Business License in Indonesia: Risk-Based Classification Approach

Business License in Indonesia: Risk-Based Classification Approach

  • InCorp Editorial Team
  • 4 July 2025
  • 7 minutes reading time

To tackle the evolving workforce situation, the Indonesian government has taken a prudent measure by enforcing the Job Creation Law in 2020 to attract more investment as part of a national economic recovery program. One of the measure is through business license in Indonesia.

Under this law, several business regulations, including Business Licensing were subjected to changes that could facilitate the investment climate in Indonesia. For instance, the government issued Regulation No. 5 of 2021 on Risk Based Business Licensing aiming to simplify licensing procedures according to the risk classification. The general idea being lower-risk business activities should have less regulatory requirements, allowing them to commence business operations with no delay.

This article will describe the key aspects of the new approach towards the process of obtaining a business license in Indonesia for foreigners and locals.

What is a Business License?

A Business License in Indonesia is a formal authorization issued by the government that allows a company to legally operate in a specific business sector. It ensures the business complies with local laws, business legality standards, and administrative requirements. Without the appropriate license, a business is considered unregistered and may face penalties, operational restrictions, or even forced closure.

Under the Online Single Submission (OSS) RBA registration , businesses must obtain a Business Identification Number (NIB) as their foundational license. After receiving an NIB, additional sector-specific licenses may be required depending on the nature of the business, such as:

  • Commercial/Operational Licenses (Izin Usaha/Izin Operasional): Required for regulated sectors like F&B, construction, logistics, etc.
  • Environmental Licenses (AMDAL, UKL-UPL, SPPL): Necessary for businesses with potential environmental impacts.
  • Import/Export Licenses: Needed for trading activities across borders.
  • Halal, BPOM, and other product-related licenses: For businesses selling food, cosmetics, medical devices, and similar products.

What are the Benefits of Business License?

Having the right business permit helps your company grow smoothly and stay compliant in Indonesia. Here are the key benefits:

A valid business permit protects your business from legal issues, fines, or forced shutdowns.

Freedom to Operate

With the proper license, you can run your business activities legally — including selling products, importing goods, or offering services.

Builds Trust

Customers, investors, and partners are more likely to trust and work with a licensed company.

Access to Incentives

Only licensed businesses can apply for tax benefits, government programs, and special permits.

Easier Expansion

Whether opening new branches or entering new sectors, having your licenses ready speeds up the process.

Risk-Based Business License in Indonesia: Understanding Key Changes

Previously, entrepreneurs were required to hold a business license, a commercial license, and/or an operational license before conducting their operations. Moreover, the government never gave adequate attention to the correlation between the scale of a company’s activity and its ability to obtain a business license.

However, that changed after the introduction of the new regulation, GR 5/2021. It has simplified the procedure to obtain a business license based on risk analysis and determination of the scale of a business (whether it is a small or a big business).

Moreover, in GR 5/2021, ex-ante licensing (satisfying all requirements in advance) is effectively replaced by ex-post licensing (the requirements are checked afterward), which will be particularly advantageous for low- and medium-risk businesses.

Procedure of Business License in Indonesia

In order to decide on the type of business licensing, the central government undertakes the following procedure:

  1. Identifying the relevant business activity;
  2. Assessing the hazard level;
  3. Assessing the potential for the occurrence of any hazard;
  4. Determining the risk level and business scale rating; and
  5. Determining the type of business licensing.

Business License Based on Risk-level

Based on the aforementioned risk analysis, the businesses activities undertaken by the applicant company are classified into one of the following risk-level types:

  • Low-risk businesses;
  • Medium-low risk businesses;
  • Medium-high risk businesses; and
  • High-risk businesses.

16 Sectors for Business License

There are sixteen sectors in which the GR 5/2021 covers business licensing in Indonesia, include: 

  1. Marine & fisheries;
  2. Agriculture;
  3. The environment & forestry;
  4. Energy & mineral resources;
  5. Nuclear energy;
  6. Industry;
  7. Trading;
  8. Public works and housing;
  9. Transport;
  10. Health, medicine and food;
  11. Education and culture;
  12. Tourism;
  13. Religion;
  14. Post, telecommunications, broadcasting, electronic systems and transactions;
  15. Defense & safety; and
  16. Employment.

Procedure to Get Risk-based Business License in Indonesia 

Obtain Business Identification Number (Nomor Induk Berusaha, NIB)

The first stage of the Risk Based Licensing procedure is to get a Business Registration Number (Nomor Induk Berusaha – NIB) through the Online Single Submission (OSS) system. In order to secure an NIB, business operators must present these required data: their business profile, capital structure, taxpayer identification number (Nomor Pokok Wajib Pajak – NPWP), the 5-digit business activity code according to the Indonesian Business Classification (Klasifikasi Baku Lapangan Usaha Indonesia – KBLI), and the proposed ‘location’ of the business. 

