Planning to launch a business in Indonesia in 2026? With a fast-growing economy, strategic trade location, and investor-friendly reforms, Indonesia presents strong opportunities for both local and foreign entrepreneurs. Indonesia is aiming to become a high-income economy by 2045. However, navigating foreign ownership limits, licensing requirements, capital thresholds, and ongoing compliance obligations can quickly become complex.
Without proper guidance, regulatory delays and documentation errors can slow market entry and increase costs. This blog examines the legal framework of Indonesia and key compliance issues.
Overview of the Indonesian Business Landscape
Indonesia is located along the world’s primary route, the Malacca and Singapore Straits, which makes it the ideal hub for businesses. It is an increasingly growing economy that has an abundance of natural resources and raw materials, including oil and coffee. Indonesia has also opened many SEZs to attract foreign companies.
| Area | 2026 Business Landscape |
|---|---|
| Population | Approx. 288.1 million |
| Population Rank | 4th largest country globally |
| GDP (Nominal) | Estimated at approximately USD 1.52 trillion |
| GDP Growth (Real) | Projected between 5.1% – 5.3% |
| Urbanisation (% of population) | Approximately 61% urban population |
| Inflation (2025) | Approximately 3.0% |
| FDI (2025) | Approximately USD 55.2 billion (around IDR 930 trillion) |
| Exports (Q1 2025) | Approximately USD 69.4 billion |
| Economic Position | Ranked among the top 16–17 largest economies globally (nominal GDP) |
What are the Legal Business Structures Available in Indonesia?
There is strong growth potential for businesses in Indonesia due to the flourishing consumer market. Indonesia is taking initiatives to encourage businesses. Hence, starting a business in Indonesia becomes desirable. As we proceed further, businesses need to be aware of the legal structures available in Indonesia. The following table discusses the business structures in Indonesia:
| Business Structure | Indonesian Term | Suitable For | Foreign Ownership | Key Characteristics |
|---|---|---|---|---|
| Limited Liability Company | Perseroan Terbatas (PT) | Local entrepreneurs and domestic investors | Not applicable (Indonesian shareholders only) | Separate legal entity; minimum 2 shareholders; limited liability protection. |
| Foreign-Owned Company | PT Penanaman Modal Asing (PT PMA) | Foreign investors establishing operations in Indonesia | Allowed subject to sector restrictions under the Positive Investment List | Most common vehicle for foreign investment; must comply with minimum capital requirements. |
| Representative Office | Kantor Perwakilan | Market research, liaison, and non-commercial activities | 100% foreign ownership allowed | Cannot generate revenue; suitable for testing the market. |
| Micro & Small Enterprise | Usaha Mikro, Kecil, dan Menengah (UMKM) | Small local businesses | Generally restricted to Indonesian citizens | Simplified licensing; benefits under government support schemes. |
| Partnership | Commanditaire Vennootschap (CV) | Small to medium domestic businesses | Foreign ownership not permitted | No separate legal entity; at least one active and one silent partner. |
| Sole Proprietorship | Usaha Dagang (UD) | Individual entrepreneurs | Indonesian citizens only | Simplest structure; unlimited personal liability. |
| Public Company | Perseroan Terbatas Terbuka (Tbk) | Large corporations seeking public investment | Foreign shareholding allowed per capital market rules | Listed on Indonesia Stock Exchange; subject to stricter reporting requirements. |
What are the Foreign Investment Regulations and Ownership Rules in Indonesia?
Foreign Investments in Indonesia are governed by the Positive Investment List and the OSS system. FDIs are overseen by the Investment Coordinating Board (BKPM). The investment framework is based on the principle of equal treatment of domestic and international investors, subject to certain conditions.
1. Positive Investment List:
The Positive Investment List is based on the ‘open by default’ principle that allows 100% foreign ownership in many sectors. Sectors include energy, mining, infrastructure, digital & tech, health & pharma, and agriculture, with 100% foreign ownership in Indonesia.
