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Risk-based licensing: BKPM Regulation 5/2025 consolidates and clarifies the 2021 regime

Risk-based licensing: BKPM Regulation 5/2025 consolidates and clarifies the 2021 regime
Published Date
Oct 27 2025
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Image of Harun Reksodiputro
Harun ReksodiputroPartner, Ginting & Reksodiputro in association with A&O Shearman, Jakarta
Image of Sugianto Osman
Sugianto OsmanPartner, Ginting & Reksodiputro in association with A&O Shearman, Jakarta
Image of Alamanda Daud
Alamanda DaudCounsel, Ginting & Reksodiputro in association with A&O Shearman, Jakarta
Image of Prasetyo Sukirno
Prasetyo SukirnoAssociate, Ginting & Reksodiputro in association with A&O Shearman, Jakarta
Image of Jehuda Winata
Jehuda WinataAssociate, Ginting & Reksodiputro in association with A&O Shearman, Jakarta

On October 1, 2025, Indonesia’s Ministry of Investment and Downstream Industry/BKPM issued Regulation No. 5 of 2025 on Guidance and Implementation of Risk-Based Business Licensing and Investment Facilities through the OSS (the New Regulation). It revokes and consolidates BKPM Regulations Nos. 3, 4 and 5 of 2021. The New Regulation addresses long-standing questions in the foreign investment (PMA) framework, whilst introducing new measures of government supervision for risk-based licensing.

Three key changes highlighted in this alert are: (i) further clarity on minimum investment rules; (ii) a change to the minimum paid-up capital and a “lock-up” requirement; and (iii) the confirmed regulatory position on the PMA status of the subsidiaries of PMAs.

Summary of changes

Minimum investment: IDR10 billion per five-digit KBLI/project location, with location now more defined

Requirement for PMABKPM Regulation NO. 4/2021New regulation

Invest > IDR10bn per five-digit KBLI per project location, excluding land and buildings

Yes

Yes

Tying of location into the same city/regency

No

Yes

Tying of location into the same province

No

Yes

The headline threshold remains the same. PMA companies must invest more than IDR10bn per five-digit KBLI per project location, excluding land and buildings, with the exception of wholesale trades, food and beverage (F&B), construction services, and certain industries that produce various products in one production line.1

“Investment” refers to the minimum proposed investment to be made by the relevant PMA company, the fulfilment of which is tracked through quarterly investment reporting to the BKPM (as opposed to issued and paid-up capital, which must be paid into the company upon establishment). The New Regulation does not set any express deadline to satisfy the minimum investment.

A key issue raised by investors in the 2021 regime is the interpretation of “location,” which may particularly impact retailers and F&B operators if an IDR10bn investment is required for multiple micro-sites within the same city/regency (kota/kabupaten).

The New Regulation now clarifies and eases the requirement by expressly tying location to certain government administrative units, albeit for certain industries only (for now). For example, in the F&B industry, the geographic scope of a single business location is the city/regency (kota/kabupaten), whereas for EV charging stations it is the province (provinsi).2

Minimum paid-up capital: Reduced to IDR2.5BN per PT PMA—with certain transfer restriction for the initial 12 months

Minimum issued and paid-up capital for PMA company (in IDR

BKPM Regulation No. 4/2021

10bn

New Regulation

2.5bn

Beyond the investment threshold, every PMA company must meet the minimum capitalization requirement, now set at issued/paid up capital of at least IDR2.5bn per company, unless a sectoral rule requires more.3 This lowers entry costs while leaving room for higher sectoral minima where applicable.

Article 27 introduces a new control on early cash movements. Paid-up capital may not be moved out of the company’s bank account for at least 12 months from placement, except for asset purchases, building construction and company operations. Companies are required to submit a declaration to record this commitment through the OSS system. The policy’s aim is to ensure that the minimum capital supports the business during its first year.

PMA status reaffirmed: One foreign shareholder is sufficient—and subsidiaries must follow

The New Regulation finally settles a classic uncertainty over PMA status requirements.

A company with even one foreign shareholder—whether an individual, a foreign entity, or a PMA company—qualifies as PMA4 and must comply with the PMA regime, alongside any applicable sectoral foreign ownership limits. The rule also confirms the downstream effect across groups: when a company becomes PMA, its subsidiaries must also adopt and adjust their status into a PMA company.5

The New Regulation removes the one-year deadline in BKPM Regulation No. 4 of 2021 for adjustment of the PMA status of subsidiaries. As a result, it is now unclear when the conversion of the subsidiaries to become a PMA must be completed.

Practical implications

For multi-site deployments, the clarified location basis should reduce capital “overbuild” across multiple sites within the same municipality and simplify planning within a single KBLI. For new entrants, the lower paid-up capital threshold enables leaner structures, but treasury teams should plan for the 12-month funds transfer restriction and maintain documentation that uses of funds fall within the permitted exceptions.

Group structures warrant review where foreign shareholding sits at a parent or intermediate level. If PMA status is triggered, subsidiaries may need to align its respective status, licensing and LKPM reporting. In M&A transactions, partial foreign acquisitions of PMDN companies are now more likely to trigger PMA status for their subsidiaries, which suggests that detailed review should be made over investment requirements.

Footnotes

1. Article 26(2) of the New Regulation.

2. Article 26(4) and 26(7) of the New Regulation.

3. Article 26(10) of the New Regulation.

4. Article 227(2) of the New Regulation.

5. Article 227(4)-(5) of the New Regulation.

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