Foreign Investment Regulations
in Indonesia: A Practical Guide
Indonesia is Southeast Asia's largest economy and actively encourages foreign investment — but the regulatory framework requires careful navigation. This guide covers what every foreign investor needs to understand before committing capital.
The Investment Framework
Foreign investment in Indonesia is governed primarily by the Investment Law (Law No. 25/2007) and the implementing regulations under the Job Creation Law (Omnibus Law, Law No. 11/2020) and Government Regulation No. 5/2021. The government regulates foreign investment through BKPM, now operating under the Ministry of Investment.
The Positive Investment List
Government Regulation No. 10/2021 introduced the current Positive Investment List, replacing the previous Negative Investment List. Most business sectors are now fully open to 100% foreign ownership, with exceptions in areas such as media, certain agricultural activities, and specific natural resources.
BKPM Registration and LKPM Reporting
All PT PMA companies must register their investment plan with BKPM via the OSS system. Once registered, companies must submit quarterly LKPM reports detailing actual investment realisation, employment, and business activity. Failure to submit on time results in warnings and can ultimately lead to revocation of the investment licence.
Repatriation of Profits
Indonesia allows full repatriation of profits, dividends, and capital for foreign investors. Dividend payments from a PT PMA to a foreign shareholder are subject to PPh 26 withholding tax at 20%, though this rate may be reduced under an applicable tax treaty. Proper documentation — including a Certificate of Domicile (SKD) — is required to claim treaty benefits.
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