Business fields closed for investment in Indonesia include cultivation & processing of controlled substances, gambling or casino activities, fishing of species listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora, chemical weapons manufacturing, and chemical industry materials.
2. Minimum Investment Thresholds:
Foreign investors are generally required to meet minimum investment value thresholds to qualify as a foreign direct investment entity. These thresholds distinguish foreign commercial investment from small-scale domestic enterprises.
The minimum capital requirement was earlier IDR 10 billion, which is now IDR 2.5 billion. The reduction aims to lower entry barriers. Although certain exceptions may apply, such as businesses under SEZs, may follow the minimum investment requirements.
3. Business Activity Classification (KBLI):
Every company must register under specific Indonesian Standard Business Classification (KBLI) codes. Foreign ownership eligibility is determined by the selected KBLI code and the applicable regulatory provisions.
4. Online Single Submission (OSS) system:
Businesses are categorised by risk (low, medium, or high), determining if they need only a Business Identification Number (NIB) or additional licenses. It replaces the traditional and slow process with an online system that can issue licenses within 30 minutes for lower-risk businesses. Ensuring proper documentation is critical to avoid future complications.
What are the Company Incorporation Requirements in Indonesia?
Before incorporating a company in Indonesia, it is important to comprehend the legal requirements of Indonesia. The companies must obtain the key licenses and permits while starting a business in Indonesia in 2026.
Key steps and requirements for incorporating a company in Indonesia in 2026 are as follows:
1. Shareholders:
Incorporation of a company in Indonesia in 2026 requires a minimum of two shareholders, one director, and one commissioner. These roles are mandatory to ensure a corporate governance structure. A PT PMA usually requires one foreigner and one local, and 100% ownership is possible in certain sectors. Before starting the company, it is essential to determine the shareholder composition and capital contributions.
2. Capital Requirements:
Starting a company in Indonesia requires a minimum paid-up capital of IDR 2.5-10 billion. The 2.5 billion capital cannot be withdrawn for one year. For domestically owned limited companies, there is no fixed minimum paid-up capital requirement.
3. Registered Office Address
Before a company can begin operating, it must establish a registered office in Indonesia, an address that is not merely symbolic but compliant with local zoning and municipal rules. The location determines which regional authorities will oversee aspects of its administration. For certain industries, the wrong address can delay operations before they begin. In practice, the office becomes the company’s legal anchor in the country.
4. Ministerial Approval
Once notarised, the deed is filed electronically with the Ministry of Law and Human Rights. Incorporation is not automatic; it hinges on formal approval from the ministry. Only after the approval letter is issued does the company exist as a recognised legal person under Indonesian law. Until then, it remains a proposal on paper.
What are the Licensing and Business Permits in Indonesia?
Business licenses are essential for starting a business in Indonesia. Business licenses provide the right to operate a business in Indonesia. License requirements differ depending on the type of business activities. Your business becomes vulnerable to government suspension if the required license is not obtained.
Key Licenses and Business Permits in Indonesia are as Follows:
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NIB (Nomor Induk Berusaha):
NIB: the Nomor Induk Berusaha, or Business Identification Number. Every entity that wishes to operate legally in the country, from a small street vendor seeking to formalise operations to a multinational corporation establishing a regional headquarters, must obtain an NIB.
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Standard Certificate:
Businesses classified as medium-low or medium-high risk, categories that cover a broad and often contested swath of commercial activity, are required to obtain a Standard Certificate. It certifies that an enterprise has met the technical standards and operational requirements established by the relevant sector ministry.
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Izin (Business License):
For enterprises operating in industries classified as high-risk, mining, energy, pharmaceuticals, and certain financial services, among them, a business license, or Izin, represents a substantive regulatory gate, often requiring additional approvals from sector-specific agencies before a company may legally begin operations.
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KKPR (Location Permit):
The KKPR, or Kesesuaian Kegiatan Pemanfaatan Ruang, functions as the government’s formal confirmation that a proposed business location aligns with the national and regional spatial planning maps that govern land use across the region.
