A New Era for Foreign Investment in Indonesia
What You Need to Know – BKPM Regulation No. 5 of 2025: New Rp 2.5 Billion Paid-Up Capital Rule for Foreign Investment in Indonesia
With BKPM Regulation No. 5 of 2025, Indonesia has dramatically lowered the barrier for foreign investors: the minimum paid-up capital for PMA companies is now Rp 2.5 billion, down from the prior Rp 10 billion. This capital must remain in the company account for 12 months (unless lawfully used). The overarching requirement of a Rp 10 billion total investment threshold (excluding land/buildings in many sectors) remains, but Bali-based developers and foreign entrepreneurs can now structure projects more flexibly , injecting phased capital, counting land and building value (in permitted sectors), and aligning their equity deployment with actual project expenditure.
Beginning October 2025, Indonesia’s BKPM ushered in Regulation No. 5 of 2025, altering the landscape of foreign investment by setting a new paid-up capital floor of Rp 2.5 billion for foreign companies (PMA). This shift reduces the upfront capital burden while retaining strategic safeguards like a 12-month lock-up and an overarching Rp 10 billion minimum investment plan in most sectors. What makes this especially significant for Bali and property-focused markets is that land and building value can now count in total project investment valuation, in many cases.
In the sections below, we unpack the regulation’s provisions, examine their implications for real estate and development in Bali, present strategic recommendations, highlight risks, and illustrate with local scenarios and tables to bring clarity.
The Regulatory Shift: Context & Rationale
From Rp 10 Billion to Rp 2.5 Billion: What Changed
Under earlier regimes, foreign investors were required to deposit Rp 10 billion in paid-up capital (or equivalent) to establish a PMA company. This created a steep barrier for many mid-tier ventures and discouraged foreign participation in local projects.
With Regulation 5/2025, that paid-up capital threshold has been cut to Rp 2,500,000,000 (2.5 billion) per PMA entity.
However, this change does not nullify the requirement that a foreign-invested project plan must show investment exceeding Rp 10 billion (in many sectors) per location. The distinction now lies between capital injected initially versus full project commitment.
Why the Government Did This
- Ease of doing business & foreign competitiveness: Indonesia aimed to reduce the liquidity burden and attract more foreign direct investment, especially in high-potential growth areas.
- Better alignment with actual project expenditure: The new rule allows capital injection to follow project milestones rather than being parked idle.
- Incorporation of assets in valuation: For sectors like property and accommodation, land and building values are recognized in the total investment calculation, making the regulation more realistic for capital-intensive industries.
- Regulatory consolidation: The regulation also revokes and replaces three earlier BKPM regulations (Nos. 3, 4, and 5 of 2021), streamlining the investment licensing and supervision regime.
Key Highlights from Legal & Practitioner Analyses
- Withers describes the revision as widening market access, lowering financial barriers, and stimulating new foreign direct investment.
- Mahendra Counsel emphasizes the mandatory 12-month lock, sectoral exceptions, and self-declaration obligations.
- ASEAN Briefing highlights that while paid-up capital is down, the full project commitment continues to be Rp 10 billion in many sectors, preserving the large-scale project orientation.
- KPMG (in “Investing in Indonesia 2025”) notes that the five-digit KBLI system still governs minimum investment thresholds, and that exceptions and incentives will require careful planning.
These analyses confirm that the reform is significant, but not a carte blanche: structuring and compliance remain critical.
Deep Dive: Key Provisions & How They Work
Paid-Up Capital: Amount, Timing & Use
- Amount: Rp 2.5 billion is the minimum equity to be deposited (or subscribed) at startup for a PT PMA.
- 12-Month Lock-Up: The deposited capital must stay in the company’s bank account for at least 12 months from deposit date, unless used for legitimate business purposes: capital expenditure, construction, or operations.
- Permissible Early Use: During that 12-month period, the funds may be used for:
- Acquisition of assets (machinery, equipment, etc.)
- Construction of buildings
- Business operational expenses
Use must align with project and business plan declarations.
Minimum Total Investment (Rp 10 Billion)
Most PMAs still must show a minimum project investment exceeding Rp 10 billion (excluding land and buildings in general).
This ensures the project’s seriousness and scale, preventing micro-investments under foreign legal form.
