Risk-Based Business Licensing in Indonesia: BKPM Regulation No. 5 of 2025 Consolidates the 2021 Regime

The Investment Coordinating Board (BKPM) has enacted Regulation No. 5 of 2025 on the Implementation of Risk-Based Business Licensing through the Online Single Submission (OSS) System, effective 1 November 2025. This new regulation consolidates and refines various prior implementing rules under Government Regulation No. 5 of 2021 on Risk-Based Business Licensing (“GR 5/2021”).

The issuance of BKPM Regulation 5/2025 is closely aligned with the amendments introduced under Law No. 6 of 2023 on Job Creation, ensuring uniformity across Indonesia’s licensing ecosystem. It streamlines administrative overlaps, strengthens digital integration, and enhances policy coherence among government institutions.

Under the new regime, business activities are classified according to risk level—low, medium-low, medium-high, and high—based on Health, Safety, Environmental, and Resource (HSER) criteria. This risk-based approach continues Indonesia’s regulatory reform trajectory, prioritizing efficiency, transparency, and accountability in business licensing.

Impact on Businesses

BKPM Regulation 5/2025 affects all business actors, both local (PT PMDN) and foreign (PT PMA) operating through the OSS platform. The regulation aims to streamline licensing while imposing stricter data governance and compliance obligations.

Key Implications:

1. Risk Reclassification Across Industries
   Several industries have been reassessed under new HSER matrices. Certain sectors such as manufacturing, construction services, and renewable energy experience a downward adjustment (simpler licensing), while others such as waste management and data centers face higher compliance obligations.
2. Mandatory OSS Data Synchronization
   Businesses must confirm or update their OSS profiles within six months (by 30 April 2026) to maintain NIB validity. Failure to comply will automatically suspend licensing access.
3. Integrated Post-Licensing Monitoring
   Compliance monitoring is now fully centralized within OSS. Reporting obligations (e.g., environmental compliance, manpower data, investment realization) are electronically transmitted to relevant ministries.
4. Transition of Existing Licenses
   NIBs issued before 1 November 2025 remain valid until 31 May 2026, after which businesses must complete migration to OSS v.1.2.
5. Automated Administrative Sanctions
   BKPM has introduced digitalized sanctions ranging from electronic warnings to automatic revocations, minimizing human intervention and enforcing regulatory discipline.

These changes reflect a policy shift from procedural control to data-driven compliance, reinforcing Indonesia’s commitment to good governance and investor confidence.

Key Changes

1. Scope and Applicability

The new regulation extends OSS risk-based licensing coverage from 16 to 22 business sectors, adding:

• Fintech and digital payments;
• Data center and cloud services;
• Carbon trading and renewable projects;
• Digital marketplaces and creative industries.

All these sectors must undergo risk classification before operational approval. The automated risk mapping system ensures consistent application across ministries.

2. New Procedures and Requirements

Key procedural reforms include:

• Data Integration: OSS now cross-verifies corporate, tax, and environmental data across ministries.
• Technical Validation: Sector-specific permits (e.g., construction, energy) are automatically matched with risk category requirements.
• Digital Environmental Licensing: Companies must upload AMDAL/UKL-UPL documents using standardized templates approved by KLHK.
• Periodic Reporting: Business actors are now required to submit performance and compliance reports every six months via OSS.

3. Sanctions and Compliance

Administrative sanctions now follow a three-tier escalation process:

1. Warning Letter (7 days)
2. Suspension of NIB and portal access (30 days)
3. License Revocation if violations remain unresolved.

In addition, BKPM may publish sanctioned entities on the National Compliance Registry, potentially impacting reputation and financial standing.

4. Transitional Provisions

Businesses are encouraged to appoint dedicated licensing compliance officers to manage OSS updates and prevent administrative delays.

READ MORE:

• OSS RBA (Online Single Submission Risk-Based Approach) in Indonesia: How It Works and Why It Matters
• Business Licensing in Indonesia: What Foreign and Local Companies Must Know

What to Expect

BKPM and relevant ministries are expected to issue technical guidelines to operationalize the regulation:

• Circular Letter on Revised Risk Matrix (Q1 2026) to align sectoral classifications.
• Joint Regulation with KLHK and Kemenperin to coordinate environmental and industrial licensing.
• API Integration Manual for OSS v.1.2 to support system interoperability for large-scale businesses.

To prepare, companies should:

1. Conduct a licensing gap analysis to identify licenses requiring revalidation.
2. Ensure consistency between OSS data and MoLHR corporate registry.
3. Update environmental documentation in line with risk-based thresholds.
4. Establish internal monitoring systems to ensure timely reporting.
5. Seek professional legal assistance to interpret sector-specific obligations.

This transition marks Indonesia’s continued commitment to regulatory modernization and the creation of a predictable, investment-friendly business environment.

Practical Commentary from Kusuma & Partners Law Firm

From our professional perspective, BKPM Regulation 5/2025 is a pivotal reform toward a data-integrated and risk-based regulatory framework. By reducing redundancy and enhancing accountability, this regulation will significantly improve the ease of doing business and reduce corruption risk associated with manual approvals.

However, businesses must remain vigilant during the transition phase. The short compliance window and mandatory data accuracy standards will likely pose operational challenges, particularly for companies with multiple subsidiaries or cross-sector activities.

To mitigate these risks, investors should adopt a compliance-by-design approach, integrating OSS obligations into corporate governance, and appointing dedicated personnel to oversee periodic reporting and license renewals. Over time, this digital framework will make Indonesia’s licensing system more transparent, predictable, and investor-oriented.

READ MORE:

• Shares Purchase Agreement (SPA) Under Indonesian Law
• Key Post-Incorporation Compliance for Company in Indonesia

Conclusion

BKPM Regulation No. 5 of 2025 represents Indonesia’s most comprehensive step toward a unified and transparent Risk-Based Business Licensing in Indonesia. By consolidating multiple regulations into a single integrated framework, it simplifies administrative processes while elevating accountability through data centralization.

Businesses operating in Indonesia especially those in regulated sectors must act promptly to review their OSS profiles, synchronize licensing data, and ensure full compliance by the transition deadline.
Early adaptation will not only prevent administrative sanctions but also demonstrate good corporate governance in the eyes of regulators and investors.

In essence, this reform reinforces Indonesia’s ambition to become a digitally driven and compliance-oriented investment hub in ASEAN.

How We Can Help

For companies and investors seeking guidance on how to comply with BKPM Regulation No. 5 of 2025, we recommend the following actions:

• Conduct a comprehensive compliance audit covering all licenses, permits, and OSS data.
• Engage professional legal counsel to interpret sector-specific provisions and manage license migration.
• Align corporate data (shareholding, location, and KBLI codes) with OSS and MoLHR records.
• Implement digital compliance tools to automate periodic reporting.
• Stay updated on forthcoming circulars and ministerial guidelines related to OSS v.1.2 implementation.

For tailored advice or legal assistance on Risk-Based Business Licensing in Indonesia, please contact Kusuma & Partners Law Firm.

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.”