central platform for licensing and reporting foreign investment.
• Ministry of Law and Human Rights (MOLHR): Legalizes company amendments and shareholder changes.
• OJK: Oversees financial services entities and may require additional disclosures for public companies.

Types and Legal Forms of Capital Injection

Understanding the legal classification of your capital injection is crucial.

a) Fresh Equity Capital

Most common form, where investors subscribe for newly issued shares. It involves:

• Allocation of authorized capital
• Amendment of share register
• Dilution of existing ownership (unless proportionally subscribed)

b) Debt-to-Equity Conversion

This allows existing liabilities to be converted into shares. Benefits include:

• Strengthening balance sheet equity
• Attracting future investors by improving financial ratios

It must be done via GMS resolution, valuation by an independent appraiser (if applicable), and MOLHR notification.

c) Asset Injection and Non-Cash Contributions

Capital may also be in the form of property, IP rights, or equipment. This requires:

• Third-party valuation
• Special GMS approval
• Specific disclosure and treatment under PSAK/IFRS

READ MORE:

• Understanding Shareholders’ Rights and Duties in a Limited Liability Company (PT)
• OSS RBA (Online Single Submission Risk-Based Approach) in Indonesia: How It Works and Why It Matters

Eligible Capital Contributors: Who May Inject Capital?

a) Founders, Existing Shareholders, and Third-Party Investors

Capital can be injected by:

• Existing shareholders
• New investors (domestic or foreign)
• Group companies or related parties

Each must be properly reflected in the shareholder register and supporting documentation.

b) Foreign vs. Domestic Capital Requirements

Foreign capital injections require:

• Establishment as a PT PMA (Foreign Investment Company)
• Minimum investment commitment of IDR 10 billion, with paid-up capital of at least IDR 2.5 billion
• Submission of Investment Activity Report (LKPM) quarterly

Certain sectors (e.g., education, energy, telecommunications) may have foreign ownership caps or require local partnerships.

Detailed Procedures for Capital Injection in Indonesia

Step 1: Convening a General Meeting of Shareholders (GMS)

A GMS must be held to approve:

• The proposed capital increase
• Share allocation terms (nominal value, type, rights)
• Waiver or pre-emptive rights (if any)

A notarial deed of the GMS decision must be prepared.

Step 2: Drafting Notarial Deeds and Amending the Articles of Association

Amendments to reflect changes in:

• Authorized and issued capital
• New shareholder names (if external capital)
• Voting rights, class of shares (if preference shares involved)

Must be notarized by a licensed notary in Indonesia.

Step 3: Legalization by the Ministry of Law and Human Rights (MOLHR)

Required documents:

• GMS resolution
• Amended Articles of Association
• Identity documents of shareholders

MOLHR will issue an approval letter (SK Kemenkumham) or notification receipt.

Step 4: OSS & BKPM Reporting Obligations

For PT PMA and regulated sectors:

• Update capital data via OSS-RBA system
• Report changes in LKPM (Investment Activity Report)
• Upload supporting documents to OSS portal

Step 5: Updating Corporate Registers and Investment Reports (LKPM)

Ensure updates in:

• Shareholder Register (Daftar Pemegang Saham)
• Company Profile and business license (NIB)
• Quarterly LKPM for compliance

Important Legal Considerations and Corporate Governance

a) Shareholder Rights and Anti-Dilution Protections

Pre-emptive rights must be honored unless waived. Offering shares to a third party without offering to existing shareholders may result in legal claims.

b) Compliance with Fiduciary Duties and Voting Rights

Directors must act in the company’s best interest. Any self-dealing or favoritism in capital increase (e.g., undervaluing shares) may breach fiduciary duties.

Tax and Financial Implications

a) Capital Injection vs. Loan: Tax Treatment Differences

Capital injections are non-taxable if properly documented. In contrast:

• Loans may incur withholding tax on interest
• Improper classification may trigger VAT or income tax audits

b) Thin Capitalization Rules and Transfer Pricing Considerations

OJK and Directorate General of Tax enforce debt-to-equity ratio limits (4:1). If a capital injection reduces debt, ensure it’s reported to avoid transfer pricing disputes.