GR 5/2021 no longer requires a “Location Permit”, but replaces it with the conformity of Spatial Utilization Activities (Kesesuaian Kegiatan Pemanfaatan Ruang). It can be secured without having to file another application. 

Obtain Business License 

According to GR 5/2021, the process of obtaining a business license will henceforth be classified depending on risk. The less risky a firm is, the easier it is to comply with company licensing regulations. Following are the classifications of risk:

Low Risk 

Low-risk business activities only need to get an NIB before they can start operating. In addition to functioning as a company’s formal identity, the NIB also serves as an import identification number. 

Medium-low Risk 

Before beginning operations, businesses in this category must get an NIB and a Certificate of Standards. A Certificate of Standards is a statement of the fulfillment of certain business or product standards, which must be filed for through the OSS system.

Additionally, the OSS system may require applicants to complete the Environmental Management and Monitoring Efforts (Upaya Pengelolaan Lingkungan – Upaya Pemantauan Lingkungan, UKL UPL), or the Statement of Undertaking Environment Management and Monitoring (Surat Pernyataan Kesanggupan Pengelolaan dan Pemantauan Lingkungan, SPPL) form.

Medium-high risk 

For medium-high risk business activities, companies will need to obtain an NIB and a Certificate of Standards. However, the Certificate of Standards is obligated to be verified by the central or regional government.

High Risk

High-risk business activities need to get an NIB and a license to operate. The license will be issued once the business has fulfilled certain conditions and verifications set out by the central or regional government, which may include an environmental impact analysis.

Note: The regulation, GR 5/2021 does not apply to businesses, the licenses of which have been approved and in effect prior to the effective date of the regulation.  Also, the businesses which obtained ‘Access Right’ prior to the effective date of GR 5/2021 will have to update its data for Access Right with the OSS System. 

How Can InCorp Help 

As a one-stop solution for business ancillary services, InCorp offers comprehensive services like company incorporation, legal services, accounting, and much more.

Prior to incorporation, InCorp also helps foreign investors in conducting due diligence and market research activities. Our consultants assist investors in obtaining required licenses for a broad range of businesses and make sure your company duly complies with legal regulations, including the new GR 5/2021. When the business becomes operational, we can help you with conducting HR activities and various other business services. 

Verified by

Hotdo Nauli

Senior Legal & Delivery Manager at InCorp Indonesia

Hotdo heads the Legal and Delivery team at InCorp Indonesia, managing Product Registration, Legal Advisory, and Business Licensing. With over 8 years of experience, she focuses on compliance and integrity, ensuring all client operations align with Indonesian laws and regulatory standards, including contract reviews and sector-specific licenses. She is also a licensed advocate and a member of the Indonesian Advocates Association (PERADI). 

Frequently Asked Questions

    Dividends can be distributed from company net profits after allocating reserves, depending on a positive profit balance. Approval from the general meeting of shareholders is necessary. Interim dividends may be distributed if specific requirements are met.

    The procedures for (voluntarily) liquidation typically involve the following steps:

    • Conduct a general shareholder meeting to approve the liquidation and the liquidator’s nomination
    • Notify the Ministry of Law and Human Rights as well as the creditors of the liquidation and the distribution plan for the assets by newspaper notice
    • All business licenses and tax numbers should be canceled or revoked; the tax office will conduct a tax audit to revoke the tax number
    • Make sure creditors are paid and that any liquidation funds are distributed to shareholders (if any)
    • Conduct a general meeting of shareholders to approve the liquidator’s discharge and acquittal
    • Notify the Ministry of Law and Human Rights of the liquidation’s outcome. After receiving the notification, the Ministry of Law and Human Rights will deregister the company’s status as a legal entity and remove its name from the Company Registry
    • Release the liquidation’s outcome in a newspaper

    Completing the liquidation process can take around two years.

    A foreign-owned company (PT PMA) in Indonesia is a popular choice among foreigners to set up a business. Foreign investors must check Indonesia’s Positive Investment List to see which businesses are open to foreign direct investment.

    According to Presidential Regulation No. 10/2021 and the amended version, all businesses are open for domestic and foreign investment with these limitations and classifications:

    • Eight businesses are closed to foreign investment and may be operated by the central government.
    • Designated business sectors or joint ventures with cooperatives (koperasi) and micro, small, and medium enterprises
    • Open businesses are subject to specific conditions, such as those that are exclusively available to 100% local investors, those with restricted foreign shareholding, and investments requiring special licenses

    Certain sectors are closed to foreign investment, including narcotics cultivation, gambling, and environmental conservation activities.

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The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind. We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.