Setting up a business in Indonesia offers access to a large domestic market and open investment fields, with online licensing through OSS. The trade-offs are minimum capital rules, layered licensing, labour and work-permit requirements, and regulatory change. Whether the pros outweigh the cons depends on your sector, capital and timeline.
What are the main advantages of doing business in Indonesia?
The main advantages are a large domestic consumer base, foreign ownership allowed in many fields, a single online licensing system and a defined corporate tax rate.
- Market access. Indonesia is a large domestic market in Southeast Asia, which makes a locally incorporated company attractive for businesses selling to Indonesian customers. Market-size figures change each year, so use current data from BPS for your own sector analysis.
- Open investment fields. Presidential Regulation 10 of 2021, as amended by Presidential Regulation 49 of 2021, moved investment rules from a negative list to defined categories of open fields. Many activities are open to foreign investors, some with conditions.
- One licensing system. Registration and risk-based licences run through OSS under Government Regulation 28 of 2025 (JDIH BPK). Low-risk activities need only an NIB.
- Defined tax rate. The general corporate income tax rate is 22 per cent, per the Directorate General of Taxes.
What are the main disadvantages?
The main disadvantages are capital requirements, layered licensing, work-permit obligations, and the need to track frequent regulatory change.
| Area | Advantage | Disadvantage |
|---|---|---|
| Market | Large domestic customer base | Local competition and price sensitivity vary by sector |
| Ownership | Many fields open to foreign investors | Some fields conditional or closed; check the KBLI code |
| Capital | Clear minimums | PT PMA minimums can be heavy for small ventures |
| Licensing | One online system (OSS) | Higher-risk activities need extra certificates or licences |
| People | Local workforce available | Foreign staff need approved manpower plans and permits |
| Regulation | Reforms aim to simplify entry | Rules and codes change, for example the move to KBLI 2025 |
For a PT PMA, BKPM Regulation 5 of 2025 sets at least IDR 2.5 billion in issued and paid-up capital and total investment above IDR 10 billion excluding land and buildings per five-digit KBLI per project location, with exceptions for some activities (regulation text). The paid-up capital must stay in the company account for at least 12 months, except for specified uses. These floors make very small trial ventures hard to run through a PT PMA.
How do licensing and compliance affect the decision?
Licensing is online but still demands accurate business codes and documents, and compliance continues after registration.
The business classification now uses KBLI 2025 under BPS Regulation 7 of 2025. BPS says existing licences remain valid and that businesses adjust only where their business purpose changes (BPS). After registration, you will still handle tax filings, social security, manpower reports and investment reporting. See company registration in Indonesia for the registration sequence and the company registration number guide for the identifiers you will hold.
Older permits such as the SIUP trading licence were folded into the NIB and risk-based licences; our SIUP explainer shows what replaced them.
What risks should foreign investors weigh?
Weigh regulatory change, work-permit compliance, partner and market risk, and operational conditions such as logistics outside major cities.
- Regulatory change. Rules have changed several times in recent years. Build a compliance calendar and re-check requirements annually.
- Foreign staff. Employers need approved manpower plans before foreign workers start. See our RPTKA guide and investor KITAS guide.
- Operations. Logistics, infrastructure quality and cultural expectations differ across islands and cities. Our article on the challenges of doing business in Indonesia covers these in detail.
- Structure. A wrong entity choice is costly to reverse. Compare options in start a business in Indonesia and foreign companies in Indonesia.
How can you decide whether to proceed?
Test the business case against the capital floors, licensing path and staffing needs, then decide between a PT PMA, a representative office or a local partner.
A short checklist: confirm your KBLI code is open to your intended ownership; model cash needs against the capital and investment minimums; list the licences your activity needs; confirm who will be your foreign directors and what permits they need; and define the compliance calendar. If you want a second opinion on the structure and filings, see our PT PMA setup service.
Frequently asked questions
Is it worth setting up a business in Indonesia?
It can be, if your activity is open to foreign ownership and you can meet the capital and compliance requirements. The domestic market and online licensing are real advantages, but minimum capital, licensing layers and regulatory change mean the case must be tested sector by sector.
What are the biggest disadvantages of a PT PMA?
The main ones are the capital and investment minimums, the licensing needed for higher-risk activities, and ongoing compliance such as tax, social security and investment reporting. Foreign staff also need approved manpower plans and stay permits, which adds planning time.
Can foreigners own a business in Indonesia outright?
In many fields, yes, through a PT PMA. Presidential Regulation 10 of 2021, as amended, classifies fields as priority, reserved for cooperatives and MSMEs, open with conditions, or open to all investors. Some sectors restrict foreign ownership, so check the KBLI code.
What is the corporate tax rate in Indonesia?
The general corporate income tax rate is 22 per cent under Article 17(1)(b) of the Income Tax Law as amended by Law 7 of 2021, as described by the Directorate General of Taxes. Specific facilities and rates may apply to qualifying taxpayers, so confirm your position with a tax adviser.
Do I still need a SIUP or TDP?
No. These older permits were replaced by the NIB and risk-based licensing through OSS. Your NIB serves as business registration, and some activities need additional Standard Certificates or licences depending on risk.
General information only; not legal or tax advice. Confirm current rules before acting.
General information only, not legal or tax advice for your specific facts. Regulations change; confirm the current position with JCSS Indonesia before acting.