Updates on Indonesia’s Risk-Based Licensing Framework: BKPM Regulation No. 5 of 2025

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The Government of Indonesia has reformed its risk-based business licensing framework through Government Regulation No. 28 of 2025. To implement this, the Minister of Investment/Head of the Indonesian Investment Coordinating Board (“BKPM”) has issued Regulation No. 5 of 2025 on Guidelines and Procedures for Risk-Based Business Licensing and Investment Facilities (“BKPM Reg 5/2025”). Effective as of 2 October 2025, this regulation consolidates and revokes BKPM Regulation No. 3, 4, and 5 of 2021, which previously governed the electronic risk-based licensing system, licensing procedures, and investment supervision. This marks a significant step toward regulatory simplification and improved investment facilitation in Indonesia.

This ARMA Update highlights the key changes under BKPM Regulation 5/2025, including updated investment and capital requirements, the enhanced pre-operational licensing framework, supervision mechanisms, as well as their improvements over the 2021 framework in Indonesia.

Redefined Investment Value and Capital Thresholds

The regulation revises investment value and capital requirements, aligning domestic investment thresholds with the definitions established under micro, small, and medium enterprise (“MSME”) legislation.

1. Micro enterprises are defined as businesses with capital up to Rp1 billion, excluding land and buildings; or annual sales of up to Rp2 billion. ¹
2. Small enterprises are those with capital between Rp1 and 5 billion; or annual sales ranging from Rp2 to 15 billion. ²
3. Medium enterprises hold capital between Rp5 and 10 billion; or annual sales of up to Rp50 billion. ³
4. Large enterprises are defined as those with investment value above Rp10 billion, excluding land and buildings. ⁴

For foreign investment companies, the regulation maintains the general requirement of a minimum investment value above Rp10 billion per business classification code (“KBLI”) at the five-digit level per project location, excluding land and buildings. Sectoral exceptions apply for wholesale trading, food and beverage services, and construction, where thresholds are calculated at broader KBLI levels or by location. ⁵ These adjustments reflect practical business realities, particularly for industries such as restaurant chains, where investment may now be assessed collectively at the city level rather than per outlet. ⁶

Paid-Up Capital and Capital Retention Rules for PMA Company

In addition to minimum investment thresholds, foreign investors are also subject to specific paid-up capital rules. Under BKPM Reg 5/2025, the government has significantly lowered the paid-up capital requirement for foreign investment companies from the previous Rp10 billion to Rp2.5 billion for each limited liability company established in Indonesia, unless an exemption applies ⁷. A notable feature introduced by BKPM Reg 5/2025 is the capital retention requirement, which obliges shareholders to declare that paid-up capital will remain in the company’s bank account for at least 12 (twelve) months. ⁸ Exceptions are allowed for asset acquisition, construction, or operational expenditure. ⁹

Pre-Operational Licensing and Basic Requirements

A key element of this process is the Business Identification Number (“NIB”), which now functions as a comprehensive legal instrument with multiple roles. The NIB serves not only as an identifier but also as an authorization for customs access, an importer identification number, social security registration, and evidence of mandatory labour reporting. ¹⁰ For medium-low, medium-high and high-risk businesses, the NIB carries the concept of “limited legality”, ¹¹ enabling companies to undertake preparatory activities before operational licenses become effective.

The pre-operational licensing regime is more clearly defined. Low-risk businesses may commence full operations with an NIB alone, while medium-low risk businesses require both an NIB and a self-declared standard certificate.¹² Medium-high and high-risk businesses may begin preparatory activities with an NIB but must obtain verified standard certificates or effective licenses before full commercial operations can begin.¹³

Investment Supervision Mechanism

The regulation also strengthens supervision mechanisms, requiring businesses to submit periodic investment activity reports (“LKPM”). The government has officially extended the LKPM submission deadline from the 10th to the 15th of the reporting month,¹⁴ and differentiated the submission schedules based on business scale. Small enterprises must submit LKPMs semiannually, with the January to June period due by 15 July of the same year and the July to December period due by 15 January of the following year.

