Setting up in Indonesia rewards preparation more than speed. The country’s licensing system is largely digital, but it links your company’s legal structure, capital, business activities and reporting duties so tightly that an early mistake, such as a poorly chosen activity code, can follow the company for years. This guide explains how each piece fits together, so you can plan the structure before you speak to a notary.

Why Register a Company in Indonesia?

Indonesia is Southeast Asia’s largest economy and one of its largest consumer markets. For foreign businesses, though, the more practical question is how much of that market they can access directly. The answer has improved considerably over the past five years.

The Positive Investment List, introduced in 2021 and amended the same year, opened more than 200 business lines to foreign investment, including transportation, energy and telecommunications. The general rule is that a sector is open to 100% foreign ownership unless a specific limitation applies. Only a handful of activities, such as gambling and chemical weapons production, are closed outright.

Capital requirements have also eased. In October 2025, a new Ministry of Investment regulation cut the minimum paid-up capital for foreign-owned companies from IDR 10 billion to IDR 2.5 billion. That brings a local entity within reach of mid-sized service businesses that previously found the entry cost too high.

Choosing the Right Business Structure

Indonesian law recognizes several business forms, but only a few are open to foreign owners. The choice comes down to one question. Does your Indonesian presence need to earn revenue, or only represent a parent company abroad?

PT PMA (Foreign Investment Limited Liability Company)

The PT PMA is the only company type that accepts foreign shareholders, and even a single foreign-owned share makes a company a PT PMA. It can sign contracts, invoice customers, hire staff and hold business licenses.

A PT PMA needs at least two shareholders, one director and one commissioner at all times. The board of commissioners supervises the directors, and the same person cannot hold both roles. Foreign ownership is capped only where the Positive Investment List imposes a limit on a particular activity.

Representative Office (KPPA)

A KPPA (Kantor Perwakilan Perusahaan Asing) is a general representative office that supervises, coordinates and represents its foreign parent, and it can prepare for a future PT PMA. It cannot earn income in Indonesia or buy and sell goods or services with Indonesian parties.

A KPPA needs no paid-up capital, can employ local and foreign staff, and must operate from a commercial office in a provincial capital. Under the 2025 rules, every representative office now needs a business identification number (NIB) valid for three years, renewable, and must file activity reports through OSS every six months.

Foreign Trade Representative Office (KP3A)

A KP3A (Kantor Perwakilan Perusahaan Perdagangan Asing) serves foreign trading companies. It operates as a selling agent, manufacturer’s agent or buying agent. Its role covers promotion, market surveys and liaison, but it cannot close sales itself. The 2025 framework also created a separate KP3A category for electronic commerce.

Foreign Construction Representative Office (BUJKA)

Foreign construction firms use a BUJKA (Badan Usaha Jasa Konstruksi Asing) representative office to take part in Indonesian construction projects. Unlike other representative offices, BUJKA offices report their investment activity annually rather than every six months.

Comparison of Common Business Structures in Indonesia

Structure Common purpose Pros Cons
PT PMA Trading, services, manufacturing and any revenue-earning activity Full commercial capacity; up to 100% foreign ownership in open sectors IDR 2.5 billion paid-up capital; investment plan above IDR 10 billion per KBLI; quarterly investment reporting
KPPA Liaison, coordination and market preparation No capital requirement; can sponsor foreign staff Cannot earn income or trade; must be in a provincial capital
KP3A Promotion and agency work for foreign trading companies Low commitment presence for trading groups Cannot conclude sales; activities limited to agency roles
BUJKA Foreign participation in construction projects Sector-specific route into construction Limited to the construction sector

To choose between them, work through these questions in order.

  • Will you invoice Indonesian customers? If so, only a PT PMA will work. Representative offices are barred from earning local income.
  • Is your activity on the Positive Investment List with a cap or conditions? Check your KBLI codes before settling on an ownership split. A capped activity may require a local partner.
  • Can you fund the capital plan? A PT PMA must deposit IDR 2.5 billion and show a credible plan to invest more than IDR 10 billion per activity code. A representative office avoids both requirements.

Indonesia's Legal and Regulatory Requirements for Companies

Indonesian corporate compliance involves more authorities than many investors expect. The Ministry of Law approves the company’s legal status. The Ministry of Investment (BKPM) administers licensing through OSS. The Directorate General of Taxes handles tax, and sector ministries verify higher-risk activities.

Key Business Regulations in Indonesia

  • Risk-based licensing. Government Regulation 28 of 2025 now governs licensing, and each KBLI code carries one of four risk levels. Low-risk activities need only an NIB, medium-risk activities add a standard certificate, and high-risk activities need a full license.
  • Operational legality. Medium-high and high-risk businesses may only carry out preparatory work until verification or the license is complete. Companies in those categories should not plan to trade on the day they receive the NIB.
  • Capital and investment. The IDR 10 billion investment test usually excludes land and buildings. Property, accommodation and certain agricultural activities may count them.
  • Activity codes. BPS, the national statistics agency, issued KBLI 2025 in December 2025 to replace KBLI 2020. Confirm which version OSS applies when you file.

