How difficult is it to stay legally compliant while doing business in Indonesia? With a population of more than 270 million people and one of the largest consumer markets in Southeast Asia, Indonesia attracts thousands of new businesses each year, both domestic and foreign. Indonesia is one of Southeast Asia’s largest economies, supported by a regulatory framework that spans corporate law, licensing, taxation, employment, and ongoing reporting.
These requirements are administered by multiple authorities and apply at different stages of a company’s operations. In practice, compliance obligations often become visible only when a business expands, hires employees, or undergoes regulatory review.
This article sets out a structured checklist of the core legal compliance requirements businesses in Indonesia must address in 2026. It brings these obligations together in one place to help companies identify risks early and manage compliance with greater clarity and consistency.
Business Registration and Legal Entity Formation in Indonesia
In Indonesia, business registration is the mechanism through which an enterprise is formally recognised by the state and brought within the country’s regulatory framework. The procedure involves setting up a legally recognised structure, assigning core identifiers through the government’s centralised systems, notarising the corporate constitutional documents, and obtaining approval from the relevant ministry.
These procedures are accompanied by specific other requirements, including ownership structure, capital participation, and corporate governance, which differ significantly between domestically and foreign-owned companies.
Registration functions not as a single administrative act but as a sequence of approvals that, together, determine whether a business may operate, enter into binding agreements, employ staff, and access capital. Deficiencies at this stage rarely cause immediate disruption, but they tend to surface later, when a company attempts to expand, attract investment, or respond to regulatory scrutiny.
What are the Key Compliance Areas and Procedural Requirements?
| Compliance Area | Process | Remarks |
|---|---|---|
| Name Reservation | Choose a unique company name approved under Indonesian rules | Required before notarisation and government filing |
| Deed of Establishment | Deed prepared by an Indonesian notary defining the structure, activities, capital, and management | Forms the legal foundation of the company |
| Ministry Approval | Approval from the Ministry of Law and Human Rights | The company legally comes into existence |
| Registered Address | Registered business address in Indonesia | Needed for tax, licensing, and banking |
| Tax Registration (NPWP) | Registration with tax authorities to obtain a Tax ID | Enables tax filings and compliance |
| Business ID (NIB) | Registration through OSS to obtain NIB | Primary business identifier and access to licenses |
| Sector Licenses | Additional permits based on business activity and risk | Allows lawful operation in specific sectors |
| Bank Account | Corporate bank account opening | Required for capital deposit and transactions |
Basic Legal and Structural Requirements for Companies in Indonesia
| Requirement | Minimum Standard |
|---|---|
| Shareholders | Minimum 2 shareholders |
| Management | At least 1 director and 1 commissioner |
| Capital | Higher minimum capital for foreign-owned companies |
| Ownership | Foreign ownership is allowed only in approved sectors |
| Office | Permanent registered office in Indonesia |
Ongoing Compliance After Registration in Indonesia for Businesses
1. Corporate Governance
The board meeting and annual general meeting of shareholders must be held in compliance with the law. Minutes and resolutions must be kept.
2. Financial Reporting and Audits
Every company shall prepare and maintain financial statements in accordance with applicable accounting standards. Where prescribed based on the company’s size, nature of business, or sector, such financial statements shall be subject to audit by an authorised auditor and submitted to the relevant regulatory authorities within the stipulated time period.
3. Tax Compliance
Every company shall comply with all applicable tax laws, including the timely filing of monthly and annual tax returns, payment of withholding taxes, and reporting of corporate income tax. Failure to comply with such obligations shall attract penalties, interest, and may result in an audit or enforcement action by the tax authorities.
4. Employment and Labour Compliance
Every company shall comply with the laws of the One Nation. Such compliance shall include the execution of lawful employment contracts, adherence to minimum wage regulations, registration of employees with mandatory social security schemes, and observance of prescribed procedures for termination of employment.
5. Management and Structural Changes
Any change in the composition of directors, commissioners, shareholders, or in the company’s capital structure shall require prior approval or formal notification to the competent authority, as applicable. Any corporate action undertaken without such approval or notification shall be deemed invalid and may result in regulatory sanctions.
Licensing and Business Permits for Businesses in Indonesia
In Indonesia, business licensing represents the regulatory process that outlines what a registered company is legally allowed to do. While registration establishes legal existence, licensing governs operational authority. A company can be fully incorporated but unable to undertake commercial activity until the relevant licenses have been issued. The Business Licenses and Permits Requirements vary depending on the nature of the business, the security classification, and the regulatory risk associated with the operation.
Indonesia has adopted a risk-based licensing system, processed through the Online Single Submission (OSS) system. Accordingly, business activities are ranked and classified by risk level, based on which the specific number and type of licenses required are determined. For low-risk activities, registration is sufficient to begin operations, while medium- and high-risk activities require subsequent approvals, verifications, or sectoral clearances before commencing operations.
