How to Start a Business in Indonesia: A Guide for Foreign Investors in Indonesia

Knowing how to start a business in Indonesia begins with choosing an eligible legal structure, checking foreign ownership and capital rules, and matching the planned commercial activities to the correct KBLI classifications. For international investors, a PT PMA is usually the structure for a locally incorporated operating company, while representative offices have narrower permitted activities.

The setup process does not end with a deed or a Business Identification Number (NIB). Under BKPM Regulation 5/2025 and PP 28/2025, investors must also plan for investment commitments, risk-based business licenses, location and sector approvals, and post-incorporation compliance before operations begin.

Key Takeaways

• Foreign investors generally use a PT PMA for direct commercial operations; a representative office is mainly for permitted non-commercial presence.
• A PT PMA generally needs at least IDR 2.5 billion in paid-up capital and an investment plan above IDR 10 billion under applicable calculation rules.
• Foreign ownership may reach 100% in eligible sectors, but the Positive Investment List must be checked against the exact KBLI activity.
• Incorporation and an NIB do not automatically authorise every operation; standard certificates, licences and sector approvals may be required.
• Before incorporating, verify that the business model, legal structure and sector licences align; a completed deed or NIB alone may not authorise full operations.

Business Setup in Indonesia: Step-by-Step Requirements at a Glance

Decision	What to confirm before proceeding
Step 1–3: Entity and ownership	PT PMA for commercial foreign ownership; KPPA/KP3A for limited representation.
Shareholders and governance	Generally at least two shareholders, one director and one commissioner for a regular PT.
Step 4: Capital and investment	Generally ≥ IDR 2.5bn issued/paid-up PT PMA capital; separate > IDR 10bn investment plan with exceptions.
Ownership	Check five-digit KBLI and Positive Investment List before fixing equity percentages.
Step 6: Business licensing	OSS NIB plus risk-tier and sector approvals as applicable under PP 28/2025.
Operations	Business address, location permissions, staff, tax, imports/product licences and LKPM as applicable.

How to Start a Business in Indonesia: 7 Essential Steps

Foreign investors can start a commercial business in Indonesia through a PT PMA where the relevant activity permits foreign investment. The practical sequence below helps avoid starting incorporation before ownership limits, investment plans and operational approvals have been checked.

1. Define activities and business model

Map the actual products, services, revenue flows, imports and operating locations of the proposed Indonesian company.

2. Check KBLI and foreign ownership eligibility

Match each intended activity to a five-digit KBLI and verify foreign shareholding rules.

3. Choose a company structure

Decide between an operating PT PMA and a limited-purpose representative office based on whether local revenue will be generated.

4. Confirm capital, investment and premises

Plan applicable paid-up capital, total investment, business address, site suitability and any sector approvals.

5. Prepare documents and incorporate

Compile shareholder records, notarise the establishment deed and obtain Ministry of Law approval.

6. Register in OSS and secure licences

Obtain an NIB and meet the risk-based standard certificate, license, location or product requirements that apply to each activity.

7. Set up ongoing compliance before launch

Prepare tax and accounting, employment and immigration arrangements and applicable LKPM and corporate filings.

Which Company Structure Should You Choose?

Choose a PT PMA when the Indonesian operation will sell, invoice, import as a local operator or provide services directly. Consider a KPPA for permitted liaison or research and a KP3A for permitted trade-promotion activities. A joint venture with an Indonesian partner generally remains a PT PMA when it includes foreign investment. A domestic PT cannot be used as a nominee workaround for concealed foreign ownership.

Can Foreign Investors Own 100% of a Company?

Yes, in business fields that permit full foreign shareholding. Presidential Regulation 10/2021, as amended by 49/2021, sets out business-field restrictions and conditions. Assess ownership against the precise KBLI code; do not infer that a broad industry such as retail, healthcare or logistics has one uniform rule.

READ MORE:

• Company Registration Number Indonesia: How to Obtain One
• Types of Companies in Indonesia: PT, PT PMA, KPPA, CV & More
• Buy a House in Indonesia: An Ultimate Guide for Foreigners

How to obtain a Domicile Letter?

A Domicile Letter (locally referred to as a Surat Keterangan Domisili) is legal proof that you have registered your company’s office location or address. All foreign-owned companies are legally required to own an office during their incorporation.

To obtain a Domicile Letter, all that is required is an office lease agreement. Domicile Letters are issued by both the Kelurahan (administrative village) and Kecamatan (city/regency’s subdivision). It is worth noting a residential address is unacceptable as a business address.

For business owners looking to start small, a Virtual or Serviced Office is a solution for obtaining your Domicile Letter and space for small teams to remain productive.

What Capital and Investment Are Required for a PT PMA?

BKPM Regulation 5/2025 provides a general minimum of IDR 2.5 billion in issued and paid-up capital for a PT PMA unless another rule applies. Separately, the investment plan generally must exceed IDR 10 billion, excluding land and buildings, based on the applicable KBLI and location rules, with special calculation methods for certain activities. Article 27 restricts movement of paid-up capital for at least 12 months, except specified bona fide business use. Do not confuse authorised capital, paid-up capital and total planned investment.

How Do You Choose the Right KBLI and Check Ownership Rules?

KBLI classifies the actual business activity and supports foreign ownership, risk assessment and licence determination. Under BPS Regulation 7/2025, KBLI 2025 replaced the prior classification, with official transition arrangements. BPS clarified in April 2026 that code-only conversions do not, by themselves, require companies to obtain a new business license; substantive changes to purpose or activity may require updates. Confirm current AHU/OSS records before adding a business line.

