New BKPM Regulation Eases Entry for Foreign Investors, Reshapes Minimum Capital Rules
Indonesia has taken another step to attract foreign investment by lowering its paid-up capital requirements for foreign-owned companies, marking one of the most significant regulatory updates in recent years.
Under the newly enacted BKPM Regulation No. 5 of 2025 on Business Licensing, Risk-Based Licensing, and Investment Facilities, the Indonesia Investment Coordinating Board (Badan Koordinasi Penanaman Modal or BKPM) officially reduced the minimum paid-up capital for foreign-owned limited liability companies (PT PMA) from Rp10 billion to Rp2.5 billion. The change is coupled with a new 12-month fund lock-up period, ensuring that the declared capital remains within the company to support genuine business operations.
This regulation replaces three earlier rules, namely:
Which previously governed risk-based licensing and investment supervision.
Minimum Capital Before Regulation No. 5 of 2025
Before this reform, all foreign-owned entities were categorised as large-scale enterprises under Presidential Regulation No. 10 of 2021 and BKPM Regulation No. 4 of 2021. They were required to maintain a minimum total investment value of Rp10 billion per business line (KBLI 5-digit), excluding land and buildings.
Of that amount, at least 25% was required to be issued and paid-up before or immediately after incorporation, typically recorded in both the company’s notarial deed and the OSS (Online Single Submission) system.
While the total investment value requirement remains unchanged at Rp10 billion, the paid-up portion is now reduced to Rp2.5 billion, marking a major policy shift intended to foster a more dynamic and inclusive investment landscape.
How About Other Capitals and Investment Capital?
The 2025 regulation distinguishes between several key forms of corporate capital:
- Authorised Capital (Modal Dasar): The maximum nominal value of shares a company may issue, as recorded in its Articles of Association.
- Issued Capital (Modal Ditempatkan): The portion of authorised capital that has been distributed to shareholders.
- Paid-Up Capital (Modal Disetor): The amount shareholders have fully paid in exchange for issued shares.
- Investment Capital (Nilai Investasi): The total investment value of a project, including paid-up funds, asset purchases, and operational expenditures.
In practice, this means that while a PT PMA’s total investment value must still exceed Rp10 billion, the immediate paid-up cash injection at incorporation can be as low as Rp2.5 billion. The remaining amount can be realised progressively through asset acquisitions, operational costs, and business development.
To maintain compliance, the deposited capital must stay in the company’s corporate bank account for at least 12 months, unless used for legitimate business purposes such as property acquisition, factory construction, or procurement.
Sectoral Exceptions and Regulatory Flexibility
BKPM Regulation No. 5 of 2025 also reaffirms sector-specific adjustments to investment thresholds, particularly for industries with unique cost structures. Exceptions include:
- Wholesale trade: Assessed based on the first four digits of the KBLI.
- Food and beverage services: Calculated per location, using the first two digits of the KBLI.
- Construction services: Evaluated per project, based on the first four digits of the KBLI.
- Manufacturing industries: May consolidate multiple product lines under a single production facility, provided the combined value exceeds Rp10 billion.
These adjustments reflect the government’s effort to strike a balance between regulatory discipline and business practicality, ensuring that smaller yet high-value sectors, particularly in digital services, hospitality, and creative industries that can access Indonesia’s vast consumer market with more manageable entry costs.
Why the Reform Matters
The 2025 reform underscores Indonesia’s broader push to streamline its investment framework in line with global best practices. By lowering the paid-up capital threshold and introducing a fund retention requirement, the government aims to:
- Encourage legitimate, long-term investment rather than speculative entities.
- Enhance capital transparency and discourage undercapitalised shell companies.
- Improve Indonesia’s Ease of Doing Business ranking, reinforcing its position as Southeast Asia’s growth hub.
For new and existing investors, this change presents both an opportunity and a responsibility. Companies gain flexibility in initial capital deployment, but must maintain accurate documentation and consistent reporting through the OSS-RBA and LKPM (Investment Activity Report) systems to remain compliant.
Navigate Business Incorporation in Indonesia with LMI Consultancy
Understanding Indonesia’s evolving capital and licensing framework can be complex — but that’s where LMI Consultancy steps in.
As one of Indonesia’s most trusted consulting partners, LMI Consultancy provides end-to-end assistance for foreign investors establishing a PT PMA. Our services cover every stage of the process:
- Advising on optimal share structure and authorised capital.
- Preparing notarial deeds and submitting documents through OSS-RBA.
- Assisting with bank account opening, capital statement letters, and fund verification.
- Ensuring timely reporting to the Ministry of Investment (BKPM).
By lowering the minimum paid-up capital from Rp10 billion to Rp2.5 billion, the government has effectively opened the door for a broader spectrum of international investors.
However, with regulatory flexibility comes greater responsibility. Investors must still demonstrate genuine operational intent and financial credibility.
As a team of experts in the Business Incorporation landscape in Indonesia, LMI Consultancy stands ready to guide you through every step of your investment journey, ensuring that your business not only meets compliance standards but thrives in Indonesia’s growing economy.