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PBG/IMB (Building Approval):
No business that builds or substantially renovates a physical facility in Indonesia can do so without a building permit. The legacy IMB: Izin Mendirikan Bangunan, has been transitioned to the PBG, or Persetujuan Bangunan Gedung, under reforms introduced in recent years.
Post-Incorporation Compliance Requirements in Indonesia
The table below discusses the organised overview of the post-incorporation compliance every business must follow after incorporating the company in Indonesia in 2026:
| Compliance Area | Key Requirement | Frequency / Timeline | Regulatory Authority |
|---|---|---|---|
| Investment Activity Reporting (LKPM) | Submission of investment realisation reports detailing business activities and capital deployment | Quarterly or as required, based on business scale | Investment Coordinating Board (BKPM) |
| Annual Financial Statements | Preparation of financial statements in accordance with Indonesian accounting standards | Annually | Ministry of Law and Human Rights / Relevant Authorities |
| Annual General Meeting (AGM) | Conduct of shareholder meeting to approve financial statements and corporate decisions | Annually | Company Internal Governance Requirement |
| Tax Filings | Corporate income tax returns, VAT filings (if applicable), and other tax declarations | Monthly and Annually | Directorate General of Taxes |
| Business License Maintenance | Renewal or updating of operational and sectoral licenses if required | As required | Relevant Line Ministries |
| Company Data Updates | Reporting changes in shareholders, directors, capital, or business activities | Within statutory deadlines after change | Ministry of Law and Human Rights |
| Employment Compliance | Compliance with manpower reporting, social security registration (BPJS), and employment regulations | Ongoing | Ministry of Manpower |
| Beneficial Ownership Reporting | Disclosure of ultimate beneficial owners to authorities | Upon incorporation and updates as needed | Ministry of Law and Human Rights |
Conclusion
Indonesia in 2026 offers scale, growth and strategic access to Southeast Asia’s expanding markets, but entering the country is not simply a matter of registering a name and opening a bank account. The regulatory framework is layered, risk-based and increasingly digitised, demanding precision at every stage from incorporation to ongoing compliance. For foreign investors, missteps are rarely dramatic but often costly in terms of time and approvals.
Firms like 3E Accounting Indonesia work at the intersection of regulation and execution, guiding businesses through incorporation, licensing, tax registration and post-establishment compliance so that market entry is not delayed by preventable administrative hurdles.
Structure Your Indonesia Expansion Correctly from Day One
3E Accounting handles ongoing compliance so your market entry moves at the speed of your ambition.
Frequently Asked Questions
The easiest and most convenient way to check a PT’s legality is through the AHU Online system. AHU stands for Administrasi Hukum Umum, which is the Directorate General of Legal Administration under the Ministry of Law and Human Rights. This is the official government body that handles company registration in Indonesia.
Legal compliance in Indonesia means ensuring your business complies with all applicable national and local laws governing your operations. This includes rules for business registration, tax payments, employment, and even sector-specific regulations. For companies operating in Indonesia, due diligence is a key first step.
A business license is a document that authorises you to operate a business. License requirements vary depending on the types of business activities or intellectual property of your company.
Companies must register for Corporate Income Tax (25% standard rate), VAT if turnover exceeds the prescribed threshold, and withholding tax obligations. Monthly and annual filing requirements begin immediately upon registration, and non-compliance triggers penalties.
Yes. A Representative Office (KPPA) allows foreign companies to establish a limited presence for market research and liaison activities, but it cannot generate revenue or sign commercial contracts. It is a stepping stone, not a substitute for full incorporation.
A Standard Certificate (Sertifikat Standar) applies to medium-risk businesses and certifies technical compliance. A Business License (Izin) is reserved for high-risk sectors and requires additional ministry-level approvals before operations can legally begin. Misclassifying your business risk level is a common and costly error.
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.