Legal Risks and Common Pitfalls

a) Failing to Register with OSS or Update AoA

Failure to update official company documents may render the capital injection legally invalid, affecting shareholder rights and raising regulatory red flags.

b) Disputes Over Valuation or Share Dilution

Lack of transparency in valuation can cause disputes. We recommend an independent appraisal, especially in related-party transactions or debt conversion.

Why Legal Counsel Is Crucial in Capital Injection

Hiring legal professionals ensures:

• Full regulatory compliance
• Clean and traceable documentation trail
• Strategic structuring of share allocation and investor entry
• Negotiation of Share Subscription Agreements or Shareholders’ Agreements

Legal errors in capital injection are expensive, time-consuming, and may lead to investor lawsuits or regulator intervention.

Practical Commentary from Kusuma & Partners Law Firm

At Kusuma & Partners, we have successfully assisted our domestic and international clients in executing Capital Injection Procedures in Indonesia. Many of our clients faced bottlenecks in OSS filings, incorrect legal documentation, and taxation issues—until they engaged us. Our team ensures full legal compliance, provides strategic structuring, and handles everything from shareholder meetings to OSS submission.

Whether you’re injecting new capital, converting debt into equity, or restructuring shareholder composition, we tailor our services to your unique business needs and guide you every step.

READ MORE:

• Buying Property in Indonesia: A Legal Guide for Foreigners
• Indonesia KITAS vs. Business Visa – Which Path is Right for You?

Conclusion

Capital injection isn’t merely a financial transaction—it’s a legal restructuring event with regulatory, tax, and shareholder implications. Understanding and complying with the Capital Injection Procedures in Indonesia is vital for business sustainability, investor confidence, and regulatory safety.

Failing to observe the legalities can derail investments, while doing it right opens doors to accelerated growth and professional credibility.

How We Can Help

Looking to inject capital into your Indonesian company or attract new investors? Kusuma & Partners Law Firm provides end-to-end legal assistance for capital structuring, OSS-BKPM filings, and shareholder documentation. Contact us today to schedule a free initial consultation and ensure your capital injection complies with Indonesian law.

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 today’s globalized economy, international business disputes are often resolved through arbitration. But what happens when the arbitration award is made in another country, and enforcement is needed in Indonesia? If you’re a business owner, investor, or foreign company dealing with cross-border transactions, understanding how to enforce an international arbitration award in Indonesia can make or break your legal strategy.

Indonesia is a signatory to the New York Convention 1958, and its domestic law supports the enforcement of international arbitration awards. However, the process isn’t always straightforward. This article walks you through the legal framework, procedural steps, and practical insights from our experience as a top-tier law firm in Jakarta.

Key Takeaways

• Enforcing international arbitration awards in Indonesia is legally possible under the New York Convention and Indonesian Arbitration Law.
• The Central Jakarta District Court is the only competent authority to issue exequatur.
• Key requirements include reciprocity, finality, and adherence to public policy.
• Procedural accuracy, proper documentation, and legal translation are crucial.
• Kusuma & Partners provides end-to-end assistance for arbitration award enforcement.

Understanding International Arbitration Awards

What is an Arbitration Award?

An arbitration award is a legally binding decision made by an arbitration tribunal to resolve a dispute between two or more parties. Arbitration is typically preferred for international commercial disputes because it is private, efficient, and enforceable across borders.

Domestic vs. International Arbitration Award

A domestic arbitration award is issued in Indonesia under Indonesian arbitration rules, while an international arbitration award is issued outside Indonesia. Enforcement mechanisms differ significantly between the two.

Legal Framework for Enforcement in Indonesia

New York Convention 1958

Indonesia ratified the New York Convention on the Recognition and Enforcement of International Arbitral Awards in 1981 through Presidential Decree No. 34 of 1981. This means Indonesia is obligated to recognize and enforce arbitration awards made in other signatory countries.

Indonesian Arbitration Law (Law No. 30 of 1999)

The enforcement of international arbitration awards is further governed by Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution, particularly Articles 65 to 69. The law emphasizes procedural compliance, reciprocity, and non-violation of public policy.

Conditions for Recognition and Enforcement

Reciprocity Principle

Indonesia will enforce international awards only from countries that are also parties to the New York Convention and have a reciprocal relationship with Indonesia. Always verify the originating country’s Convention status.

Final and Binding Nature of the Award

The award must be final and binding, with no further legal recourse available in the country where it was issued. This must be proven with valid documentation.

