While in Japan you can establish a company with just 1 yen in capital, in Indonesia, it requires considerable funds. Additionally, since the capital amount differs significantly between foreign-owned companies and domestic companies, it’s not uncommon to determine the form of establishment based on whether you can pay the required capital.

If you’re considering expanding into Indonesia in the future, it’s important to understand how much capital is required and what criteria determine the capital amount.

This article summarizes the capital requirements for establishing a company in Indonesia. We’ve detailed the capital requirements for both foreign-owned and domestic companies, as well as explaining the timing of payments and capital increases, so you can understand the key points.

Dollar conversions are calculated based on the rate as of December 18, 2023 (1 Rupiah = $0.000064).

Capital Required for Establishment

When establishing a company in Indonesia, there are broadly two options: foreign-owned companies (PMA) and domestic companies (PMDN).

For foreign-owned companies, the advantage is that you can establish them without finding an Indonesian partner, and as a foreigner, you can maintain control of the company. However, when foreign companies establish a foreign-owned company in Indonesia, depending on the industry, there may be restrictions on investment ratios or conditions requiring partnerships with local companies that don’t apply to domestic companies, which is a disadvantage.

For domestic companies, the advantage is that you can establish a company in any industry without being subject to investment ratio regulations, but on the other hand, the fact that foreigners cannot become shareholders is a disadvantage.

Another major difference between foreign-owned and domestic companies is the amount of capital required.

Foreign-Owned Companies

For foreign-owned companies, both the minimum paid-up capital and minimum investment amount are 10 billion Rupiah ($640,000) or more each. The minimum paid-up capital refers to the amount of capital that shareholders actually pay (capital stock). The minimum investment amount refers to the total amount of capital stock and borrowed funds.

The minimum paid-up capital for foreign-owned companies was previously 2.5 billion Rupiah ($160,000), but in March 2021, the Indonesian Investment Coordinating Board (BKPM) announced an increase (BKPM Regulation No. 4 of 2021).

With this new regulation, the barrier to entry into Indonesia has significantly increased for companies other than those with strong financial capabilities.

Capital Rules to Be Aware of When Establishing a Foreign-Owned Company

The capital required when establishing a foreign-owned company is determined by the number of businesses, not the number of companies. This means that even if it’s one company, if it conducts two businesses such as food service and manufacturing, it needs 20 billion Rupiah ($1,280,000) in capital.

Also, if a manufacturer sells products it manufactures itself, it must pay the capital for both manufacturing and wholesale businesses.

The total amount of capital required varies depending on the number of businesses and their scope. When actually calculated, it can be hundreds of millions of dollars more than initially anticipated. Therefore, it’s important to consider what kind of business you will develop before opening.

Domestic Companies

For domestic companies, the minimum paid-up capital is 12.5 million Rupiah ($800), and the minimum investment amount is 50 million Rupiah ($3,200).

Since the capital is significantly cheaper compared to foreign-owned companies, many companies considering expansion into Indonesia contemplate establishing as a domestic company due to financial reasons.

However, in the case of domestic companies, investment by foreigners is not permitted at all, and foreigners are not allowed to become shareholders after the company is established. Therefore, whether to establish as a domestic company needs to be decided after careful consideration of aspects other than capital.

Exceptions to Minimum Investment Amount for Foreign Investment (PMA)

Exceptions to Minimum Investment Amount for Foreign Investment (PMA)

As mentioned above, the minimum paid-up capital for foreign-owned companies is set at 10 billion Rupiah ($640,000) per business. However, there are exceptions, such as construction implementation businesses and integrated construction businesses, which require a minimum paid-up capital of 25 billion Rupiah ($1,600,000).

There are also exceptions applied to minimum investment amounts for certain industries. Below is a table summarizing the exceptions to minimum investment amounts.

For large-scale commercial businesses, previous BKPM Regulation No. 1 of 2020 required meeting minimum investment requirements for businesses with different first two digits. In Regulation No. 5 of 2021, even if the first two digits are the same, if they differ when looking at the fourth digit, the minimum investment requirements must be met, making the regulations stricter.

Also, for construction service businesses, 10 billion Rupiah ($640,000) is added per activity, and for industries, it’s added per line. For construction service businesses, construction consulting service businesses are not permitted to be treated as a single business together with construction implementation or integrated construction businesses.