Key Licensing Categories in Indonesia
| License Category | Applicability | Regulatory Purpose |
|---|---|---|
| Operational Licenses | Before commencing day-to-day business activities | Confirms the business meets basic regulatory standards for its sector |
| Commercial Licenses | When engaging in revenue-generating activities such as trading or service delivery | Permits the company to earn income from its operations legally |
| Sector-Specific Licenses | For businesses operating in regulated industries | Authorises operations subject to industry-specific technical, capital, or competency conditions |
| Environmental and Location-Based Approvals | For businesses with physical facilities or ecological impact | Allows operations at approved locations and ensures environmental compliance |
Risk Classification and Regulatory Oversight
Licensing requirements rise with regulatory risks. For medium and high-risk businesses, the following apply:
- Pre-operational verification
- Periodic compliance reporting
- Technical inspections
- License renewal or validation requirements
Failure to comply with risk-based requirements may result in the suspension or revocation of licenses, regardless of their current registration status.
Operating without the appropriate permits or beyond the scope of issued licenses exposes a company to administrative sanctions. These may include fines, operational shutdowns, blacklisting of business activities, or restrictions on future licensing. In regulated sectors, non-compliance may also attract criminal or civil liability.
Tax Registration and Ongoing Tax Compliance in Indonesia
A company carrying on business activities in Indonesia shall register with the tax authority. Such registration shall be made upon commencement of business activities. The company shall also obtain a Taxpayer Identification Number (Nomor Pokok Wajib Pajak). The company will be subject to corporate income tax, withholding tax, and value-added tax where applicable. Tax obligations are supposed to apply for as long as the company exists. Failure to comply with tax obligations shall give rise to penalties, audits, or enforcement actions in accordance with law.
| Step | Legal Requirement | Regulatory Purpose and Effect |
|---|---|---|
| Taxpayer Registration (NPWP) | Every company is required to register with the competent tax office to obtain a Taxpayer Identification Number (Nomor Pokok Wajib Pajak). | Establishes the company’s identity within the national tax system and serves as the primary reference for tax reporting, payment, audit, and enforcement actions. |
| VAT Registration (PKP Status) | Companies that meet the prescribed turnover threshold or engage in taxable supplies are required to register as VAT-able entrepreneurs (Pengusaha Kena Pajak). | Authorises the collection, crediting, and reporting of value-added tax in accordance with applicable tax laws. |
| Payroll and Withholding Tax Registration | Companies that employ personnel or make payments subject to withholding tax must register for applicable withholding obligations, including employee income tax and statutory deductions. | Ensures lawful deduction, remittance, and reporting of withholding taxes to the tax authority. |
| Tax Office Domicile Alignment | Tax registration must correspond to the company’s registered business domicile. Any change in registered address must be formally notified to the tax authority. | Maintains jurisdictional accuracy for tax administration, correspondence, audits, and enforcement proceedings. |
General Tax Registration Requirements for Indonesian Businesses
1. Legal Existence
Tax registration may be carried out only after the company has been validly incorporated and has obtained legal recognition under the applicable corporate law framework.
2. Registered Business Address
A verifiable registered business address is required for tax registration and official correspondence with the tax authority.
3. Authorised Signatory
Tax registrations and filings are undertaken by a person legally authorised to act on behalf of the company, including a director or a duly appointed tax representative.
Key Ongoing Tax Compliance Obligations for Indonesian Companies
1. Corporate Income Tax
It is the company’s obligation to calculate the corporate income tax due, make the payment as required, and submit the annual income tax returns as needed.
2. Monthly Tax Filings
Companies are required to submit periodic tax returns every month, covering withholding taxes, value-added tax, where applicable, and any other statutory tax that may arise from business transactions.
3. Withholding Tax Obligations
Where payments are subject to withholding tax, the company is responsible for deducting the tax, remitting it to the tax authority, and reporting the transaction within the prescribed time limits.
4. Tax Payments and Documentation
Tax payments must be supported by appropriate documentation and recorded in accordance with statutory record-keeping requirements.
Employment and Labour Law Compliance in Indonesia
In Indonesia, employment compliance regulates the legal relationship between employers and employees. A business entity hiring staff is obligated by law to comply with labour laws. This applies to all business entities regardless of their nature. This non-compliance does not impact the legal existence of a business entity. However, it may lead to administrative action against it under the law.
Key Compliance Area and Procedural Requirements for Employment Compliance
| Compliance Area | Legal Requirement | Regulatory Purpose |
|---|---|---|
| Employment Agreements | Every employment relationship must be evidenced by a written employment agreement specifying the nature of employment, remuneration, working hours, term of service, and other conditions prescribed by labour law. | Establishes the legal basis of the employer–employee relationship and ensures the enforceability of employment terms. |
| Employee Classification | Employees must be classified in accordance with applicable law, including permanent and fixed-term employment categories. Fixed-term employment must comply with statutory limits on duration and renewal. | Ensures lawful use of employment categories and prevents worker misclassification. |
| Minimum Wage Compliance | Employers are required to pay wages in accordance with the applicable minimum wage set at the national, provincial, or regional level. Payment below the prescribed minimum wage is prohibited. | Protects employee wage rights and ensures compliance with statutory wage standards. |
| Working Hours and Overtime | Working hours, rest periods, and overtime must comply with labour law. Overtime work is subject to prescribed limits, prior authorisation, and compensation at statutory rates. | Regulates working conditions and safeguards employee welfare. |
| Social Security Registration | Employers must register employees with mandatory social security programs, including health insurance, employment injury coverage, old-age benefits, and pension schemes. | Ensures employee access to statutory social protection and benefits. |
General Employment Requirements
1. Workplace Policies
Companies employing a prescribed minimum number of employees are required to adopt internal employment regulations or collective labour agreements governing workplace conduct and conditions.
