Common Mistakes Foreign Companies Make with Indonesia’s New Licensing Rules

Indonesia has recently overhauled its regulatory framework through Government Regulation No. 28 of 2025 (GR 28/2025), updating the risk-based approach to licensing under the Online Single Submission (OSS) system. For foreign companies, understanding Indonesia’s New Licensing Rules is crucial to avoid legal setbacks, financial losses, and project delays. Yet, many businesses still fall into avoidable traps.

In this article, we outline the common mistakes foreign companies make with Indonesia’s New Licensing Rules, explain how to prevent them, and show why professional assistance from experts such as CPT Corporate can save both time and money.

What Are Indonesia’s New Licensing Rules?

Indonesia’s New Licensing Rules refer to the updated system introduced by GR 28/2025, replacing GR 5/2021. The new rules maintain the risk-based classification of business activities—low, medium-low, medium-high, and high—but introduce crucial updates:

• Deemed approvals (fiktif positif): If the government misses deadlines for technical checks, approvals can proceed automatically.
• OSS and INSW integration: Some licensing processes now shift to INSW, especially for trade and customs.
• Environmental clarity: Businesses must prepare environmental approvals (AMDAL, UKL-UPL, or SPPL), with stricter rules for multiple KBLI activities in one site.
• Stronger enforcement: Non-compliance can lead to suspension, revocation, or fines.

What is an NIB?

The NIB (Nomor Induk Berusaha) is the unique business identification number. Under Indonesia’s New Licensing Rules, the NIB also functions as an importer ID (API) and connects directly to customs registration. Many foreign companies mistakenly assume the NIB alone guarantees full operational rights.

Common Mistakes to Avoid

Mistake 1 – Treating the New Rules Like the Old Ones

One of the most frequent missteps foreign companies make with Indonesia’s New Licensing Rules is assuming they work exactly like the old GR 5/2021 system. This leads to missed opportunities such as leveraging deemed approvals, and it risks non-compliance with new sanction provisions.

Why this matters: GR 28/2025 sets tighter deadlines and provides automatic approvals if regulators miss them. Companies that do not track these timelines may either wait unnecessarily or miss their rights.

Mistake 2 – Choosing the Wrong KBLI Code

Selecting the wrong KBLI code (Indonesia’s business activity classification) can derail licensing. For instance, if multiple activities are conducted in one integrated site, companies must comply with the strictest environmental standard. Many foreign firms overlook this nuance.

Q&A: What happens if I pick the wrong KBLI?
You risk application rejection, delays, or being unable to operate legally until corrected.

Mistake 3 – Assuming an NIB is Enough

While the NIB is central under Indonesia’s New Licensing Rules, it is not always sufficient. Medium-high and high-risk businesses still require verified certificates or licenses. Additionally, many import/export permits are now managed through INSW instead of OSS.

Q&A: Does having an NIB mean I can trade immediately?
Not necessarily. Depending on your risk classification, you may still need additional permits.

Mistake 4 – Underestimating Capital Requirements

Foreign companies often underestimate the strict minimum investment requirements for a PT PMA:

• IDR 10 billion minimum issued and paid-up capital.
• IDR 10 billion minimum investment per 5-digit KBLI per project location.

Failing to meet these thresholds is a common error that leads to rejection. Many investors set up a company only to discover they must recapitalize.

Mistake 5 – Using Nominee Shareholders

Some investors still attempt to bypass foreign-ownership restrictions through nominee arrangements. This practice is explicitly prohibited under Indonesia’s Investment Law and puts businesses at risk of being declared invalid. Contracts based on nominee structures are unenforceable, leaving investors vulnerable.

Mistake 6 – Misusing Representative Offices

Representative offices (KPPAs) are non-revenue entities. A common mistake is using them for trading or generating income, which is illegal. For commercial operations, a PT PMA registration is mandatory under Indonesia’s New Licensing Rules.

Q&A: Can my representative office sell products in Indonesia?
No. It may conduct marketing or research, but revenue-generating activities require a PT PMA.

How Professional Assistance Can Help

Understanding Indonesia’s New Licensing Rules requires more than reading regulations—it demands practical, on-the-ground expertise. Professional firms like CPT Corporate provide:

• PT PMA Registration support ensuring capital requirements are properly met.
• Guidance on KBLI selection to avoid rejection or environmental compliance issues.
• End-to-end OSS licensing assistance including NIB registration and INSW integration.
• Corporate secretarial services to ensure ongoing compliance with Indonesian law.

Q&A: Can CPT Corporate handle licensing and secretarial tasks together?
Yes. CPT Corporate integrates PT PMA registration, licensing, and corporate compliance in one streamlined service.

Frequently Asked Questions (FAQ)

Q1: What is the main change in Indonesia’s New Licensing Rules?
The biggest update is the introduction of deemed approvals and tighter OSS/INSW integration.

Q2: How much capital is needed for PT PMA registration under the new rules?
At least IDR 10 billion paid-up capital, with IDR 10 billion minimum investment per KBLI.

Q3: Can I use a representative office for sales activities?
No. Representative offices cannot generate revenue; a PT PMA is required for commercial operations.

Q4: What are the risks of nominee shareholder arrangements?
They are prohibited by law and may render your business invalid.

Q5: Do environmental approvals apply to all businesses?
Yes, all companies must meet environmental requirements, with stricter rules if multiple activities are conducted in one location.

Conclusion

Navigating Indonesia’s New Licensing Rules is complex, but avoiding common mistakes is possible with the right guidance. By ensuring proper KBLI selection, meeting capital requirements, and complying with OSS and environmental processes, foreign companies can successfully establish operations in Indonesia.