Enforcement Procedure in Indonesia

Filing for Exequatur

To enforce an international arbitration award in Indonesia, an application for exequatur (recognition and enforcement) must be submitted to the Central Jakarta District Court. This is the only court authorized to handle such requests.

Required Documents

Key documents to submit include:

• Original or certified copy of the arbitration award;
• Original arbitration agreement (or authenticated copy);
• Official translation of both documents into Bahasa Indonesia;
• Proof that the award is final and binding;
• Power of attorney (if filing through counsel).

All translations must be conducted by a sworn translator.

Role of Central Jakarta District Court

The Court will not re-examine the merits of the case but will ensure that formal and legal requirements are met. If all is in order and no public policy issues arise, the court will issue an exequatur.

READ MORE:

• Indonesia’s Arbitration Reform Under Supreme Court Regulation No. 3 of 2023
• How to Deal with a Breach of Contract in Indonesia

Common Challenges and Pitfalls

Public Policy Exceptions

Even if procedural requirements are fulfilled, the court can reject enforcement if the award is deemed to violate public policy. This concept, while broad, typically refers to values of morality, justice, and national interest.

Language and Translation Issues

A common issue in applications is improper or inaccurate translations, which can delay or derail your case. Sworn translations are not optional—they are mandatory.

Time Limit for Filing

There is no specific statute of limitations under Indonesian law for enforcing an international arbitration award. However, it is recommended to act swiftly to avoid complications such as loss of evidence or changes in party status.

Recent Court Decisions on Enforcement

Recent decisions from the Central Jakarta District Court indicate a trend of increasing willingness to enforce international awards, provided that procedural steps are strictly followed. Courts are becoming more commercially aware and arbitration-friendly, especially in finance, oil & gas, and construction sectors.

Case Studies of Successful Enforcement

A multinational energy firm recently enforced a USD 50 million arbitration award in Indonesia within 6 months by partnering with a local law firm that understood both the legal and cultural landscape. Their success was largely due to complete documentation, accurate translation, and proactive court engagement.

Practical Tips for Foreign Investors and Companies

• Hire local counsel experienced in arbitration enforcement;
• Prepare your documents meticulously;
• Use certified translators;
• Understand the nuances of Indonesian public policy;
• Keep communication clear with the court and counsel.

READ MORE:

• Debt Collection in Indonesia: Legal Strategies & Best Practices
• The Differences Between PKPU and Bankruptcy in Indonesia

Practical Commentary from Kusuma & Partners

At Kusuma & Partners, we have assisted numerous clients in enforcing international arbitration awards in Indonesia. Our deep understanding of the Indonesian judiciary and arbitration law enables us to streamline the exequatur process, anticipate possible objections, and safeguard your interests.

Whether you’re dealing with a million-dollar dispute or a smaller commercial claim, we ensure clarity, compliance, and control.

Conclusion

To enforce an international arbitration award in Indonesia, understanding both international commitments and domestic procedural law is crucial. While the process is supported by international treaties and Indonesian law, enforcement requires strategic planning, legal expertise, and cultural awareness.

With the right legal partner, you can turn your arbitration award into an enforceable judgment, ensuring your rights and investments are protected.

How We Can Help

Need to enforce an international arbitration award in Indonesia? Kusuma & Partners Law Firm offers expert legal assistance to ensure swift and secure enforcement. Contact us today to safeguard your interests in Indonesia.

Fill in the form below to get legal 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.”

Indonesia is the world’s treasure chest for minerals—nickel, coal, bauxite, gold, copper, and tin. With over 17,000 islands, Indonesia is not just an archipelago; it is a mining frontier that continues to attract global interest. But before a single shovel hits the ground, a company must secure what is legally non-negotiable: a Mining Business License (IUP – Izin Usaha Pertambangan).

This article is your guide on how to legally and effectively obtain a Mining Business License (IUP) in Indonesia. Whether you’re an investor, a mining company, or a foreign entity looking to enter this sector, this resource is designed to walk you through the legal terrain step-by-step.

