Hong Kong Business Investment in Indonesia: What Changed in 2026

Hong Kong became Indonesia’s largest recorded source of foreign investment in Q2 2026, overtaking Singapore for the first time in a decade. Much of this growth reflects China-linked capital routed through Hong Kong, according to Indonesia’s Ministry of Investment and Downstream Industry (BKPM). Much of this growth reflects China-linked capital routed through Hong Kong.

For Hong Kong businesses considering Indonesia, recent changes to PT PMA capital requirements, tax incentives, and trade rules make it important to understand the current investment landscape before entering the market.

Key Takeaways

• Hong Kong became Indonesia’s largest recorded foreign investor in Q2 2026, with approximately USD 5 billion in realized investment.
• Much of the increase was linked to Chinese capital routed through Hong Kong, according to BKPM.
• The minimum paid-up capital for a PT PMA (foreign-owned limited liability company) is IDR 2.5 billion, while the total investment generally must still exceed IDR 10 billion per five-digit KBLI code and project location.
• Indonesia’s tax holiday now needs to be considered together with OECD Pillar Two global minimum tax rules, while PMK 69/2024 sets 31 December 2025 as the latest general application deadline.
• The ASEAN–Hong Kong Free Trade Agreement (AHKFTA) can provide preferential tariffs for qualifying Hong Kong-origin goods that meet the applicable rules of origin.

Hong Kong Foreign Direct Investment in Indonesia

Period	Hong Kong FDI	Rank	Key Context
Q1 2025	USD 2.23 billion	2nd	Hong Kong remained one of Indonesia’s leading FDI sources
Q3 2025	USD 2.7 billion	2nd	Investment continued to increase
Q1 2026	USD 2.7 billion	2nd	Hong Kong remained the second-largest source
Q2 2026	~USD 5 billion	1st	Became the top source for the first time in a decade, largely driven by China-linked capital

What Does Hong Kong’s Investment Growth Mean for Indonesia?

Hong Kong became Indonesia’s largest recorded source of foreign investment in Q2 2026, with around USD 5 billion in realized investment, according to Indonesia’s Ministry of Investment and Downstream Industry (BKPM). BKPM noted that much of the increase was linked to Chinese capital routed through Hong Kong, reinforcing Hong Kong’s role as an investment gateway for businesses entering Indonesia.

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Which Sectors are Attracting Hong Kong Investment?

Hong Kong investment in Indonesia is most visible in sectors connected to industrial growth, downstream processing, and regional supply chains. These areas also create opportunities for businesses considering expansion, manufacturing, and long-term investment in Indonesia.

Basic Metals, Downstream Processing, and EV Supply Chain

Basic metals and mineral processing remain among Indonesia’s strongest investment sectors, with the sector leading investment realization in the first half of 2026. Indonesia is also continuing to expand its nickel-based EV battery ecosystem, creating opportunities across mineral processing, battery materials, and related manufacturing. This is particularly relevant to Hong Kong investment given the significant amount of Chinese capital entering Indonesia through Hong Kong entities.

Manufacturing and Industrial Production

Manufacturing also remains relevant for Hong Kong investors expanding production or regional supply chains. Previous Hong Kong investment in Java has included paper and printing, food manufacturing, and other industrial activities, alongside Indonesia’s broader manufacturing base.

Industrial Estates and Commercial Infrastructure

Industrial estates and related commercial property have also attracted Hong Kong investment, particularly in Java. As manufacturing and downstream projects expand, demand for industrial locations and supporting infrastructure can create additional opportunities for investors entering Indonesia.

What Tax Incentives Are Available in Indonesia?

Indonesia offers several incentives that can reduce the cost of qualifying investments. However, eligibility depends on the business activity, investment value, and company structure, while larger multinational groups also need to consider the global minimum tax.

Tax Holiday, Tax Allowance, and Deduction

Incentive	What It Provides	Governing Regulation
Tax holiday	50% corporate income tax reduction for qualifying pioneer-industry investments of IDR 100 billion to below IDR 500 billion, and 100% for qualifying investments of at least IDR 500 billion, with benefits of 5–20 years depending on investment value	PMK 130/2020 as amended by PMK 69/2024
Tax allowance	30% net income deduction on qualifying investment in tangible fixed assets, spread over 6 years, together with accelerated depreciation or amortization and other qualifying benefits	PP 78/2019; PMK 81/2024, Articles 407–422
R&D super deduction	Total gross income deduction of up to 300% of qualifying research and development expenditure in Indonesia	GR 45/2019; PMK 81/2024, Articles 432–441
Import duty facility	Import duty exemption for qualifying machinery, goods, and materials used for eligible investment activities	PMK 176/2009 as amended; BKPM Regulation 4/2021

For new investors in 2026, the general tax-holiday application timeline is important. Under PMK 69/2024, proposals for the corporate income tax reduction facility could be submitted until 31 December 2025. Businesses planning new investments in 2026 should therefore assess other available incentives and confirm whether any new or sector-specific facility applies.

