How to Start a Foreign-Owned Company in Indonesia in 2026

Indonesia has rapidly emerged as one of the most attractive investment destinations in Southeast Asia for foreign entrepreneurs, startups, manufacturers, digital businesses, and global investors. With a population exceeding 280 million people, a fast-growing middle class, abundant natural resources, and strong government-backed industrial expansion, Indonesia offers significant opportunities for businesses in 2026.

As Southeast Asia’s largest economy and a G20 member, Indonesia continues to attract billions in foreign direct investment (FDI), particularly in manufacturing, technology, mining, logistics, renewable energy, fintech, and consumer sectors. In 2025 alone, Indonesia recorded approximately USD 53.4 billion in FDI inflows, with major investments coming from Singapore, China, Hong Kong, Japan, and Malaysia. 

For foreign investors planning regional expansion into Asia, establishing a foreign-owned company in Indonesia can provide access to one of the world’s fastest-growing consumer and industrial markets.

Why You Should Start a Business in Indonesia as a Foreigner

Indonesia is one of the fastest-growing investment destinations for foreign entrepreneurs in 2026, backed by a USD 1.5 trillion economy, a population of over 280 million, and annual GDP growth above 5%. As Southeast Asia’s largest consumer market, Indonesia offers significant opportunities across technology, manufacturing, logistics, renewable energy, and digital services.

 

1. Access to Southeast Asia’s Largest Consumer Market

Indonesia is the world’s fourth-most populous country, with more than 56% of its population under the age of 40, creating a highly active consumer and workforce base. The country’s middle-income population is projected to exceed 140 million people by 2030, significantly increasing demand for retail, healthcare, fintech, education, real estate, and digital services.

Indonesia also has over 220 million internet users and is one of the fastest-growing e-commerce markets in Asia, making it highly attractive for digital and consumer-focused businesses.

 

2. Strong Economic Growth Momentum

Indonesia’s economy continues to outperform many global markets, supported by domestic consumption, infrastructure investment, industrial expansion, and export growth. The government has committed over USD 400 billion toward long-term infrastructure and industrial development projects, including airports, ports, toll roads, industrial parks, and renewable energy initiatives.

Indonesia is also rapidly expanding its EV battery and downstream nickel-processing industries, positioning itself as a major global manufacturing hub for electric-vehicle supply chains.

 

3. Strategic Location for ASEAN Expansion

Indonesia sits along some of the world’s busiest international shipping routes, connecting major asian, middle eastern, and global markets. The country provides direct access to the ASEAN region, which has a combined GDP exceeding USD 4 trillion and a population of more than 680 million people.

Indonesia’s growing port infrastructure, logistics modernisation, and participation in regional trade agreements further strengthen its position as a strategic base for international companies expanding across Southeast Asia.

 

4. Growing Foreign Investment Opportunities

Indonesia continues to liberalise foreign investment regulations through reforms such as the Omnibus Law and OSS-RBA digital licensing system. Many sectors now permit up to 100% foreign ownership under the PT PMA structure, depending on business classification. The government actively promotes investment in sectors including data centres, renewable energy, AI, semiconductors, logistics, tourism, healthcare, and advanced manufacturing.

Large multinational companies from China, Singapore, South Korea, Japan, and the United States continue expanding operations in Indonesia due to its strong long-term market potential.

 

5. Competitive Business Costs

Indonesia offers one of the most cost-efficient business environments in Southeast Asia, making it highly attractive for foreign investors seeking scalable regional operations. Average manufacturing wages remain around IDR 3.2 million per month (approximately USD 190–200), significantly lower than labour costs in markets such as Singapore, Malaysia, South Korea, and Japan.

In addition to lower operational costs, the Indonesia government offers substantial fiscal incentives to foreign investors, including:

• Corporate tax holidays of up to 20 years for qualifying large-scale investments
• Up to 300% super tax deductions for R&D activities
• 0% import duty exemptions for eligible industries
• Investment allowances with deductions of up to 30% of the investment value

Can Foreigners Own a Company in Indonesia?

Indonesia has opened many of its business sectors to up to 100% foreign ownership, making it one of Southeast Asia’s most attractive destinations for international investors and global businesses. Foreigners can legally establish and incorporate a company in Indonesia through a PT PMA (Perseroan Terbatas Penanaman Modal Asing), which is the country’s official foreign-owned company structure.