Sectoral Exceptions & KBLI Classification
Regulation 5/2025 provides exceptions for how the minimum investment requirement is measured in some sectors:
Sector | KBLI Basis | Threshold Application | Land & Building Inclusion? |
---|---|---|---|
Wholesale trade | 4-digit KBLI | Rp 10 billion per 4-digit KBLI | Land & buildings typically excluded |
Food & beverage services | 2-digit KBLI per location | Rp 10 billion per 2-digit KBLI per city/district | Excluded |
Construction services | 4-digit KBLI | Rp 10 billion per 4-digit KBLI | Excluded |
Industrial (varied products in same line) | Consolidated under one production line | Rp 10 billion in aggregate | Excluded |
Property, accommodation | 5-digit KBLI | Rp 10 billion (which may include land/building) | Included |
Agriculture / plantation / aquaculture / livestock | 5-digit KBLI | Rp 10 billion (may include land) | Included |
Mahendra Counsel provides a detailed breakdown of these exceptions.
In addition, Regulation 5/2025 allows business activity consolidation under related KBLI groups, meaning you might not have to treat each micro-activity separately for thresholds.
OSS Self-Declaration, Sanctions & Monitoring
- The investor must submit a self-declaration in OSS confirming compliance with the paid-up capital rules.
- False or incorrect declarations may incur administrative sanctions, including license revocation or fines.
- Compliance and realization of planned investment are monitored via LKPM (Investment Realization Reports) and OSS reporting mechanisms.
Interaction with Other Regulations, Incentives & Special Zones
- In Special Economic Zones (KEK), investment thresholds may follow tailored Presidential Regulations, offering more flexibility in capital requirements.
- Regulation 5/2025 serves as a bridge under Government Regulation 28/2025, which further overhauls investment law; implementing rules are expected.
- Investors may still qualify for fiscal incentives (tax holidays, import duty exemptions, etc.), provided they meet requirements and maintain compliance.
What the Regulation Means: Opportunities & Constraints
Opportunities
- Lower capital barrier = broader participation
Entrepreneurs and developers who previously found Rp 10 billion too steep can now establish PMA vehicles legally and more affordably. - Phased capital deployment
Rather than injecting full capital upfront, you can align equity input with construction phases and project progression. - Asset valuation counts (in some sectors)
Inclusion of land & buildings in valuation (in property, hospitality, agriculture) helps reduce cash burden. - Better cash management, less idle capital
You avoid having large sums sit unused simply to satisfy capital rules. - Encourages new foreign developers in Bali & tourism areas
Niche resorts, eco-lodges, boutique villa firms, etc., may now approach investment with lower entry cost. - Greater appeal to joint venture / minority capital structures
Foreign investors can enter as minority partners or capital-light participants more easily.
Constraints & Risks
- The Rp 10 billion investment plan still applies; you can’t do a small project and claim compliance.
- Sector classification risk
Mis-KBLI assignment could disqualify your project from land/inclusion benefits, leading to noncompliance. - Strict scrutiny of capital usage
Using the capital prematurely for non-permissible purposes could lead to sanctions. - Regulatory interpretation variance
In practice, local BKPM offices or licensing bodies may interpret rules differently—be cautious. - Non-retroactive limits
Existing PMAs don’t necessarily get to revise their historical capital structure freely. - Bank, tax & financing alignment
Banks, loan covenants, transfer pricing, tax authorities all must accept the new logic for the benefit to fully materialize. - Kept as large-scale designation
Even with lower capital, PMAs are still treated under “large enterprise” rules; MSME privileges don’t apply.
Bali & Regional Focus: How This Plays in Bali, Nusa Penida, Lombok, etc.
Bali’s Real Estate & Tourism Context
Bali is highly tourism-driven, with resorts, villas, hospitality compounds, wellness centers, and resort-themed real estate developments. These typically require high upfront capital for land, construction, landscaping, interiors, and tourism infrastructure.
Under the new regulation:
- The ability to count land and building value toward total project investment is a big win for hospitality and property sectors in Bali.
- A boutique resort developer could deposit Rp 2.5 billion initially, while using the valuation of the already-owned land and projected buildings to help satisfy the project threshold.
- Joint venture with local partners becomes more attractive—foreign capital doesn’t need to be the entire burden.