Key Takeaways

• A Mining Business License (IUP) is legally required for any mining activity in Indonesia, whether exploration or production.
• Both local and foreign investors can apply, but foreign entities must establish a PMA and meet BKPM and OSS requirements.
• The application process involves legal incorporation, environmental approvals (UKL-UPL or AMDAL), technical plans, and financial proof.
• IUPs are regulated under Law No. 3/2020 and related ESDM regulations, with licenses issued by either local or central authorities.
• Kusuma & Partners offers end-to-end legal support to streamline IUP applications, ensuring full compliance and risk mitigation.

What is a Mining Business License (IUP)?

A Mining Business License (IUP) is a legal permit issued by the Government of Indonesia that grants companies the right to conduct mineral exploration and exploitation activities. It functions both as a legal foundation and as a compliance tool. Without an IUP, any mining activity—no matter how small—is illegal and subject to criminal prosecution.

The IUP ensures:

• Legal certainty for investors
• Environmental accountability
• Access to mineral reserves within a defined area
• Fiscal and regulatory transparency

Legal Framework for Mining Licenses in Indonesia

Indonesia’s mining sector is governed by an intricate set of laws and regulations. The primary legal basis for IUPs is:

• Law No. 3 of 2020 (as an amendment to Law No. 4 of 2009 on Mineral and Coal Mining)
• Government Regulation No. 96 of 2021 on Implementation of Mineral and Coal Mining Business Activities
• Ministry of Energy and Mineral Resources (ESDM) Regulation No. 7 of 2020 on Procedures for Area, Licensing, and Reporting
• OSS-RBA Regulation (Online Single Submission Risk-Based Approach)

These regulations aim to balance investment incentives with resource governance, environmental protection, and community interests.

Types of Mining Licenses in Indonesia

Understanding the types of mining permits is crucial before applying. The most relevant types include:

For most commercial investors, the Mining Business License (IUP) is the go-to license.

Who Can Apply for a Mining Business License (IUP)?

Entities eligible to apply for an IUP include:

1. Indonesian Legal Entities – Domestic companies (PTs)
2. Foreign Investment Companies (PMA) – Must be established under Indonesian law and registered with BKPM (Investment Coordinating Board)
3. State-Owned Enterprises (BUMN) and Regional-Owned Enterprises (BUMD)
4. Cooperatives or individuals, for small-scale IPRs

Foreign investors must set up a PMA company under Indonesian law and comply with foreign ownership limits (as per the Positive Investment List).

READ MORE:

• Setting Up a PT PMA in Indonesia: A Complete Guide for Foreign Investors
• Key Post-Incorporation Compliance for Company in Indonesia

Stages of Mining Activities in Indonesia

The mining lifecycle in Indonesia consists of:

1. Exploration Stage – Initial geological and geophysical studies
2. Feasibility Study Stage – Assessment of reserves, environmental impact, and economic viability
3. Construction Stage – Site preparation and infrastructure
4. Exploitation Stage – Full-scale extraction and production
5. Post-Mining Stage – Reclamation and community rehabilitation

Each stage has different IUP classifications e.g., IUP Eksplorasi vs IUP Operasi Produksi.

Step-by-Step Process to Obtain an IUP

This is the most critical section for businesses. Let’s break it down:

a. Preliminary Corporate Requirements

• Establish a legal company in Indonesia (PT or PMA)
• Register with OSS (Online Single Submission) system
• Obtain NIB (Business Identification Number)
• Secure land data and confirm zoning compatibility

b. Application Submission

• Prepare an official application through the Minerba One Data Indonesia (MODI) system
• Submit to the local ESDM office or directly to the Ministry of ESDM (for strategic minerals)

c. Technical and Administrative Evaluation

Authorities will assess:

• The Work Plan and Budget (RKAB)
• Company legality and management
• Proof of financial capacity and capital adequacy
• Environmental documentation (UKL-UPL or AMDAL)

d. Issuance of the Mining Business License (IUP)

If approved, the IUP will be:

• Registered on the OSS system
• Published in the National Licensing Database
• Associated with a specific WIUP (Mining Permit Area)

Required Documents for the IUP Application

An IUP application includes at least :

• Deed of Establishment & Company Legalization
• Articles of Association
• NIB (Nomor Induk Berusaha)
• Mining technical documents (maps, feasibility study)
• Environmental compliance (UKL-UPL/AMDAL)
• Proof of financial capacity
• Power of attorney (if using a consultant)

Failure to include even one document could lead to automatic rejection.

