Frequently Asked Questions: #investmentrestrictions

A PMA (Penanaman Modal Asing) company is a foreign direct investment entity in Indonesia that allows foreign investors to own and operate a business in the country. Key points about PMA companies include:

• Legal structure for foreign investment in Indonesia
• Allows foreign ownership of businesses, subject to certain restrictions
• Registered through the Online Single Submission (OSS) system, overseen by the Ministry of Investment and Downstream Industry (BKPM)
• Must comply with the Positive Investment List (Presidential Regulation 10/2021, as amended), which replaced the old Negative Investment List (DNI) and opens most sectors to full foreign ownership
• Requires an investment plan of more than IDR 10 billion (approximately USD 600,000) per business classification (KBLI) per location, with minimum paid-up capital of IDR 2.5 billion
• Offers benefits such as the ability to sponsor foreign work permits and conduct business activities across Indonesia
• Subject to specific tax regulations and reporting requirements for foreign-owned entities
• May require local shareholders in a small number of restricted business sectors
• Provides a formal structure for foreign investors to participate in Indonesia’s growing economy

Setting up a PMA company involves several steps, including OSS registration, company incorporation, obtaining necessary risk-based licenses, and ensuring ongoing compliance with Indonesian regulations. It’s advisable to seek professional assistance when establishing and managing a PMA company to navigate the complex regulatory environment effectively.

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Yes, specific licenses and permits are often required for certain business activities in Indonesia. The requirements can vary depending on the nature of the business. Here are some key points to consider:

• Basic Licenses: All companies, regardless of their business activity, need to obtain:

  • Business Identification Number (NIB), issued via the OSS system (this replaced the old company registration certificate, TDP)
  • Tax Identification Number (NPWP)
  • Risk-based business licenses via the OSS Risk-Based Approach (PP 28/2025), depending on the risk level of the business activity

  A separate domicile certificate is no longer a licensing requirement, although a registered office address is still needed as the company’s legal domicile.

• Sector-Specific Licenses: Depending on the industry, additional licenses may be required:

  • Trading companies may need an import license
  • Manufacturing companies often require industrial business licenses
  • Construction companies need construction services business licenses
  • Hotels and restaurants require tourism business licenses
  • Financial services companies need approval from the Financial Services Authority (OJK)

• Environmental Permits: Businesses that may have an environmental impact often need to obtain environmental permits or conduct environmental impact assessments (AMDAL).

• Location-Based Permits: Some regions or special economic zones may have additional licensing requirements.

• Professional Licenses: Certain professions (e.g., lawyers, doctors, architects) may need individual professional licenses in addition to company licenses.

• Online Business Permits: E-commerce businesses may require specific permits related to online transactions and data protection.

• Foreign Investment Considerations: PMA companies may face conditions in a small number of sectors under the Positive Investment List (Presidential Regulation 10/2021, as amended by 49/2021), which replaced the old Negative Investment List — most sectors are now open to 100% foreign ownership by default.

It’s important to note that licensing requirements can change, and it’s advisable to consult with a professional service provider or relevant government agencies to ensure compliance with the most up-to-date regulations for your specific business activity.

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The Negative Investment List (DNI) was Indonesia’s former list of business sectors closed or restricted to foreign investment. In 2021 it was replaced by the Positive Investment List (also called the Priority Investment List, Daftar Prioritas Investasi), issued under Presidential Regulation No. 10/2021 as amended by No. 49/2021. Key points for foreign investors:

• The default flipped: under the DNI, sectors were assumed restricted unless listed as open; under the Positive Investment List, all business sectors are open to 100% foreign ownership unless specifically listed otherwise.

• Closed sectors: only a small set of activities remains completely closed to investment — for example gambling and casinos, cultivation of class-I narcotics, capture of protected and endangered species, coral extraction, and chemical weapons production. The alcoholic beverage manufacturing industry also remains closed to new investment.

• Conditional sectors: a limited number of sectors keep foreign ownership caps or special requirements (for example postal services and domestic air transport), or are reserved for — or require partnership with — Indonesian cooperatives and micro, small, and medium enterprises (MSMEs).

• Priority sectors: several hundred business fields are designated as priority sectors and qualify for incentives such as tax holidays, tax allowances, and customs facilities.

• Impact on PMA companies:

  • Far more sectors are available for wholly foreign-owned PMA companies than under the DNI
  • Business activities are defined by 5-digit KBLI classification codes chosen at registration through the OSS (Online Single Submission) system
  • Compliance with the list is checked automatically during OSS registration

• Seeking professional advice:

  • Sector conditions still change from time to time, so it’s advisable to consult with experts like Okusi Associates for the most current information and guidance on how the Positive Investment List affects specific investment plans.

By understanding the Positive Investment List, foreign investors can confirm early whether their planned activities allow full foreign ownership and structure their PMA company accordingly.

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Foreign investment restrictions in Indonesia are governed by the Positive Investment List (Presidential Regulation No. 10/2021, as amended by No. 49/2021), which in 2021 replaced the old Negative Investment List (DNI). The default is now openness: all sectors are open to 100% foreign ownership unless specifically listed. Key points to consider:

• Sectors are categorized as:

  • Fully open to foreign investment (the default — most sectors)
  • Open with conditions (e.g., maximum foreign ownership percentage, special licenses)
  • Reserved for, or requiring partnership with, Indonesian cooperatives and MSMEs
  • Closed to investment entirely (a small list)

• Sectors closed to investment include:

  • Gambling and casinos
  • Cultivation of class-I narcotics
  • Capture of protected and endangered species, and coral extraction
  • Chemical weapons production
  • New investment in the alcoholic beverage manufacturing industry

• Conditions in the remaining restricted sectors can involve:

  • A maximum foreign ownership percentage (e.g., postal services, domestic air transport)
  • Partnership or reservation requirements protecting local MSMEs
  • Location-specific rules (special economic zones may have different treatment)
  • Additional sectoral licensing requirements

• Business activities are defined by 5-digit KBLI classification codes selected during registration in the OSS (Online Single Submission) system, which checks Positive Investment List compliance automatically.

• Several hundred priority sectors qualify for investment incentives such as tax holidays, tax allowances, and customs facilities.

• The Ministry of Investment and Downstream Industry (BKPM) provides guidance on interpreting the list for specific business activities.

• Even in fully open sectors, foreign-owned companies must meet PMA capital requirements (investment plan above IDR 10 billion per KBLI per location; paid-up capital of at least IDR 2.5 billion) and any risk-based licensing conditions.

Always consult with legal experts or investment advisors familiar with the latest Indonesian regulations to ensure compliance with current foreign investment conditions.

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The on-call consultancy service typically addresses a wide range of issues related to PMA companies and business operations in Indonesia, including:

• Due diligence on potential business partners or investment opportunities
• Market intelligence gathering for specific industries or sectors
• Project management support for business expansion or new ventures
• Company status information searches to verify legal standing and compliance
• Guidance on navigating regulatory requirements and changes
• Assistance with interpreting and applying Indonesian business laws
• Support for resolving operational challenges or compliance issues
• Advice on corporate structuring and governance matters
• Clarification on tax obligations and optimization strategies
• Guidance on employment regulations and HR practices
• Support for obtaining necessary licenses and permits
• Assistance with understanding and complying with the Positive Investment List (Perpres 10/2021 jo. 49/2021), which replaced the former Negative Investment List
• Advice on foreign investment restrictions and local shareholder requirements
• Guidance on corporate secretarial matters and regulatory filings
• Support for financial reporting and accounting practices

The service aims to provide timely, expert advice to help foreign-owned businesses navigate the complexities of operating in Indonesia’s business environment.

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