IKN Indonesia Opens New Doors to Foreign Investment

The Importance of Foreign Investment for IKN Indonesia

  • InCorp Editorial Team
  • 2 July 2025
  • 5 minutes reading time

Indonesia’s new capital city, Ibu Kota Nusantara (IKN), offers a golden opportunity for foreign investors. Nusantara Capital aims to simplify and enhance investing in Indonesia by reducing bureaucracy and offering assistance to foster a conducive business environment. 

With its prime location and friendly policies, IKN Indonesia is paving the way for growth and collaboration for those serious about investing. 

Indonesia’s Plan to Build A New Capital City

Indonesia is presently in the process of establishing a new capital city called Nusantara, featuring a forest city concept located in North Penajam Paser, East Kalimantan.

Bambang Susantono, the Head of the Nusantara Capital Authority (OIKN), affirmed that investor interest in contributing to developing Indonesia’s new capital, Nusantara, remains strong, demonstrating a positive market outlook.

Required Investment in the IKN Project

President Joko Widodo has commenced 23 non-APBN (non-state budget) development projects within the Indonesia New Capital throughout 2023. Foreign investors participating in the Government and Business Entity Cooperation (KPBU) scheme are undergoing selection processes to contribute to developing residential and smart city technology in IKN Indonesia.

Beyond housing development, foreign investors are engaged in six categories of IKN initiative projects focused on establishing a smart city. These categories include urban systems, government services, access and mobility, safety and security, environment and sustainability, and livability for urban life.

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Opportunities for Foreign Investors

IKN Indonesia Opens New Doors to Foreign Investment

The government is promptly preparing mechanisms for foreign investor cooperation in IKN. To this end, the Nusantara Capital Authority Business Entity (BUO) will quickly prepare a cooperation format with the Indonesia Investment Authority.

Boyke P. Soebroto, CEO of the Nusantara Capital Authority Business Entity (BUO), stated that they are preparing to offer three sectors—telecommunications, transportation, and energy—to foreign investors. These three areas require significant and rapid investments.

Indonesia’s Investment Climate

Indonesia offers investors a favorable investment climate, especially those interested in IKN. Those are:

Ease of Doing Business in IKN Indonesia

  • Article 17, Paragraph 3: The IKN authority assures the duration of the Right to Utilize Land (HGU), Right to Build (HGB), or land use rights to business entities stipulated in the agreement.
  • Article 18, Paragraph 1: Grants the HGU a maximum duration of 95 years over the IKN authority’s Land Management Rights (HPL) through the first cycle.
  • Article 18, Paragraph 4: Within ten years before the end of the first cycle of HGU, business entities may apply for the renewal of HGU for a second cycle with a maximum duration of 95 years.
  • Article 19, Paragraph 1: Grants the HGB a maximum duration of 80 years over the HPL of the IKN authority through the first cycle.
  • Article 20, Paragraph 1: Grants a maximum duration of 80 years for land use rights over the HPL of the IKN authority through the first cycle.
  • Article 21, Paragraph 1: The grant of Land Rights in the form of HGU, HGB, or land use rights over HPL is subject to Land and Building Acquisition Duty (BPHTB) at a rate of 0 percent of the acquisition value for a certain period.
  • Article 21, Paragraph 2: After obtaining approval from the IKN authority, individuals may transfer, inherit, or encumber land rights (HAT).

Foreign Workers in IKN Indonesia

  • Article 22, Paragraph 2: Within ten years, foreign workers employed in the IKN area may receive approval for using foreign workers’ plans, with the possibility of extension.
  • Article 22, Paragraph 3: Businesses employing foreign workers are exempt from the obligation to pay compensation for using foreign workers for a certain period.
  • Article 23, Paragraph 1: The authorities may grant foreign workers ten-year residency permits.
  • Article 23, Paragraph 2: If the residency permit is nearing expiration, the employer and the foreign worker may extend it by the terms of their employment agreement.