Tips for Staying Compliant with Indonesian Laws

Most compliance failures in Indonesia come from reports that no one owned, rather than deliberate breaches. These habits prevent the common ones.

  • Assign an owner for each reporting clock. Investment reports, tax filings and the annual report to the Ministry of Law run on different schedules. Putting one person in charge of each avoids the gaps that trigger warnings.
  • Keep your KBLI codes aligned with what you actually do. Operating outside your registered activities can be treated as unlicensed operation. It can also hold up bank financing and partner due diligence.
  • Update OSS whenever your business changes. Licensing records, investment figures and ownership data all feed later filings. An outdated profile can block amendments and reports when you need them.

Step-by-Step Process to Set Up a Company in Indonesia

For a PT PMA, the process moves from planning through the notary and the Ministry of Law, then into OSS licensing. Most low-risk registrations take around two weeks from notarization to NIB. Regulated sectors can take one to two months or more.

1

Map Your KBLI Codes and Check the Positive Investment List

Everything that follows depends on this step. Identify each activity the company will carry out, match it to a KBLI code, and check its risk level and any foreign ownership limit. Each code generally carries its own investment commitment of more than IDR 10 billion. Wholesale trade is assessed on the first four digits and food and beverage services per location, so adding codes casually can multiply your required investment plan.

2

Obtain Italian Tax Codes for Every Founder and Director

Foreign shareholders sign powers of attorney for the notary, and corporate shareholders provide constitutional documents that may need legalization depending on their home country. The company name must be at least three words and approved by the Ministry of Law. You will also need a business address, supported by a lease and domicile documents. Some sectors now require a verified physical office rather than a virtual office address.

3

Sign the Deed of Establishment Before an Indonesian Notary

The notary prepares the deed of establishment, which contains the articles of association, share capital, shareholders, directors and commissioners. Shareholders or their attorneys sign it before the notary. Budget for administrative details as well, such as the Ministry of Law’s requirement for a separate phone number for each shareholder and for the company.

4

Obtain Ministry of Law Approval and the Tax ID

The notary submits the deed electronically to the Ministry of Law. Approval, including tax ID (NPWP) processing, typically takes three to seven business days. Once the approval decree is issued, the PT legally exists.

5

Register in OSS and Receive the NIB

The company registers in OSS, enters its KBLI codes, investment plan and location, and receives its NIB. For low-risk activities, the NIB is issued automatically and takes effect immediately. For medium-low risk, a self-declaration activates the standard certificate. Medium-high and high-risk activities require verification or a license from a technical ministry or regional licensing office before operations begin.

6

Open the Bank Account and Deposit the Paid up Capital

After the deed is issued, shareholders deposit the paid-up capital into the company’s Indonesian bank account. The deposit must be evidenced by a bank statement and declared in OSS, and the funds are subject to restrictions for the first year, which the FAQs explain.

7

Register Employees and Start Reporting

Before hiring, register the company with BPJS Kesehatan (health insurance) and BPJS Ketenagakerjaan (employment social security). Investment reporting also begins from the company’s first full quarter.

Hiring and Managing Employees

Employment costs in Indonesia vary sharply by location, and foreign hires involve a separate permit process. Both should shape your hiring plan before you choose a city.

Minimum wages are set by province and, in many areas, by city or regency. Jakarta’s provincial minimum wage for 2026 is IDR 5,729,876 per month, up 6.17% on 2025, while some Central and West Java areas are around IDR 2.3 million. On top of salary, employers pay 4% for BPJS Kesehatan, 3.7% for old-age savings (JHT), 2% for pension (JP), 0.3% for death benefit (JKM) and 0.24% to 1.74% for work accident insurance (JKK), depending on the industry’s risk level.

Hiring foreign nationals starts with a Foreign Worker Utilization Plan (RPTKA) approved by the Ministry of Manpower. The employer then pays a levy called DKP-TKA of US$100 per position per month, after which immigration issues the stay permit, usually an E23 work KITAS. Foreign workers employed for more than six months must also be enrolled in BPJS Ketenagakerjaan.

If you need people in Indonesia before your PT PMA is licensed, an Employer of Record in Indonesia can employ them compliantly in the meantime.

Tips for Recruiting and Retaining Local Talent

Competing for skilled staff in Indonesia depends as much on benefits and structure as on base pay. These points help.

  • Budget for THR, the mandatory religious holiday allowance. Every employee is entitled to it. Treat it as part of annual compensation, not a discretionary bonus.
  • Offer private health cover for professional roles. BPJS Kesehatan works through a tiered referral system that many professionals find slow. Private medical insurance is often the first benefit Jakarta candidates ask about.
  • Compare locations before you commit. The same role can cost significantly more in Jakarta than in regional cities. A local recruitment agency in Indonesia can benchmark pay and talent availability across regions.

