October has brought notable developments for international companies operating or planning to operate in Indonesia. Through the Ministry of Investment and Downstream Industry Regulation No. 05/2025, the Indonesian government has lowered the minimum paid-up capital requirement for foreign-owned limited liability companies (Perseroan Terbatas Penanaman Modal Asing, or PT PMA) by 75%, reducing it from IDR 10 billion (approximately USD 572,000) to IDR 2.5 billion (around USD 143,000) per business field at the time of incorporation or registration.
Following its publication in the Indonesian State Gazette on October 2, 2025, Regulation No. 5/2025 came into force, sending a powerful signal, especially to foreign investors aiming to establish a foothold in the country’s roughly 280 million‑strong market full of potential.
Previously, the IDR 10 billion threshold had been considered relatively high and therefore burdensome for foreign investors, particularly in non-capital-intensive sectors. This was especially so given that neighbouring ASEAN member states such as Malaysia, Thailand, and Singapore apply markedly lower minimum capital requirements, or none at all. The revision now restores the regulatory framework that was in place before 2021, before implementing regulations under the Omnibus Law introduced the IDR 10 billion threshold.
Although the minimum equity threshold has been reduced, the prior requirement of a minimum investment plan of IDR 10 billion remains unchanged. In addition, Regulation No. 5/2025 explicitly mandates that paid‑up capital of at least IDR 2.5 billion must be kept deposited in the company for at least 12 months and may only be utilised for essential operating expenditures during that time. This provision does not alter the availability of that paid‑up capital as working capital.
The amendment clarifies that the paid‑up capital threshold of IDR 2.5 billion (approximately USD 150,000) applies to the company as a whole. In contrast, the investment plan threshold of IDR 10 billion (approximately USD 600,000) applies to each business field as defined under the Indonesian Standard Classification of Business Fields (Klasifikasi Baku Lapangan Usaha Indonesia – KBLI) guidelines.
At the same time, a quarter of the planned investment for each business sector must be contributed as equity. For example, a company operating in three business sectors under the KBLI would need a paid-up capital of at least IDR 7.5 billion (approximately USD 470,000) and a minimum total investment of over IDR 30 billion (around USD 1.9 million). Since the introduction of the IDR 10 billion threshold, there has been legal uncertainty about whether the paid-up capital requirement applies to the company as a whole or to each business sector. By aligning the minimum paid-up capital requirement with the minimum investment per sector, this reform now provides apparent legal certainty.
Entering the Indonesian market has become significantly easier for foreign investors, especially small and medium‑sized enterprises, as they can now launch operations with a much lower initial financial commitment. This change is particularly advantageous for service‑ or sales‑oriented businesses that don’t require substantial physical assets.
(Source: Business Indonesia)