For real estate development businesses, as mentioned above, real estate in the form of entire buildings or integrated residential areas requires 10 billion Rupiah ($640,000) including land and buildings, but real estate units that are not entire buildings or integrated residential areas require 10 billion Rupiah ($640,000) excluding land and buildings.

Note that KBLI codes represent major classifications (broad industries) with 1-2 digits, medium classifications (subcategories) with 3-4 digits, and minor classifications (more specific business activities) with 5-6 digits.

(*) Refers to any of the following activities: construction consulting service business, construction implementation business, or integrated construction business

Timing of Capital Remittance

The general procedure for establishing a company in Indonesia is as follows. This is a rough outline for general understanding; please contact us for detailed workflow information.

1. Company name reservation
2. Preparation of articles of association and application for establishment deed
3. Obtaining location certificate (SKTU)
4. Obtaining taxpayer identification number (NPWP) and taxable enterprise number (PKP)
5. Opening a bank account
6. Payment of capital
7. Application to the Ministry of Law and Human Rights

Capital payment is made after preparing the articles of association and obtaining various certificates.

Also, when remitting, you must receive proper documentation proving that the payment has been completed. Proper documentation here refers to payment certificates issued by the bank where the account is opened, audited financial documents by an accountant, or the company’s balance sheet signed by the board of directors or board of commissioners (*).

After the capital payment is completed, the notary registers the company establishment through the online system of the Ministry of Law and Human Rights. At this time, documents such as the proof of payment obtained earlier are also submitted. Once the registration procedure is completed and the establishment is approved, an NPWP is also assigned.

(*) Board of Commissioners: A body that supervises the company management by the board of directors and provides advice on company management

About Bank Accounts for Remitting Capital

To pay in capital, you need to create a “temporary account for capital remittance.” This bank account cannot be used for business revenue deposits and is specifically for capital remittance. It can be opened even without an assigned NPWP.

Temporary accounts for capital remittance can be opened remotely. Major Indonesian banks (such as BNI, BCA, Mandiri, BRI, etc.) accommodate a wide range of procedures, so it’s advisable to open an account with a major bank that provides nationwide services to ensure smooth procedures.

To prevent delays in the company establishment procedure at the time of capital payment, it’s good to proceed with the bank account opening with ample time in the schedule.

Procedure for Capital Increase for Foreign Investment (PMA)

The major flow of the capital increase procedure is as follows:

1. Holding a shareholders meeting
2. Changing investment approval (notification to the Investment Coordinating Board (BKPM))
3. Capital payment
4. Amendment of the company’s articles of association
5. Registration
6. Issuance of share certificates

The key points to note in the above procedure are explained below.

Holding a Shareholders Meeting

In Japan, capital can be increased with only a board of directors resolution if it’s within the authorized capital (*), but in Indonesia, a shareholders meeting resolution is mandatory even if it’s within the authorized capital.

For capital increases within the authorized capital, attendance by shareholders holding a majority of shares and approval by a majority of attending shareholders is required. For capital increases exceeding the authorized capital, attendance by shareholders holding at least two-thirds of shares and approval by at least two-thirds of attending shareholders is required.

(*) The total number of shares that a company can issue as stated in the articles of association

Amendment of Articles of Association

If capital is increased, the procedure for amending the articles of association must be followed regardless of whether it’s within the authorized capital. If it exceeds the authorized capital, approval from the Minister of Law and Human Rights is required, but if it stays within the authorized capital, only notification to the Minister of Law and Human Rights is necessary.

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Choosing the Establishment Form According to Company Budget and Situation

Due to the need for capital of several hundred million dollars (depending on the number of business licenses), establishing a foreign-owned company in Indonesia is quite challenging even for large companies.

Therefore, many consider establishing a domestic company with a minimum paid-up capital of 12.5 million Rupiah ($800) and a minimum investment amount of 50 million Rupiah ($3,200).

However, regardless of what form you choose to establish a company, it’s important to understand that each form has its advantages and disadvantages. The establishment method should be chosen after comprehensive consideration, not just financial aspects, but also what kind of business you will develop and whether you can find reliable partners.

If you are considering expanding into Indonesia, please refer to and consider the content covered in this article.