Financial Management and Reporting

A PT PMA reports to three authorities on three separate schedules. Planning finance operations around all three from day one avoids penalties that can restrict the company’s ability to make later filings.

Corporate income tax is 22% of net taxable profit in 2026. New companies should plan on that rate from the start. Government Regulation 20 of 2026, effective April 22, 2026, narrowed the 0.5% final tax on turnover so it no longer covers newly established limited liability companies. VAT has a statutory rate of 12%, but most goods and services are taxed on a base of 11/12 of the price, giving an effective rate of 11%. Only luxury goods pay the full 12%. All tax filings run through Coretax, the tax authority’s system, which has been mandatory since 2025.

A PT PMA also files investment activity reports (LKPM) through OSS every quarter, due by the 15th of the month after each quarter ends. On the corporate side, a Ministry of Law regulation effective December 17, 2025, requires the directors’ annual report to be approved by shareholders within six months of the financial year-end. The approval must be recorded in a notarial deed and submitted to the Ministry through its SABH system within 30 days.

Common Pitfalls to Avoid

These errors are easy to make in a company’s first year, and each has consequences beyond a fine.

  • Missing the new annual report deadline. The Ministry of Law can issue warnings and then suspend the company’s access to SABH if it still hasn’t complied 30 days later. A suspended account can hold up share transfers, director changes and other corporate actions until it is restored.
  • Treating the LKPM as a formality. An LKPM counts as filed only once the regional licensing office approves it, not when it is submitted. Reports that are rejected or sent back for correction still need follow-up before the deadline.
  • Building a financial model on the 0.5% final tax. Older guides still describe this regime as available to new companies. Since April 2026, a new PT PMA should budget on the standard corporate tax framework.

Tips for Operating Successfully in Indonesia

Companies that do well in Indonesia treat the licensing system as a live record of the business, not a one-time hurdle. Most practical problems come from records drifting away from what the company actually does.

Plan your activity codes around your realistic next two to three years, not just your first product. Each additional code can raise your investment commitment, but trading outside your registered activities creates licensing risk. Reviewing the codes once a year, before you launch new services, is far cheaper than fixing gaps under audit.

Invest in local finance and legal support early. Indonesia’s rules change frequently, often through implementing regulations published in Indonesian first. An in-house or outsourced team that follows those changes will spot new obligations before they become problems.

Common Mistakes to Avoid

  1. Assuming the old IDR 10 billion rule still describes the whole requirement. Paid-up capital dropped to IDR 2.5 billion, but the investment plan above IDR 10 billion per KBLI remains. Investors who confuse the two either overcommit cash or register a plan they can’t support.
  2. Using a representative office to earn revenue. A KPPA cannot sign sales contracts or earn Indonesian income. Once commercial activity starts, you need a PT PMA to operate lawfully.
  3. Starting operations on the NIB alone in a higher-risk sector. For medium-high and high-risk activities, the NIB only permits preparation until verification or licensing is complete. Trading before that point exposes the company to sanctions.
  4. Letting a foreign hire start before the permits are complete. The RPTKA approval and stay permit must be in place before the employee begins work. Early starts create immigration liability for both the employee and the company.

Why Now is the Right Time to Register a Company in Indonesia

Indonesia’s 2025 and 2026 reforms have made entry cheaper and the rules clearer, even as compliance has tightened. That combination favors investors who set up carefully.

The lower paid-up capital requirement opens the PT PMA to smaller service businesses. The updated OSS framework also brings more activities under standardized, published rules. The stricter annual reporting, beneficial ownership checks and tax changes add work, but they also mean a company registered today starts under a settled framework instead of adjusting mid-stream.

Ready to register your company in Indonesia? RemotePeople’s company registration services can help you map your KBLI codes, work with the notary and complete OSS licensing, then support your first local and foreign hires.

Frequently Asked Questions

Yes, for business purposes. The capital can fund operating expenses, asset purchases or construction. It cannot be moved out of the company account for non-business purposes during the first 12 months, so keep documentation showing how the funds were used.

At least one director must be resident in Indonesia, and a foreign director who will work there needs a KITAS. Because a director cannot also serve as commissioner, a minimum setup needs at least two different individuals on the boards.

Not as freehold. Freehold title (Hak Milik) is reserved for Indonesian citizens. A PT PMA can instead hold registered land rights such as the right to build (Hak Guna Bangunan), which is how most foreign-owned companies hold offices and factories.

Yes. Ministry of Manpower rules bar foreigners from certain positions, particularly human resources and industrial relations roles such as HR manager and employee mediator. Check the current list before planning an expatriate hire into a people-management position.

You can add a KBLI code to your existing NIB through OSS, and the NIB number stays the same. Low-risk codes usually activate immediately. Medium and high-risk codes require a standard certificate or license, and missing the one-year window to fulfill those commitments can lead to revocation.