However, the business structure chosen before incorporation plays a critical role in determining eligibility for foreign ownership, licensing requirements, tax obligations, operational flexibility, and long-term compliance.

While many sectors now allow full foreign ownership, certain industries still have restrictions or require additional approvals under Indonesia’s KBLI business classification and investment regulations.

Types of Foreign-Owned Businesses in Indonesia

Foreign investors entering the Indonesia market can choose from multiple business structures based on their industry, investment size, and operational objectives.

Key Requirements to Start a Foreign-Owned Company in Indonesia

Foreign investors intending to establish a foreign-owned company in Indonesia must comply with several regulatory, capital, and corporate governance requirements under the PT PMA framework. Understanding these requirements is essential to ensure a smooth company incorporation process and long-term compliance with Indonesia investment regulations.

 

1. Minimum Capital Requirement

A PT PMA company in Indonesia is generally required to meet the following investment criteria:

• Minimum investment plan of IDR 10 billion
• Paid-up capital requirements based on the business sector and licensing category

These capital requirements apply to most foreign-owned businesses operating in Indonesia.

 

2. Approved Business Activities and KBLI Code

Foreign-owned companies must select the correct KBLI business classification code during incorporation. The KBLI code determines:

• Whether foreign ownership is permitted
• Maximum foreign ownership percentage
• Applicable business licences and approvals
• Industry-specific compliance requirements

Certain sectors in Indonesia remain partially restricted to foreign investors.

 

3. Shareholder Requirements

To register a foreign-owned company in Indonesia, a PT PMA must have:

• Minimum two shareholders
• Foreign individuals or foreign corporate entities as shareholders
• Shareholding structure compliant with Indonesia foreign investment regulations

 

4. Director and Commissioner Requirements

Every PT PMA company must appoint:

• At least one Director to manage company operations
• At least one Commissioner to oversee corporate governance

Additional directors or commissioners may be required depending on the company structure and business activities.

 

5. Registered Business Address

Foreign company registration in Indonesia requires a valid local business address. The office address must generally:

• Be located in a commercial zone
• Meet local licensing requirements
• Support the company’s operational activities

Virtual office registration may be allowed for selected industries.

 

6. Required Incorporation Documents

The company registration process requires submission of supporting corporate and identity documents, typically including:

• Passport details of shareholders and directors
• Proposed company name
• Description of business activities
• Share capital structure
• Office address information

 

7. OSS Business Licensing

Following incorporation, businesses must complete registration through Indonesia’s Online Single Submission (OSS) system to secure:

• Business Identification Number (NIB)
• Commercial and operational licences
• Tax registration credentials

 

8. Tax and Compliance Requirements

All foreign-owned companies in Indonesia must comply with:

• Corporate tax registration
• Annual filings
• Accounting and bookkeeping requirements
• Employment and payroll regulations

Proper compliance management is essential to maintain business operations and avoid regulatory penalties in Indonesia.

Step-by-Step Process to Start a Foreign-Owned Company in Indonesia

Setting up a company in Indonesia involves registering with the Ministry of Investment (BKPM) via the Online Single Submission (OSS) system, with a mandatory minimum investment of IDR 10 billion (approx. USD $700,000). Key steps include

 

Step 1: Select the Business Activity and KBLI Code

The first step in starting a foreign-owned business in Indonesia is determining the company’s intended business activities and selecting the correct KBLI classification code. The KBLI code determines whether foreign ownership is permitted, the applicable licensing requirements, and the scope of activities the company can legally conduct in Indonesia.

 

Step 2: Confirm Foreign Ownership Eligibility

Before proceeding with incorporation, foreign investors must review Indonesia’s foreign investment regulations to confirm whether the selected sector allows full or partial foreign ownership. Certain industries may still require local participation or additional regulatory approvals.

 

Step 3: Reserve the Company Name

The proposed PT PMA company name must be submitted for approval with the Ministry of Law and Human Rights. The company name must be unique, comply with local naming regulations, and align with the company’s planned business activities.

 

Step 4: Prepare the Incorporation Documents

Foreign investors are required to prepare the necessary incorporation documents, including shareholder and director identification documents, company structure details, registered office information, and capital investment details. Foreign corporate documents may require notarisation or legalisation before submission.