Authorities Involved in the IUP Process

• Ministry of Energy and Mineral Resources (ESDM): Primary licensing body
• BKPM (now Ministry of Investment): For foreign investment approvals
• Local Governments: District-level IUPs
• Ministry of Environment and Forestry: Environmental and forestry use licenses

Understanding jurisdiction is crucial. Regional mining is governed locally, while cross-province or strategic mineral operations are centralized.

Key Compliance and Reporting Obligations

Once you have secured your Mining Business License (IUP), the work has just begun. IUP holders must:

• Submit quarterly and annual RKAB (Work Plans)
• Report production volumes and sales
• Pay royalties and non-tax state revenues (PNBP)
• Fulfill community development (PPM) programs
• Conduct post-mining reclamation

Failure to report could result in:

• Fines
• License suspension
• Criminal liability under Mining Law Article 161

Common Pitfalls and How to Avoid Them

Here’s what often goes wrong:

• Incomplete application: Especially environmental documents
• Wrong licensing authority: Local vs central confusion
• Undercapitalization: Not meeting minimum capital requirements
• Incorrect WIUP boundaries: Overlapping with protected zones or concessions

READ MORE:

• Merger in Indonesia: A General Overview for Businesses
• Buying Property in Indonesia: A Legal Guide for Foreigners

Practical Commentary from Kusuma & Partners

We often assist clients who attempted to apply on their own and ran into major setbacks—wrong WIUPs, delayed environmental approvals, or rejected due to weak financial documentation. These errors cost months of time and millions in opportunity loss. Our firm has deep working knowledge with ESDM and local governments to ensure your Mining Business License (IUP) is issued efficiently and correctly.

Conclusion

Securing a Mining Business License (IUP) is not just a regulatory step—it’s a strategic advantage. A properly issued and managed IUP ensures your business is protected, profitable, and respected by the government and communities.

How We Can Help

Don’t leave your mining business vulnerable to costly delays or legal exposure. Let us handle your licensing and compliance so you can focus on growing your investment in Indonesia’s booming mineral sector.

Fill in the form below to get our legal 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.”

Indonesia has launched Danantara, a sovereign wealth fund (SWF) aimed at consolidating state assets, attracting foreign investment, and fueling long-term economic development. This initiative aligns with the country’s strategy to ensure sustainable growth through responsible and transparent investment practices.

Key Takeaways:

• Danantara is Indonesia’s new sovereign wealth fund created to boost long-term national investment.
• It is governed by Law Number 1 of 2025, Government Regulation Number 10 of 2025, and Presidential Decree Number 30 of 2025.
• The fund aims to attract both domestic and foreign capital for strategic sectors.
• Legal safeguards offer protection to investors through transparency, compliance, and governance.
• Danantara differs from INA by focusing more on long-term, future-oriented development.

Legal Foundations of Danantara

Law Number 1 of 2025

This law serves as the principal legal foundation for Danantara. It formally establishes Danantara as a sovereign wealth fund with independent legal personality. The law outlines:

• The creation and legal form of Danantara as a state-owned investment institution.
• Its core function to manage and grow state assets through investment.
• Governance structures including a Supervisory Board and Executive Board.
• Clear principles of accountability, professionalism, and transparency.
• Mandated compliance with international best practices in sovereign fund management.

Government Regulation Number 10 of 2025

As a derivative of the primary legislation, this regulation clarifies the operational and technical mechanisms of Danantara, including:

• Types of investments Danantara may pursue.
• Criteria for investment selection and portfolio diversification.
• Risk management protocols aligned with global standards.
• Performance monitoring and reporting duties to the Ministry of Finance and Parliament.
• Incentives for partnerships with foreign and domestic investors.

Presidential Decree Number 30 of 2025

This decree was issued to enforce the practical implementation of Danantara’s establishment, such as:

• Official operationalization and initial funding of Danantara.
• Appointment of board members with proven competence and integrity.
• Strategic investment targets focusing on infrastructure, innovation, and energy.
• Transfer of certain state assets to be professionally managed by Danantara.

These instruments ensure Danantara functions as a robust, legally sound, and accountable entity aligned with national goals.

