Overview of Investment Thresholds under Indonesian Law
Foreign investors planning to establish a Foreign Investment Limited Liability Company (PMA Company) in Indonesia must comply with specific minimum capital and investment requirements.
These thresholds are derived from Law No. 25 of 2007 on Investment and its implementing regulations, ensuring that foreign direct investment supports Indonesia’s long-term economic growth.
The minimum investment rule also distinguishes foreign-owned companies from micro, small, and medium enterprises reserved for Indonesian nationals.
General Minimum Investment Requirement
Under Indonesia’s investment framework, a PMA company must commit to a minimum total investment exceeding IDR 10 billion for each five-digit KBLI (business classification) in one project location.
Key notes:
- This value excludes land and buildings.
- The investment amount covers machinery, equipment, pre-operational expenses, working capital, or other operational needs.
Investment Amount vs Capital Amount
These two concepts are often misunderstood:
- Investment Amount → Total planned expenditure to run the business.
- Capital Amount → The equity portion injected by shareholders.
The two may be equal or structured differently depending on the business model.
Minimum Paid-Up Capital for PMA Companies
A PMA company must have a minimum issued and paid-up capital of IDR 10 billion, unless sectoral regulators require more.
This requirement generally applies across industries except:
- Banking and financial institutions — governed by OJK with higher capital obligations
- Insurance and fintech companies — subject to capital adequacy rules
- Mining, oil and gas, or energy sectors — often require additional exploration or environmental commitments
Foreign investors may still use loan financing beyond their paid-up capital, as long as tax and reporting obligations are met.
Sectoral Exceptions and Special Rules
Some business structures are subject to reduced or different requirements:
Representative Offices (RO)
- Not allowed to generate revenue
- Not subject to minimum capital rules
- Suitable for market research or liaison functions
Trading PMA Companies
While still subject to minimum capital rules, some trading KBLI codes allow flexible structuring depending on their business scope:
- Distributor vs importer vs exporter
- Type of API (import license)
- Whether warehousing or multiple locations are used
Foreign investors should always verify their KBLI classification through the OSS system before structuring capital.
Why the Minimum Investment Rule Matters
Indonesia’s IDR 10 billion minimum is not arbitrary — it supports several national policy objectives:
- Ensures credible foreign investment backed by sufficient financial capacity
- Protects MSMEs, which are reserved for Indonesian ownership
- Encourages long-term, value-adding investment, not short-term speculative activity
- Supports employment creation and technology transfer
Meeting this requirement is essential to obtain:
- Business Identification Number (NIB)
- Operational or commercial business licenses
- Tax registration and compliance
Conclusion
To establish a PMA company in Indonesia, foreign investors must commit to:
- A minimum investment value exceeding IDR 10 billion, and
- A minimum paid-up capital of IDR 10 billion, unless sectoral rules specify otherwise.
Because requirements vary by industry, investors should verify their KBLI classification through OSS or seek guidance from qualified legal advisors.
Adhering to the correct investment and capital structure ensures smooth licensing, stronger credibility, and long-term regulatory compliance within Indonesia’s investment framework.