Indonesia Lowers Initial Paid-in Capital Requirement For Foreign Investors To IDR 2.5 Billion

Indonesia Lowers Initial Paid-in Capital Requirement For Foreign Investors To IDR 2.5 Billion

In a significant move to enhance its global competitiveness and streamline the foreign direct investment (FDI) process, the Indonesian government has enacted a pivotal reform by substantially reducing the mandatory minimum paid-up capital for foreign-owned limited liability companies (Perseroan Terbatas Penanaman Modal Asing, or PT PMA).

Under the new regulatory framework, foreign investors are now only required to remit an initial paid-up capital of at least IDR 2.5 billion (approximately USD 160,000) upon the establishment of a PT PMA. This is a significant 75% reduction from the previous minimum of IDR 10 billion, a requirement that had been in place since 2021. 

This revision, formalized in the Minister of Investment and Downstream Industry/Head of the Investment Coordinating Board Regulation No. 5 of 2025, effectively lowers the financial entry hurdle, signalling Indonesia’s commitment to attracting a wider array of international businesses, especially those in service, technology, and other non-capital-intensive sectors.

What Investors Need to Know: Clarifying Capital vs. Investment

The most crucial distinction for both prospective and established investors is the difference between the Paid-Up Capital and the Total Investment Plan. While the barrier for immediate capital injection has fallen, the underlying investment commitment remains robust.

1. The New Paid-Up Capital (Initial Remittance)

    • In Requirement: Minimum of IDR 2.5 Billion
    • Purpose: This is the minimum amount of equity that shareholders must subscribe to and remit into the company's bank account upon incorporation. It ensures the company has sufficient initial funds to begin operations and demonstrate financial commitment.
    • Flexibility: This capital is not frozen. The regulation explicitly permits the funds to be used for legitimate business activities, such as covering operational expenses, purchasing essential assets, or funding construction buildings, even during the initial 12-month period.

2. The Total Investment Plan (Project Commitment)

    • In Requirement: Minimum of more than IDR 10 Billion (per 5-digit KBLI business line).
    • Status: This requirement remains unchanged.
    • Scope: The Total Investment Plan encompasses the entire projected cost of the business venture, covering everything from feasibility studies, licensing, equipment, and working capital to cover one cycle of turnover. The initial IDR 2.5 billion in paid-up capital is considered a component of this overall IDR 10 Billion-plus commitment. Exclusion/Exception: For most business sectors, the cost of land and buildings is excluded from this IDR 10 Billion minimum. However, there is a key exception for sectors inherently tied to real estate, such as property development, accommodation services, agriculture, and plantations, where land and building costs can be counted towards the total investment value.

Strategic Implications for New and Existing Investors


This regulatory adjustment provides immediate strategic advantages for foreign investors navigating the Indonesian market:

For Future Investors (New PT PMAs): The reduction in paid-up capital significantly accelerates market entry, particularly for foreign small and medium-sized enterprises (SMEs) or service-oriented firms that require less upfront capital expenditure. Investors can now commit a lower initial sum while realizing the remaining portion of their IDR 10 billion investment plan progressively through operational growth and asset acquisition.

For Current Investors (Existing PT PMAs): Existing PT PMAs that initially established their company with the IDR 10 billion paid-up capital may now have the opportunity to improve their capital efficiency. Subject to specific application procedures, these companies can potentially apply for a capital structure amendment to reduce their registered paid-up capital to the new IDR 2.5 billion minimum (while taking into account the provision that at least 25% of the authorized capital must be paid-up). This could free up a substantial amount of equity for alternative deployment or repatriation, while still maintaining full compliance with the overall investment commitment.

Our Perspective

This reform is a calculated policy choice by the Indonesian government to strike a better balance between maintaining investment quality (via the IDR 10 billion project value) and reducing financial friction at the point of market entry. It aligns Indonesia more closely with the investment facilitation standards of its ASEAN peers, cementing its position as a dynamic and welcoming environment for foreign capital.

In With our Indonesia colleagues at Martia Anggraini Partnership, KCP is closely monitoring the implementation of Regulation No. 5 of 2025. Whether you are planning your initial market entry or considering a capital restructure for your existing PT PMA, our team is equipped to guide you through the latest compliance requirements and strategic options available under the new framework.