Indonesia Lowers Paid-Up Capital for Foreign Investors to IDR 2.5 Billion

Amid intensifying competition for foreign investment across ASEAN, Indonesia has moved to ease one of its most persistent entry barriers. The government has reduced the paid-up capital requirement for foreign-owned limited liability companies, known as PT PMAs, from IDR 10 billion (US $640,000) to IDR 2.5 billion (US $160,000) under Minister of Investment Regulation No. 5 of 2025.

The reform simplifies market entry while preserving the rule that every project must carry a minimum investment plan of IDR 10 billion (US $640,000). The change lowers the upfront burden for investors without weakening Indonesia’s policy of attracting large-scale, growth-oriented projects.

Lower entry barriers and capital flexibility

For more than a decade, Indonesia required foreign investors to inject IDR 10 billion as paid-up capital before incorporation — a threshold that discouraged many mid-sized and service-sector entrants. The new rule reduces that equity requirement by three-quarters, allowing companies to commit funds progressively through project realization rather than a single upfront injection.

Paid-up capital now refers to the shareholder equity deposited when a company is formed, while the investment plan covers the full project value registered in the OSS-RBA system.

Qualifying expenditures include feasibility studies, licensing fees, equipment, vehicles, and working capital, while land and buildings are excluded except in industries such as property, agriculture, and aquaculture.

This separation provides liquidity flexibility in early operations and aligns financial planning with actual project milestones.

Regional context and policy alignment

Indonesia’s reform brings its capital framework closer to ASEAN norms.

Vietnam generally approves foreign projects with capital starting around US $100,000, depending on the sector. Thailand sets a minimum of about THB 3 million (US$80,000), while Malaysia requires between RM500,000 and RM1 million (US$105,000–210,000).

The Philippines mandates US$100,000 for export-oriented firms and US$200,000 for those targeting the domestic market, whereas Singapore imposes no statutory minimum.

With its new IDR 2.5 billion (US$160,000) paid-up capital and IDR 10 billion investment plan, Indonesia now offers one of the more accessible incorporation regimes in the region. This balance enhances competitiveness without diluting the scale expectations that distinguish foreign from domestic participation.

Safeguards and sectoral exceptions

Foreign-owned companies remain classified as large enterprises under Indonesia’s investment rules, ensuring that micro, small, and medium enterprises remain reserved for domestic entrepreneurs. Certain activities remain closed to foreign ownership, while others require partnerships with local MSMEs or cooperatives, which must be documented through the OSS-RBA system.

The reduced threshold does not apply to highly regulated industries.

Commercial banks must retain capital of at least IDR 10 trillion (US$640 million), insurance companies IDR 150 billion (US$9.6 million), and enterprises within special economic zones are subject to their own capital requirements.

Existing PT PMAs that previously injected IDR 10 billion remain fully compliant, as the regulation does not apply retroactively.

Compliance, incentives, and monitoring

The minimum equity must remain in the company for at least 12 months unless legitimately used for operational purposes. Compliance is monitored through OSS-RBA filings and periodic LKPM investment reports that demonstrate realization of the registered plan. Maintaining accurate filings is essential not only for license validity but also for continued access to investment incentives.

Companies that meet all reporting and partnership obligations may qualify for tax holidays, tax allowances, import-duty exemptions, and customs relief. Conversely, non-compliance can result in warnings, suspension of licenses, or withdrawal of incentives.

The system, therefore, links transparency, regulatory discipline, and fiscal reward under a unified administrative framework.

Strategic implications for investors

The reform introduces greater flexibility in how foreign investors plan their capitalization. Rather than committing the full amount of capital at incorporation, companies can now align their funding schedule with the commercial rhythm of their operations. This flexibility benefits industries that rely on gradual expansion, such as technology, services, and digital infrastructure, where early costs are concentrated in staffing and working capital rather than fixed assets.

At the same time, the reduced threshold still allows capital-intensive manufacturers or resource-based investors to maintain stronger balance sheets by injecting more equity upfront if required by lenders or joint-venture partners.

In practice, the policy gives boards wider room to determine the mix of equity and debt that best supports liquidity, risk tolerance, and long-term tax efficiency, without compromising compliance under the OSS-RBA framework.

• Previous Article What the AANZFTA Second Protocol Means for ASEAN Trade
• Next Article Malaysia’s EPF Mandate for Foreign Employees: What Investors Must Reassess