Indonesia has introduced stricter regulatory controls over direct selling businesses, reinforcing the importance of proper company establishment and operational compliance for investors entering the country.
The changes come under Government Regulation (PP) No. 3 of 2026, enacted on 15 January 2026, which amends PP No. 29 of 2021 on Trade Administration. The regulation tightens requirements relating to business address verification, operational presence, and consumer protection oversight.
For businesses operating or planning to operate in Indonesia’s direct selling sector, it has now become apparent that companies must demonstrate genuine operational presence rather than relying on administrative structures that lack physical substance.
Stricter Compliance Under Indonesia’s OSS Licensing Framework
The new regulation aligns with Indonesia’s risk-based licensing system administered through the Online Single Submission (OSS) platform.
Under this framework, businesses must not only obtain licences but also demonstrate real operational capacity that corresponds with the activities declared during the licensing process.
Government authorities have increasingly emphasised that the OSS system is designed to monitor actual business activities rather than function as a purely procedural registration platform.
By strengthening compliance obligations for direct selling companies, the government aims to reinforce accountability across Indonesia’s trade sector and ensure that licensed businesses maintain verifiable operations.
For foreign investors and domestic companies alike, this development underscores the need to establish corporate structures that fully align with Indonesia’s regulatory framework from the outset.
Virtual Offices No Longer Accepted for Direct Selling Companies
One of the most significant provisions introduced by PP No. 3 of 2026 is the prohibition on the use of virtual office addresses for companies operating in the direct selling sector.
Under the updated regulation, companies must maintain a verifiable physical office address that reflects genuine operational activity. Administrative addresses, shared workspaces or virtual office arrangements that do not demonstrate actual business presence may no longer satisfy licensing requirements.
For many companies entering Indonesia’s market, virtual offices have historically been used as a cost-efficient entry strategy during early operational stages. The new regulation effectively removes that option for direct selling businesses.
Companies operating under this model must now secure compliant physical office space as part of their licensing and operational framework.
Regulatory observers say the measure reflects Indonesia’s broader policy objective of ensuring that businesses registered within the OSS system maintain real commercial operations and are subject to clear regulatory oversight.
What are considered direct selling businesses in Indonesia?
In Indonesia, direct selling businesses refer to companies that sell goods or services directly to consumers outside conventional retail channels, such as stores, malls, or traditional marketplaces. These businesses typically operate through individual distributors, agents, or sales representatives who promote and sell products directly to customers.
Types of Direct Selling Businesses in Indonesia
1. Multi-Level Marketing (MLM)
One of the most common forms of direct selling in Indonesia.
Characteristics:
- Sales are conducted through independent distributors or members
- Participants may earn commissions from both personal sales and recruitment
- Requires a Direct Selling Business License (SIUPL)
Examples typically include:
- Health supplements
- Cosmetics
- Household products
2. Single-Level Direct Selling
In this model, distributors sell products directly to consumers but do not earn commissions from recruiting other sellers.
Characteristics:
- Income derived purely from product sales
- No hierarchical sales network
- Often used by smaller product brands
3. Door-to-Door Sales
Companies sell products directly to consumers’ homes or workplaces through sales representatives.
Typical industries include:
- Household appliances
- Cleaning products
- Consumer goods demonstrations
4. Direct Selling Through Sales Events
Products may be sold during home gatherings, presentations, or demonstration events organised by distributors or sales agents.
Common product categories include:
- Beauty products
- Kitchen equipment
- Wellness products
Consumer Protection Standards Raised
Beyond corporate structure requirements, the regulation also strengthens oversight of consumer protection practices within the direct selling industry.
Authorities have placed greater responsibility on businesses to ensure that sales processes, marketing strategies, and customer engagement practices meet higher standards of transparency.
Companies must review their operational policies to ensure alignment with the updated requirements, including:
- Sales and marketing transparency
- Commission structures and incentive systems
- Consumer complaint management procedures
- Customer redress mechanisms.
The government has indicated that the reforms are intended to address concerns around misleading sales practices and inadequate consumer protection within parts of the direct selling sector.
Implications for Foreign Investors
For international companies evaluating Indonesia as a market entry destination, the new regulation introduces additional considerations when structuring local operations.
Direct selling businesses in Indonesia typically operate under KBLI 47999, a classification covering retail trade conducted outside traditional stores, stalls, or markets. Licensing under this classification already involves multiple regulatory requirements.
With the introduction of PP No. 3 of 2026, companies must now also ensure that their business structures satisfy stricter operational presence criteria.
Industry advisers note that these requirements reinforce the importance of properly structured company establishment in Indonesia, particularly for foreign investors establishing PT PMA (foreign-owned companies).
Elements that now require closer attention include:
- Selection of a compliant physical office address
- Alignment between business activities and KBLI classification
- OSS risk-based licensing compliance
- Consumer protection procedures are embedded in operational policies.
Failure to address these elements during the establishment phase could delay licensing approvals or create compliance challenges after operations begin.
Regulatory Direction: From Registration to Accountability
Indonesia’s regulatory approach in recent years has increasingly emphasised substantive operational compliance rather than procedural registration alone.
Authorities are gradually raising expectations that companies registered within the OSS system demonstrate real economic activity and maintain clear accountability structures.
This trend is visible not only in trade regulations but also across broader areas of corporate compliance, including tax reporting, investment monitoring and employment reporting requirements.
For investors, this evolving regulatory environment highlights the strategic importance of establishing companies in Indonesia through legally sound and operationally compliant structures.
Businesses that approach market entry with careful legal preparation, including appropriate licensing strategy, compliant office arrangements, and structured corporate governance, are likely to face fewer regulatory obstacles.
A Reminder for Businesses Already Operating
Companies currently operating in the direct selling sector should review their existing arrangements to ensure alignment with the new regulatory framework.
This may involve assessing whether current business addresses meet the physical presence requirements, reviewing customer engagement processes, and verifying that licensing records accurately reflect operational activities.
For businesses planning to enter the Indonesian market, early planning will be essential.
As Indonesia continues to refine its regulatory environment, authorities are signalling that compliance expectations will increasingly extend beyond documentation to the underlying substance of business operations.
Companies that adapt to these changes early, by establishing properly structured legal entities and maintaining transparent operational practices, will be better positioned to operate with confidence in Indonesia’s evolving regulatory landscape.
LMI Consultancy: Strategic Support for Company Establishment in Indonesia
For foreign investors and companies entering Indonesia’s market, LMI Consultancy provides end-to-end advisory services for businesses establishing operations in Indonesia. Our team assists investors in structuring PT PMA (foreign-owned companies) and local entities while ensuring alignment with Indonesia’s evolving regulatory framework.
Our services include:
- Company establishment and corporate structuring
- Business licensing through the OSS risk-based system
- KBLI classification advisory and regulatory assessment
- Physical office compliance and operational setup
- Ongoing corporate, immigration, and tax compliance support.
By combining legal, tax, immigration, and business advisory expertise, LMI Consultancy helps companies build compliant corporate structures from the outset, allowing investors to operate confidently within Indonesia’s dynamic regulatory environment.
For tailored consultation on company establishment and business registration in Indonesia, our professional advisory support can help ensure a smoother entry into one of Southeast Asia’s fastest-growing markets.
