Complying with Foreign Investment Laws in Indonesia

5 min read|Last Updated: December 30, 2022|

When you plan to incorporate a company in Indonesia as a foreigner, you’ll need to be aware of the company law under the Regulation No. 40 of Year 2007 for Limited Liability companies. Aside from that, another regulation that is deemed crucial is Regulation No. 25 of Year 2007 which focuses on Capital Investment (Investment Law) in Indonesia.

These are the key regulations that every foreign investor must know, and we’ll share the information in this article in compliance to the foreign investment law in Indonesia.

General Provisions

Article 1

In this Law,

  • Investment shall be any kinds of investing activity by both domestic and foreign investors for running business within the territory of the Republic of Indonesia.
  • Domestic Investment shall be any investing activity for running business within the territory of the Republic of Indonesia, made by any domestic investor using domestic capital.
  • Foreign Investment shall be any investing activity for running business within the territory of the Republic of Indonesia, made by any foreign investor using either foreign capital entirely or joint capital with domestic capital.
  • Investor shall be any individual or corporation that makes investment in form of either domestic or foreign investors.
  • Domestic Investor shall be any individual of Indonesian citizen, Indonesian corporation, the state of the Republic of Indonesia, or any region making investment within the territory of the Republic of Indonesia.
  • Foreign Investor shall be any individual foreign citizen, foreign corporation, or foreign state making investment within the territory of the Republic of Indonesia.
  • Capital shall be any asset in the form of money or any form other than money possessing economic value owned by any investor.
  • Foreign Capital shall be any capital owned by any foreign country, individual foreign citizen, foreign corporation, foreign legal entity, and/or Indonesian legal entity, whose capital is owned partially or entirely by foreign party.
  • Domestic Capital shall be any owned by the state of the Republic of Indonesia, individual Indonesian citizen, or corporation or non-corporation.
  • One-Stop Integrated Service shall be any licensing or non-licensing activity delegated or authorised by any institutions or agencies possessing licensing or non-licensing authority, whose issuance process shall begin with application stage up to the document issuance stage conducted in a single place.

Article 2

Provisions in this law shall apply to any investments in any sectors within the territory of the Republic of Indonesia.

Principles and Objectives

Article 3

Investment shall be organised based on the principle of:

  • legal certainty;
  • openness;
  • accountability;
  • the equal treatment without discriminating the country of origin;
  • togetherness;
  • impartial efficiency;
  • sustainability;
  • environmental friendly;
  • independency;
  • balance of progress and national economic unity.

Basic Policy of Investment

Article 4

Government stipulates the basic policy of investment for:

  • Encouraging the creation of conductive national business climate for investment in order to strengthen the competitiveness of national economy; and

  • Accelerating the increase of investment.

Form of Corporation and Domicile

Article 5

Domestic investment may be in the form of corporation, non-corporation, or individual business, in accordance with the rules of law.

Treatment to Investment

Article 6

The Government shall provide the same treatment to any investors originating from any countries making investment in Indonesia pursuant to the rules of law.

Treatment set forth above shall not apply to investor of certain countries that have received privilege by virtue of an agreement with Indonesia.

Article 7

The government shall neither nationalise nor take over the ownership right of any investors, except through the law.

In the event that the Government either nationalises or takes over the ownership right of any investors set forth above, the Government is required to pay compensation whose amount is stipulated based on market price.

Article 8

Any investors may transfer their assets to another party they choose in accordance with the rules of law.

Any assets other than those set forth in paragraph (1) above shall constitute assets owned by the state as stipulated by the law.

Any investors shall have the right to transfer or repatriate foreign currency to, among others:

  • Capital;
  • Profit, bank interest, dividend, and any other revenue;
  • Funds required for:

    • Purchasing raw materials and support materials, intermediate products, or final product;
    • Reimbursement of capital goods in order to secure the investment.
  • Additional fund required for financing investment


Article 9

Any investment company shall prioritise in recruiting workers those of Indonesian citizen, shall be entitled to use experts of foreign citizen on certain position and expertise in accordance with the rules of law and are required to improve the competence of workers of Indonesian citizen through work trainings pursuant to the rules of law.

Article 10

Efforts shall be devoted to settling any industrial related dispute with deliberation between any investment company and the workers and if such effort fails to materialise, the settlement shall be made through a three-party mechanism.

The above stated points are essentially the key points that are required to be taken into consideration by foreign investors in regard to the capital investment in Indonesia as stated down in Regulation 25 of Year 2007.

Positive Investment List

The Positive Investment List provides guidance on which sectors foreign investors are able to invest in. This list was issued to replace the negative investment list, resulting in the number of restricted sectors from 350 to 46. Therefore, there are still certain sectors that foreign entrepreneurs could not incorporate a company in.


Come to our office or get in touch with us virtually for a consultation on your company registration, and other corporate services today.


How long does it take to register a company in Indonesia?2022-05-10T15:46:36+08:00

The process of registering a company in Indonesia varies on a case-by-case basis. However, based on our experience, the timeline for company incorporation is 1-2 months.  

What is the corporate tax rate in Indonesia?2022-05-10T15:46:13+08:00

The corporate tax rate in Indonesia is 20%.

What are the types of entities that someone can set up in Indonesia?2022-05-10T15:45:28+08:00

There are 3 main types of entities for consideration – Local PT company, PT PMA company (Foreign-owned company) and KPPA (Representative Offices).  

What is the Positive Investment List?2022-05-10T15:45:07+08:00

The Positive Investment List is a list of restricted sectors in Indonesia that no foreign investors can invest in. You can refer to the list here.

Can foreign entrepreneurs start a company in Indonesia?2022-05-10T15:43:45+08:00

Yes, foreign entrepreneurs are always welcomed to start a company in Indonesia. However, they should note of the sectors that they are not allowed to invest in under the Positive Investment List.

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