How the Global Minimum Tax Affects a Hong Kong-Based Group

Under Minister of Finance Regulation 136/2024, Indonesia applies a 15% global minimum tax framework to multinational enterprise groups within the OECD Pillar Two scope, generally including groups with consolidated annual revenue of at least EUR 750 million. The regulation took effect on 1 January 2025, with the Undertaxed Payment Rule (UTPR) applying from 1 January 2026.

For an in-scope Hong Kong group benefiting from an Indonesian tax incentive that reduces its effective tax rate below 15%, a top-up tax may apply. This means the headline value of a tax holiday or other incentive may not equal the group’s final tax benefit.

Hong Kong groups within Pillar Two’s scope should therefore assess the after-top-up-tax position when evaluating Indonesia’s tax incentives.

Does Hong Kong Have a Trade Advantage in Indonesia?

Hong Kong businesses trading goods with Indonesia may benefit from preferential tariffs under the ASEAN–Hong Kong Free Trade Agreement (AHKFTA). However, the benefit depends on the origin of the goods and applicable documentation, not simply on having a Hong Kong company.

The ASEAN–Hong Kong Free Trade Agreement

The ASEAN–Hong Kong Free Trade Agreement (AHKFTA) has applied between Hong Kong and Indonesia since 4 July 2020. It provides preferential tariff treatment for qualifying trade between Hong Kong and Indonesia.

For goods exported from Hong Kong to Indonesia, preferential treatment is subject to the applicable rules of origin and generally requires a Certificate of Hong Kong Origin – Form AHK (CO(Form AHK)). The benefit therefore applies to qualifying originating goods rather than simply because an investment or company is Hong Kong-owned.

For Hong Kong businesses that meet these requirements, AHKFTA can provide a trade advantage separate from the tax and investment incentives available to qualifying investors in Indonesia.

What are the Requirements for a Hong Kong Company to Enter Indonesia?

Entering Indonesia typically requires the right legal entity, sufficient investment and paid-up capital, and business licences that match the company’s activities. The exact requirements depend on the business classification and sector.

Entity Structure and Capital

A Hong Kong company investing directly in Indonesia typically establishes a PT PMA (foreign-owned limited liability company). Under BKPM Regulation 5/2025, effective 2 October 2025, the minimum paid-up capital is IDR 2.5 billion per PT PMA, down from the previous IDR 10 billion.

The total investment plan generally must still exceed IDR 10 billion per five-digit business classification (KBLI) code and project location, excluding land and buildings. Different calculation rules apply to certain business activities, so the required investment should be assessed against the company’s specific KBLI.

Eligibility and any foreign-ownership limits are determined by Indonesia’s investment and sector-specific regulations, including the Positive Investment List.

Licensing Under OSS-RBA

Business licensing operates through Indonesia’s OSS-RBA (Online Single Submission – Risk-Based Approach) system, under Government Regulation 28/2025 and BKPM Regulation 5/2025.

Business activity classification now follows KBLI 2025, introduced under BPS Regulation 7/2025. However, existing businesses do not need new licences solely because of the change to KBLI 2025.

Where there is no substantive change to the company’s business purpose or activities, the KBLI conversion is handled automatically through the AHU and OSS systems. Businesses generally need to make their own adjustment where there is a substantive change to their business activities. The 18 June 2026 deadline applied to the government system adjustment, not to businesses obtaining new licences.

What Challenges Should Hong Kong Investors Plan For?

Hong Kong businesses entering Indonesia should prepare for several practical challenges:

• Foreign ownership restrictions can affect the permitted investment structure for certain business activities.
• Changing regulations can affect capital, licensing, business classifications, and available incentives.
• Global minimum tax rules may reduce the value of tax incentives for multinational groups within OECD Pillar Two scope.
• Location and infrastructure can affect manufacturing, logistics, and operational costs.
• Labor compliance requires businesses to follow Indonesian requirements for employment contracts, termination, and worker protection.

How Can InCorp Indonesia Support Your Market Entry?

Entering Indonesia requires more than establishing a company. The right structure, licences, tax position, and workforce arrangements should be considered before operations begin.

InCorp Indonesia (an Ascentium Company) can support Hong Kong businesses with:

• Company Incorporation: Establish the appropriate PT PMA structure and meet capital requirements.
• Business Licensing: Identify the required KBLI classifications and obtain licences through OSS-RBA.
• Tax and Incentive Advisory: Assess available incentives and the potential impact of global minimum tax rules.
• Employment and Immigration: Support workforce compliance, including Investor KITAS and other required permits.
• Ongoing Compliance: Manage corporate, tax, accounting, and regulatory requirements after establishment.

Planning to expand into Indonesia? Talk to our team to assess the right structure and compliance requirements for your investment. Fill out the form below.

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