Redefining Entry Barriers: BKPM Reduces Foreign Capital Requirement Back to IDR2.5 Billion

Indonesia has taken another step to refine its investment framework and attract a broader range of investors through the issuance of the Minister of Investment and Downstreaming/Head of BKPM Regulation No. 5 of 2025 on Guidelines and Procedures for the Implementation of Risk-Based Business Licensing and Investment Through the Electronically Integrated Business Licensing System (Online Single Submission) (“BKPM Regulation 5/2025”).

One of the most notable reforms under BKPM Regulation 5/2025 is the reduction of the minimum issued and paid-up capital for foreign investment companies (PMA companies) from a staggering IDR10 billion to IDR2.5 billion. The regulation also introduces several practical updates to improve the overall ease of doing business.

Key Changes Introduced by BKPM Regulation 5/2025

1. Reduction of Minimum Paid-Up Capital for PMA Company

   In 2021, BKPM applied a uniform Rp10 billion minimum paid-up capital as a benchmark for establishing a PMA company. The increase in minimum capital was then offset by the liberalization of a wide range of business lines for foreign investment.

   Under this new 2025 regulation, a relaxation of minimum capital has been introduced to become only Rp2.5 billion. This minimum capital must be injected by shareholders at establishment, while the total investment value remains at more than IDR10 billion per five-digit KBLI per location, excluding land and building (unless specifically permitted).

   The IDR2.5 billion paid-up capital must remain in the company’s account for at least 12 months from the date of injection–a new requirement applicable to all PMA companies. This lock-up period serves as a safeguard to ensure that foreign investors demonstrate real financial commitment to their Indonesian ventures. However, the regulation allows the IDR2.5 billion capital to be utilized during this period for business operations and investment expenditures, such as purchasing assets, constructing buildings, or funding operational expenses.

   In practice, while the Ministry of Law’s system (AHU Online) has already adopted the reduced capital threshold, the OSS system is still in the process of adjusting. Several new PMA companies have reportedly experienced delays as the OSS platform continues to update its system settings to reflect the new IDR2.5 billion capital requirement.

2. Extension of LKPM Reporting Deadline

   BKPM Regulation 5/2025 provides a more flexible submission timeline to BKPM for the mandatory Investment Activity Report (LKPM).

   The regulation extends the LKPM submission deadline by five days–from the 10^th to the 15^th day of the applicable reporting month for both semesterly and quarterly reporting periods.

   This seemingly small change is expected to ease compliance pressures and reduce late submission risks; especially for companies managing multiple projects or complex reporting structures.

3. Licensing Facilitation for Businesses in Shared Commercial Building

   Another key development under BKPM Regulation 5/2025 is the licensing facilitation for businesses operating in shared commercial or service premises, such as office towers and shopping centres.

   The regulation streamlines the licensing process for these businesses by allowing them to use permits/approvals already obtained by the building manager or owner—for example, a Spatial Utilization Conformity (KKPR) or Environmental Approval (PL). In such cases, tenants or occupants may directly apply for their own business licenses through the OSS system using the permits/approvals issued under the name of the building manager or owner.

   This change is particularly beneficial for retailers, service providers, and SMEs operating within malls or co-working spaces, and other shared facilities, as it removes the need for each tenant to separately procure environmental or location-related permits, reducing administrative burdens.

Outlook

BKPM Regulation No. 5 of 2025 signals a pivotal shift in Indonesia’s investment landscape—lowering capital thresholds, providing reporting flexibility, and simplifying licensing for businesses.

The reduction of the minimum paid-up capital from Rp10 billion to Rp2.5 billion marks a reform of Indonesia’s foreign investment policy, returning the minimum capital to Rp2.5 billion, which had previously been increased in 2021 and had often discouraged potential investors from entering Indonesian market.

By recognizing that not all sectors are capital-intensive, BKPM Regulation 5/2025 supports a more inclusive investment environment, particularly for service-oriented and technology-driven businesses, while still maintaining the overall investment value requirement above Rp10 billion to ensure genuine investor commitment.

Although further technical guidance from BKPM and OSS operators may be needed to clarify certain implementation details, this regulatory update clearly demonstrates Indonesia’s commitment to enhancing its investment climate and strengthening competitiveness within the region.

Contact us for more information on this new regulation.

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This material is prepared for general information purposes only. It is not intended to give legal or any other professional advice, opinion or recommendation and, accordingly, it should not be relied upon. Specific legal advice should be sought before taking any action based on the contents in this material. Please contact us if you need any assistance regarding this matter.