NEWS ALERT: Indonesia Slashes Foreign Investment Capital Threshold in Major Licensing Reform

Key changes

Indonesia’s Investment Coordinating Board (BKPM) has officially issued Regulation No. 5 of 2025 (“Reg 5/2025”), effective 2 October 2025.

Key changes include:

• The minimum paid‑up capital for foreign‑investment companies (PT PMA) is lowered from IDR 10 billion to IDR 2.5 billion per company.
• The total investment value threshold remains at IDR 10 billion (excluding land and buildings) per five-digit KBLI per location.
• Paid‑up capital must be deposited in a local bank account and locked‑up for at least 12 months, except when used for asset purchase, construction or operations.

Any investors fail to comply with this commitment may result in administrative sanctions, which may include:

1. written warnings;
2. temporary suspension of business activities;
3. administrative fines;
4. coercive enforcement measures;
5. revocation of licenses, certifications, or approvals; and/or
6. revocation of basic requirements, business licensing, and/or business licensing to support business activity (Perizinan Berusaha untuk Menunjang Kegiatan Usaha or PB UMKU).

• Reg 5/2025 consolidates and replaces three previous BKPM rules (No. 3/2021,  No.4/2021 and No. 5/2021) into a single unified framework.
• Licensing and investment facilities are broadened under the risk‑based OSS (Online Single Submission) system, promising faster access and more streamlined procedures.

Sector-Based Exceptions to the more than IDR 10 Billion Minimum Investment Threshold

While Reg 5/2025 retains the minimum total investment value of more than IDR 10 billion (excluding land and buildings) per five-digit KBLI per location — consistent with the previous BKPM Regulation No. 4 of 2021 — it also introduces several sector-specific exceptions that adjust how this threshold is applied, depending on the nature and scope of the business activity.

Some of these exceptions remain unchanged from the previous regulation, while others reflect new developments. Notably, Reg 5/2025 provides further clarification on the definition of “business location” and introduces new provisions for sectors such as electric vehicle (EV) infrastructure as mentioned in point 5 below.

All sector-specific exceptions, including both existing and newly introduced provisions, are summarized below:

1.Wholesale Trade (Perdagangan Besar)

• Minimum Investment threshold of more than IDR 10 billion (excluding land and buildings) applies per 4-digit KBLI code.

2. Food and Beverage Services (Jasa Makanan dan Minuman)

• Minimum Investment threshold of more than IDR 10 billion applies per 2-digit KBLI code per business location (titik lokasi).
• The term titik lokasi refers to individual premises, and the regulation states this applies per kabupaten/kota (regency/city).

3. Construction Services (Jasa Konstruksi)

• Minimum Investment threshold of more than IDR 10 billion per 4-digit KBLI, excluding land and buildings.

4. Manufacturing Industries (Industri)

• For industrial companies that produce different types or variants of products within a single production line, the Minimum Investment threshold of more than IDR 10 billion applies as a total, not per KBLI.
• This offers flexibility for manufacturers with multiple but related products under one integrated operation.

5. EV Sector:

New category: Businesses developing and operating electric vehicle charging stations (SPKLU) must invest more than IDR 10B (excluding land/building), but the threshold applies per province rather than per KBLI or location.

6. KEK Areas:

Projects in Special Economic Zones (e.g., for digital economy, logistics, tourism, energy) are not bound by the general Minimum Investment threshold of more than IDR 10 billion rule. Instead, they must follow thresholds as set in the relevant Presidential Regulations on investment in KEKs.

7. In the case of business activities related to property development and management, the following provisions apply:

a. For property in the form of a complete building or a fully integrated residential complex, the required investment value must be greater than IDR 10,000,000,000 (ten billion rupiah), including land and buildings; or

b. For individual property units that are not part of a complete building or an integrated residential complex, the required investment value must be greater than IDR 10,000,000,000 (ten billion rupiah), excluding land and buildings.

8. For certain sectors, the total minimum investment value requirement for a foreign investment company (PMA) includes land and building costs. These sectors are:

a. Property development (including construction, sale, and/or leasing)
b. Short- and long-term accommodation services
c. Agriculture
d. Plantations
e. Livestock
f. Aquaculture (fish farming)

Why it matters

These reforms reduce barriers for foreign investors—especially smaller firms or those with “capital‑light” models—to enter Indonesia.

Implications for businesses

Companies planning new projects in Indonesia should review their corporate structure, capital placement strategy and ensure compliance with the 12‑month lock‑up and OSS requirements.

Those already operating as PMA Companies with existing permits or approvals issued under the revoked regulations may continue to operate under the terms of those permits until their expiration.

Investors who have submitted applications or are in the process of obtaining permits under the previous regulations should reassess their capital commitments or licensing status under the new regime and observe the transition provisions under Reg 5/2025

Any new applications will be subject to the rules and requirements specified in Reg 5 / 2025.

At ZeLo, we provide legal services to support Japanese companies expanding overseas, including to Indonesia, as well as foreign companies entering the Japanese market.

Please let us know if you have further questions or may need assistance on this matter. For further information on the above, about our firm or any other matters, please contact through the form (https://zelojapan.com/en/contact).

---

The information provided in this article does not, and is not intended to, constitute legal advice and is for general informational purposes only. Readers of this article should contact an attorney to obtain advice with respect to any particular legal matter.