Meanwhile, medium and large enterprises are required to submit LKPMs quarterly, with deadlines on 15 April for the January–March period, 15 July for April–June, 15 October for July–September, and 15 January of the following year for October–December.¹⁵ If a reporting deadline falls on a public holiday, the submission date will be adjusted and officially announced through the OSS system.¹⁶

Expanded Investment Facility Services

Companies that have a business license to carry out preparation or operational, may apply for Investment Facilities through fiscal facility services which shall be in the form of customs facilities and tax facilities.¹⁷ However, BKPM Reg 5/2025 introduces several new non-fiscal investment facilities aimed at supporting business operations across key sectors.

The new non-fiscal facilities include:¹⁸

1. Recommendations for the transfer of machinery that previously received import duty exemptions for re-export purposes;
2. Recommendations for the transfer of capital goods that were granted import duty facilities for public electricity generation; and
3. Recommendations for the transfer of imported goods that have obtained import duty exemptions or reductions under the Contract of Work (Kontrak Karya) and Coal Contract of Work (Perjanjian Karya Pengusahaan Pertambangan Batubara) schemes.

Transitional Provisions

As of the effective date of BKPM Reg 5/2025 on 2 October 2025, the following transitional rules apply:

1. Existing Licenses Status – Companies holding valid and verified business or supporting licenses may continue operations under their current licenses and are not obliged to comply with the new licensing rules.¹⁹
2. Pending Applications – Applications for basic requirements, business or supporting licenses, and/or investment facilities that are still being processed before the OSS system under BKPM Reg 5/2025 becomes operational shall continue to be handled in accordance with the previous regulations.²⁰
3. Relocation or License Renewal – PT PMA that relocate their business or renew a risk-based business license issued prior to 2 October 2025 will continue to comply with the capital and minimum investment requirements set forth in their existing valid license.²¹
4. Business Expansion: PT PMA expanding their business activities under the same approved business license will continue to follow the capital requirements outlined in the license issued and verified before BKPM Reg 5/2025 came into effect.²²

Comparative Improvements from 2021

Compared with the previous 2021 framework, the 2025 regulation introduces several key improvements. Most notably, it integrates licensing, procedures, and supervision into a single regulation, strengthens the role of the NIB as a multi-functional license, and imposes stricter capital rules for foreign investors, including the capital retention requirement. It also enhances the OSS system with new subsystems for investment facilities and partnerships, calibrates LKPM reporting obligations according to business scale, and embeds enforcement provisions directly into the licensing framework.

1. Article 25 paragraph (4) of BKPM Reg 5/2025 ↩
2. Article 25 paragraph (4) of BKPM Reg 5/2025 ↩
3. Article 25 paragraph (4) of BKPM Reg 5/2025 ↩
4. Article 25 paragraph (5) of BKPM Reg 5/2025 ↩
5. Article 26 paragraph (3) of BKPM Reg 5/2025 ↩
6. Article 26 paragraph (4) of BKPM Reg 5/2025 ↩
7. Article 26 paragraph (10) of BKPM Reg 5/2025 ↩
8. Article 27 of BKPM Reg 5/2025 ↩
9. Article 27 of BKPM Reg 5/2025 ↩
10. Article 16 paragraph (6) of BKPM Reg 5/2025 ↩
11. Article 16 paragraph (9) of BKPM Reg 5/2025 ↩
12. Article 186 paragraph (3) of BKPM Reg 5/2025 ↩
13. Article 186 paragraph (3) of BKPM Reg 5/2025 ↩
14. Article 286 paragraph (3) of BKPM Reg 5/2025 ↩
15. Article 286 paragraph (5) of BKPM Reg 5/2025 ↩
16. Article 286 paragraph (7) of BKPM Reg 5/2025 ↩
17. Article 246 of BKPM Reg 5/2025 ↩
18. Article 266 of BKPM Reg 5/2025 ↩
19. Article 389 of BKPM Reg 5/2025 ↩
20. Article 392 of BKPM Reg 5/2025 ↩
21. Article 395 paragraph (1) of BKPM Reg 5/2025 ↩
22. Article 395 paragraph (2) of BKPM Reg 5/2025 ↩

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Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.

Go to

1. Redefined Investment Value and Capital Thresholds
2. Paid-Up Capital and Capital Retention Rules for PMA Company
3. Pre-Operational Licensing and Basic Requirements
4. Investment Supervision Mechanism
5. Expanded Investment Facility Services
6. Transitional Provisions
7. Comparative Improvements from 2021

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