2. Occupational Safety and Health
Employers must provide a safe and healthy environment for the employees and meet the occupational health and safety standards prescribed for that industry.
3. Equal Treatment
Employment practices shall be conducted without discrimination and in accordance with principles of equal treatment as prescribed by law.
Corporate Governance, Reporting, and Ongoing Compliance
In Indonesia, corporate governance and regular compliance regulate how a company is directed, controlled, and held accountable after incorporation. Each company must have an internally adopted system of governance, comply with the reporting requirements imposed by the statute, and ensure that the records in its corporate documents accurately reflect the company’s operations and management.
These requirements continue and serve to maintain transparency, safeguard stakeholders’ interests, and allow regulatory oversight. Non-compliance does not affect validity but can lead to administrative penalties, limitations on conducting corporate activities, or even suspension of business activities.
Key Steps and Procedural Requirements for Corporate Governance
| Governance Area | Legal Requirement | Purpose and Effect |
|---|---|---|
| Board of Directors and Board of Commissioners | Every company must maintain a board structure in accordance with corporate law, with directors responsible for management and commissioners accountable for supervision. | Establishes accountability for management and oversight of company operations. |
| Shareholder Meetings | Companies must convene annual general meetings and extraordinary meetings as required to approve financial statements, appoint or remove directors and commissioners, and decide matters prescribed by law. | Ensures shareholder participation and lawful approval of key corporate decisions. |
| Corporate Resolutions and Record Keeping | Corporate actions requiring approval must be recorded through written resolutions or meeting minutes and retained as part of statutory records. | Provides legal evidence of corporate decisions and compliance with procedural requirements. |
| Statutory Registers | Companies must maintain accurate and up-to-date registers of shareholders, directors, commissioners, and capital structure. | Reflects the company’s current legal status and ownership structure for regulatory purposes. |
Key Reporting and Ongoing Compliance Obligations for Businesses in Indonesia
1. Financial Statements
Companies should prepare financial statements each year in accordance with the relevant accounting standards. Where required by law, such financial statements must be audited by an authorised auditor.
2. Regulatory Reporting
Companies shall submit periodic reports to the relevant authorities, including reports on investment realisation, corporate changes, and operational activities, as applicable.
3. Tax and Labour Alignment
Corporate governance obligations operate alongside tax and labour compliance requirements. Governance failures that affect tax reporting or employment practices may result in additional regulatory consequences.
Conclusion
Doing business in Indonesia requires ongoing attention to legal detail. Registration, licensing, tax, employment, and governance obligations do not end once a company is set up. They continue throughout the life of the business and are enforced through regular filings, inspections, and reporting requirements. Companies that address compliance early and keep records aligned with actual operations reduce regulatory risk and avoid disruption as they grow.
3E Accounting Indonesia works with businesses operating in Indonesia to manage these requirements in practice. From initial setup to ongoing tax, labour, and corporate compliance, 3E Accounting provides hands-on support grounded in local regulations, helping companies meet their obligations with clarity and consistency.
Need Help Staying Compliant in Indonesia?
From incorporation to labour and corporate filings, obligations can become complex over time. 3E Accounting provides end-to-end support.
Frequently Asked Questions
Yes. All businesses operating in Indonesia, whether domestic or foreign-owned, are required to comply with applicable laws and regulations. Compliance obligations apply regardless of company size and extend across registration, licensing, taxation, employment, and corporate governance.
No. While registration establishes legal existence, operational activity may only begin once the relevant licenses have been issued. Operating without the required permits or beyond their approved scope may result in administrative sanctions, suspension of activities, or license revocation.
No. Foreign-owned companies are subject to additional requirements, including higher capital thresholds, sector-specific ownership restrictions, and enhanced reporting obligations. Compliance expectations may vary depending on the nature of foreign participation and the business sector involved.
Non-compliance may result in administrative penalties, financial fines, interest charges, audits, license suspensions, or restrictions on business operations. In regulated sectors, serious violations may also give rise to civil or criminal liability.
Abigail Yu
Author
Abigail Yu oversees executive leadership at 3E Accounting Group, leading operations, IT solutions, public relations, and digital marketing to drive business success. She holds an honors degree in Communication and New Media from the National University of Singapore and is highly skilled in crisis management, financial communication, and corporate communications.