Purpose and Vision of Danantara

Danantara is designed to:

• Maximize long-term returns on state assets.
• Finance infrastructure, digital transformation, green energy, and strategic sectors.
• Attract institutional investors by providing a credible and independent investment platform.
• Support fiscal stability by diversifying government revenue sources beyond taxes and natural resources.

READ MORE:

• Setting Up a PT PMA in Indonesia: A Complete Guide for Foreign Investors
• New Tax Audit Procedures in Indonesia : Key Updates and Implications for Taxpayers

How Danantara Differs from the Indonesia Investment Authority (INA)

Danantara complements, not replaces, INA—focusing more on sovereign-level development and generational wealth-building.

Structure and Governance of Danantara

Danantara’s structure prioritizes independence and professionalism:

• Supervisory Board: Appointed by the President, consisting of professionals and ex-officio ministers.
• Executive Board: Responsible for daily operations and strategic decisions.
• Internal Audit and Compliance Units: Enforce transparency and risk controls.

Investment Mandates and Strategic Focus

Under Government Regulation No. 10/2025, Danantara is mandated to invest in:

• Critical infrastructure (ports, toll roads, airports)
• Energy transition projects (solar, geothermal)
• Technology startups and digital transformation
• Strategic reserves (food, health, and defense)
• Internationally diversified assets for returns and risk management

Opportunities for Foreign and Domestic Investors

Danantara provides an inclusive, transparent, and professionally managed investment platform for both foreign and domestic investors. Key opportunities include:

• Equity Co-Investment: Investors can participate directly in Danantara’s portfolio projects, including infrastructure, energy, and technology sectors.
• Public-Private Partnerships (PPP): A structured avenue to collaborate with government-backed entities with reduced political and legal risk.
• Strategic Project Access: Investors will be prioritized for access to high-impact projects identified in the National Medium-Term Development Plan (RPJMN).
• Stable and Predictable Returns: Danantara’s focus on commercially viable, state-supported projects ensures a strong potential for sustainable returns.
• Legal and Institutional Certainty: Backed by robust laws and policies, investors are assured of legal clarity and enforceability of contracts.
• Capital Market Linkages: Domestic investors, including pension funds and SOEs, can tap into Danantara’s projects through syndicated funds or special purpose vehicles (SPVs).

These opportunities make Danantara a strategic gateway for long-term, responsible, and profitable investments aligned with Indonesia’s development goals.

Legal Safeguards and Risk Mitigation for Investors

Investor protections include:

• Protection under bilateral investment treaties (BITs).
• Access to international arbitration forums (ICSID, UNCITRAL).
• Guarantees of non-expropriation and fair treatment.
• Legal rights embedded through shareholders’ agreements and regulatory contracts.

Compliance and Regulatory Considerations

Investors must comply with:

• OJK regulations for capital markets and financial reporting.
• BKPM rules for foreign direct investment.
• ESG and anti-corruption standards under Presidential Instruction.

Legal structuring is key—particularly for tax optimization, sectoral permits, and dispute resolution frameworks.

How Danantara Supports National Development

Danantara is pivotal to:

• Financing Indonesia’s Golden Indonesia 2045 vision.
• Mobilizing capital without over-reliance on APBN.
• Encouraging innovation, entrepreneurship, and sustainable industries.
• Strengthening Indonesia’s sovereign balance sheet.

Challenges and Criticisms

Concerns exist, including:

• Risk of bureaucratic interference or mission creep.
• Long lead time for return on investment.
• Need for continuous capacity building and international partnerships.

Addressing these will require robust governance and civil society oversight.

Practical Commentary from Kusuma & Partners Law Firm

We believe Danantara is a breakthrough for Indonesian economic governance. However, legal due diligence, structuring of joint investments, and navigation of regulatory frameworks are crucial. Our firm is ready to advise both public and private stakeholders.

Conclusion

Danantara marks a new era for Indonesia’s strategic financial management. It is not just a fund—it’s a sovereign instrument to shape the country’s future. By understanding its legal base and operational structure, investors and policymakers can unlock real opportunities while upholding public accountability.

How We Can Help

At Kusuma & Partners Law Firm, we offer professional legal support for stakeholders engaging with Danantara, including:

• Structuring investments that align with the Danantara framework.
• Drafting and negotiating joint venture agreements.
• Regulatory compliance and licensing.
• Managing risks through contractual protections and due diligence.

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“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.”