What activities are allowed for a Representative Office?

A Branch or Representative Office in Indonesia is commonly used for, but not limited to, market research of investment opportunities, building early-stage market presence, building vendor relations, branding and promotions, research, and development. A Rep Office is also suitable for companies looking to set up a back or support office (e.g., call centers or design houses).

From the examples listed above, the common thread between them is that these business activities do not generate revenue for the business – this remains the key characteristic of a Rep Office. To provide a clearer idea, here are some actions a Representative Office in Indonesia cannot carry out.

• Engagement in any trading (including export and import) and commercial activities that can generate profits
• Entering a business contract on behalf of the parent company or providing a service for a fee
• Participation in the management or operation of any of its branches, subsidiaries, or affiliates in Indonesia
• Issuance of invoices and receipts

What Documents and Registration Steps Are Required for a PT PMA?

Prepare the proposed company name, shareholders’ identity or corporate documents, management and ownership details, intended KBLI codes, an investment plan and a suitable address. Foreign records may require apostille/legalisation and translation. Incorporation typically involves an Indonesian notarial deed, Ministry of Law approval, tax registration and OSS registration; exact documents vary by ownership structure.

Can a foreign-owned company hire a foreigner?

Yes, a foreign-owned company can employ foreigners and sponsor their work permits (locally called a Work KITAS). However, it is essential to note some sectors do not permit foreign employment. Here are

• Supply Chain Management (including procurement and logistics)
• Human Resource
• Legal & Compliance
• Quality Control and Inspection
• Health, Safety, and Environment

HR is often the main obstacle for newly set up companies. Please find out how we can help recruit, select, and draft employment contracts with our HR consulting capabilities.

How Long Does It Take to Start a Business in Indonesia, and What Does It Cost?

For planning, straightforward PT PMA incorporation may take around four to eight weeks, but this is an indicative professional-services estimate, not a statutory deadline. Sector licences, authenticated foreign documents, site approvals and banking can extend readiness. Separate professional/notarial costs and government charges from shareholder capital, working capital, premises, payroll and sector-specific approval expenses; quote the latter case by case rather than promising one universal fee.

Do You Need an Indonesian Office or Business Address?

A PT PMA needs a valid registered address that is compatible with its activity and local requirements. A virtual or serviced office may be suitable for certain office-based activities, but it is not an automatic solution for warehouses, factories, clinics, hospitality premises or other site-dependent operations. Do not treat the old domicile-letter process as a universal national prerequisite; check current AHU, OSS and local premises rules.

How Do You Obtain an NIB and the Licences to Operate?

Apply through OSS to obtain the company’s NIB once its incorporation and business details are ready. For low-risk activities an NIB may suffice, while medium- or high-risk activities can require a standard certificate or business license and, where applicable, supporting approvals. Check the license status and prerequisites for each KBLI before beginning commercial operations.

Can You Register a Company in Indonesia from Overseas?

Many stages can be coordinated remotely through an Indonesian notary and authorized representatives, provided identification, signatures, authenticated documents and statutory formalities are satisfied. Bank onboarding and certain sector-specific checks may still require additional verification or presence. Confirm the practical signing and banking requirements early rather than advertising fully remote setup as guaranteed.

Can Your Indonesian Company Hire Foreign Employees?

A PT PMA may employ foreign workers where the roles and employer satisfy applicable manpower and immigration rules. Required approvals can include a foreign manpower utilisation plan (RPTKA) and the proper stay and work authorisation, subject to exceptions. A company’s incorporation or NIB is not, by itself, permission for an individual to work.

READ MORE:

• Why You Need Qualified Tax Support to Address Your SP2DK Response Letter
• Avoid Work KITAS Rejection in Indonesia with Expert Support
• Set Up a PT PMA in Bali: Guide to 2026 Costs & Restrictions

What Visa or Residence Permit Does a Foreign Founder Need?

The immigration route depends on whether the individual is visiting for meetings, residing as an investor or carrying out work in Indonesia. Holding shares does not automatically confer an investor stay permit, and a visit visa does not substitute for permission to perform local employment. Assess actual duties, investment shareholding and the current immigration category before assigning responsibilities.

What Tax, LKPM and Corporate Obligations Follow Incorporation?

A new company should establish tax registration, accounting and applicable VAT/withholding arrangements, then assess investment-activity reporting through OSS. PT PMA businesses generally have LKPM obligations tied to their classification and reporting rules. If hiring staff, payroll tax, BPJS and manpower administration may also apply. Annual financial, shareholder and company-secretarial obligations should be placed on a recurring compliance calendar.

What Should You Update When You Expand Your Business?

Expanding into a new KBLI, opening another project location or introducing foreign investment can alter ownership eligibility, investment calculations and required licences. A domestic company acquiring foreign shareholders may need investment-classification and corporate-document changes. Review the proposed commercial scope before amending AHU, OSS, tax, employment or sector records so the registered activities continue to match actual operations.

How Can You Avoid Delays When Starting a Business in Indonesia?

Before drafting the deed, align five items:

(1) actual products or services,

(2) KBLI and foreign ownership,

(3) capital and investment plan,

(4) proposed site and operational approvals, and

(5) personnel and first-year compliance. For example, a manufacturer may need environmental and building clearances while a medical-device distributor may need separate product and distribution authorisatio

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How Can InCorp Indonesia Help

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