 

Step 5: Execute the Deed of Establishment

An Indonesia notary will draft the company’s Deed of Establishment, which formally outlines the company structure, shareholding composition, capital allocation, and management appointments. This document serves as the legal foundation of the PT PMA company.

 

Step 6: Obtain Legal Entity Approval

Once the deed has been notarised, the incorporation documents are submitted to the Ministry of Law and Human Rights for approval. Upon approval, the PT PMA is officially recognised as a legal entity in Indonesia.

 

Step 7: Obtain the NIB and Business Licences

After incorporation, the company must register through Indonesia’s Online Single Submission (OSS) system to obtain its Business Identification Number (NIB), operational licences, and tax registration details. Depending on the business sector, additional permits or industry-specific approvals may also be required.

 

Step 8: Complete Tax and Compliance Registration

Foreign-owned companies must establish their ongoing compliance framework, including corporate tax registration, accounting setup, payroll registration, and statutory reporting procedures. Proper compliance is essential to maintain active business operations in Indonesia.

 

Step 9: Open a Corporate Bank Account

The final step is opening a corporate bank account in Indonesia to facilitate capital injection, operational transactions, payroll processing, and tax payments. Banks require incorporation documents, business licences, and shareholder verification records before activating the account.

Tax and Compliance Requirements for Foreign-Owned Companies in Indonesia

Foreign-owned companies in Indonesia (PT PMA) must comply with ongoing tax, reporting, and corporate regulations to operate legally and avoid penalties.

 

• Corporate Income Tax

Indonesia’s standard corporate income tax rate is 22% under the Harmonisation of Tax Regulations Law (UU HPP). Publicly listed companies with at least 40% of their shares publicly traded may qualify for a reduced 19% tax rate.

Companies with annual revenue below IDR 50 billion can receive a 50% tax reduction on taxable income derived from revenue up to IDR 4.8 billion, while eligible SMEs with turnover below IDR 4.8 billion may opt for a final tax of 0.5% of gross revenue.

Taxable income is determined through fiscal reconciliation, and related-party expenses such as royalties and management fees are subject to close tax authority review.

 

• VAT (PPN) Compliance

Foreign-owned companies in Indonesia must comply with the updated VAT (PPN) regulations effective from 1 January 2025. While the standard VAT rate increased to 12%, most general goods and services continue to carry an effective VAT burden of around 11% through an adjusted tax base mechanism.

VAT Payable = 12% x (11/12) x Selling Price

Luxury goods are taxed at the full 12% rate. Businesses must maintain accurate invoicing, transaction classification, and VAT reporting to remain compliant.

 

• Employment and Payroll Compliance

Foreign-owned companies in Indonesia must comply with local employment and payroll regulations when hiring staff. This includes withholding employee income tax (PPh 21), registering employees with the BPJS social security and health schemes, and ensuring accurate monthly payroll reporting.

Companies employing foreign nationals must also comply with work permit (IMTA) and stay permit requirements, as well as applicable tax obligations for expatriate employees.

 

• Transfer Pricing Compliance

Transfer pricing is a key audit focus for foreign-owned companies in Indonesia. All related-party transactions must follow the Arm’s Length Principle under Minister of Finance Regulation No. 172/2023.

Documentation is required once thresholds are met, typically including:

• Master File (group structure and global policies)
• Local File (Indonesia transaction analysis and pricing method)
• Country-by-Country Report (for large multinational groups)

If documentation is missing, the tax authority may adjust prices and impose penalties. Indonesia also applies a 4:1 debt-to-equity ratio, where excess interest is non-deductible.

Common Mistakes Foreign Investors Should Avoid in Indonesia

Conclusion

Establishing a foreign-owned company (PT PMA) in Indonesia in 2026 offers significant long-term opportunities for international investors looking to access Southeast Asia’s fastest-growing economy. With strong FDI inflows, ongoing regulatory reforms through the OSS system, and increasing openness to 100% foreign ownership in key sectors, Indonesia continues to position itself as a strategic hub for manufacturing, digital business, logistics, renewable energy, and services.

To ensure a smooth, compliant setup, many investors choose experienced advisors such as 3E Accounting Indonesia, which assists with PT PMA incorporation, licensing, accounting, and regulatory compliance.

Frequently Asked Questions