Investment Facilities in IKN Indonesia

Article 27:

  • Reduced corporate income tax for domestic companies investing in IKN.
  • Special tax rates for financial activities conducted within the designated financial center.
  • Lower tax burdens for companies establishing or relocating headquarters and regional offices in IKN.
  • Tax breaks for businesses implementing work practices, internships, and competency-based training programs.
  • Tax reductions for companies conducting specific research and development activities.
  • Tax incentives for contributions towards public facilities, social facilities, and other non-profit amenities within IKN.
  • Government assumption of final income tax for employees under Article 21.
  • Zero final income tax on unavoidable gross business turnover for Micro, Small, and Medium Enterprises (MSMEs).
  • Reduced tax rates on the transfer of land and building ownership within IKN.

Corporate Income Tax Reduction Facilities in IKN Indonesia

  • Granted for investments in IKN with a minimum value of IDR 10 billion.
  • For investments strategically significant to accelerate the development and growth of IKN.
  • Granted at 100 percent of the total corporate income tax owed.
  • For infrastructure and public service sectors, granted for a 30-year tax period from 2023 to 2030.
  • From 2023 to 2030, economic sectors will receive a 20-year tax period grant.
  • From 2023 to 2030, other sectors will receive a 10-year tax period grant.

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Start Maximizing the Potential of IKN with InCorp

The emergence of IKN Indonesia presents a wealth of investment prospects for businesses seeking growth opportunities. Entrepreneurs looking to venture into IKN can benefit from InCorp Indonesia’s expertise.

With our specialized services in company registration and business licensing, we facilitate establishing your business within the IKN framework. 

By engaging InCorp Indonesia (an Ascentium Company), you gain access to comprehensive support to navigate the intricacies of setting up your business in IKN, ensuring a smooth and efficient process from start to finish.

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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

    The investment requirement for PMA companies in Indonesia varies based on their classification under the Indonesia Industrial Standard Classification (KBLI). Generally, a minimum investment of IDR 10,000,000,000 (ten billion Indonesian Rupiah), excluding investment in land and buildings, is needed to conduct one business activity in one location.

    In Indonesia, the licensing system has been updated with the implementation of the Omnibus Law. Businesses are categorized into four risk levels based on the PMA company classification. Licensing requirements vary accordingly, with three main types:

    • Business Identification Number (NIB)

      • Low-risk businesses needing only an NIB

    • Standard Certification
    • Standard Certification is necessary for medium-low and medium-high-risk businesses
    • Licenses/Permits

    High-risk businesses require licenses/permits
    Additionally, basic requirements, including business location, must be met. Many licensing processes are facilitated through the Online Single Submission (OSS) platform managed by the Investment Coordinating Board (BKPM).

    A PMA company in Indonesia must obtain an NIB, which also functions as:

    • Importer Identification Number (Angka Pengenal Impor or API)
      Producer Importer Identification Number (Angka Pengenal Impor Produsen or API-P), which is required for the import of machinery and equipment, goods, and materials used in production.
      General Importer Identification Number (Angka Pengenal Impor Umum or API-U), which is required for the import of specific goods for trading purposes, is grouped under one section in the Customs Classification System.
    • Customs Identification Number (Nomor Identitas Kepabeanan or NIK), It functions as an identifying document for the applicable Customs and Excise authorities during the customs clearance process.

    Some goods may face limitations or restrictions on importation in Indonesia, potentially requiring additional approval from the Ministry of Trade. Recommendations from technical ministries like Industry or Agriculture may influence these approvals.

    A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances.

    • Import facilities
      Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production.
    • Tax holiday
      The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status.

      • Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy.

    • Tax allowance
      For companies in certain designated areas or regions, the government may provide the following tax concessions:
      Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration.
      Accelerated depreciation and/or amortisation deductions
      An extension of tax losses carried forward for a maximum of ten years
      A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents
      The applicant eligible has to meet high-level-criteria for the above tax facilities:
      High investment value or for export purposes
      High manpower absorption
      High level of local content
    • Investment allowance
      The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project.
    • Super deduction
      This facility could be granted to certain businesses, such as:
      60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame.
      Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities.
      Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia.

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Disclaimer

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.

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