Sample Hypothetical: Ubud Boutique Wellness Retreat
Suppose a foreign investor wants to build a wellness retreat in Ubud comprising:
- Purchase of 2,000 m² land
- Construction of 10 villas, spa, pool, paths, landscaping
- Utilities, interiors, staff quarters, operating capital
Under old regime:
- Full paid-up capital of Rp 10 billion required before incorporation.
- Then you must also satisfy/licence based on full project plan.
Under new regime:
- Deposit Rp 2.5 billion as paid-up capital.
- Include land + building valuation toward the investment plan.
- Phase spending: infrastructure first, villas later.
- You now can enter earlier, start operations, and grow, rather than sitting idle waiting for full capital.
This makes Bali-based projects more agile and accessible to smaller-scale international investors.
Comparison with Neighboring Islands
In Nusa Penida, Lombok, Sumbawa, and other areas where tourism infrastructure is ramping, the same logic applies. The lower capital entry threshold helps encourage foreign investment in more “outside Bali” projects, spreading growth to secondary islands.
Local Practical Considerations
- Local BKPM/regional investment offices may interpret “land and building inclusion” conservatively—always confirm at local level.
- In Bali, zoning, spatial planning (RTRW), tourism zoning, coastal setback, and local permits (e.g. building permit, environmental) often are limiting factors beyond capital rules.
- Local partners, compliance advisors, and consultants with Bali experience are key to navigating local practicalities.
Strategic Roadmap for Property Developers & Investors
Here’s a step-by-step strategy you can follow to take advantage of Regulation 5/2025:
Step 1: Initial Feasibility & Project Planning
- Estimate land + building values, construction costs, operating capital.
- Choose the correct KBLI classification (e.g. accommodation, property development) to ensure you can count land/buildings.
- Model phased capex and cashflow matching.
Step 2: Capital Structure & Equity Planning
- Plan to inject Rp 2.5 billion first.
- Design the schedule for further capital / debt injection aligned with project phases.
- If using debt, ensure lending party accepts new regulation logic.
Step 3: Entity Formation & OSS Filing
- Form PT PMA with proper articles, shareholding.
- Submit OSS application plus self-declaration on capital compliance.
- Plan for monitoring via OSS, LKPM, etc.
Step 4: Execution & Capital Use
- Use the deposited funds only for permitted uses during the 12-month lock-up.
- Phase construction, procurement, operations to align with capital deployment.
- Keep detailed documentation, receipts, asset records.
Step 5: Investment Realization & Reporting
- File LKPM reports showing progress, capital use, asset additions.
- Be ready for audit or regulatory scrutiny.
- If project lags, prepare justification and path to full compliance.
Step 6: Expansion, JV, or Exit Strategy
- As the project grows, bring in additional capital or partners.
- Undertake phased expansions under the same PMA or new PMA if needed.
- If exiting, ensure compliance with repatriation rules, capital return documentation.
Bold Predictions & What to Watch
- We expect a wave of smaller foreign entrants into Bali’s boutique hospitality, wellness, coworking, and boutique villa market.
- Secondary islands will gain more attention as capital barriers shrink.
- There may be greater regulatory scrutiny as authorities test the boundaries of what “permitted use” means in the 12-month period.
- Some local or provincial offices might resist or delay implementation—so expect inconsistent local interpretations.
- Advisory, legal, and consulting services specializing in Bali and foreign investment will grow in demand.
Table: Old vs. New Capital & Investment Rules
Feature | Previous Regime | Regulation 5/2025 |
---|---|---|
Minimum paid-up capital for PMA | Rp 10 billion | Rp 2.5 billion |
Investment plan threshold (excl. land/building) | Rp 10 billion per 5-digit KBLI | Rp 10 billion (many sectors) |
Lock-up period | No or less formal constraint | 12 months (unless used for building, operations, assets) |
Land/building inclusion | Generally excluded | Included for property, accommodation, agriculture, etc. |
Sectoral KBLI exceptions | Limited | Wholesale (4-digit), F&B (2-digit), etc. |
Self-declaration & sanctions | Less formal | Mandatory, with penalties for misstatement |
Innovation / consolidation | Separate KBLI treated independently | Consolidation of related KBLI allowed |
With Regulation 5/2025, Indonesia has struck a smart balance: lowering upfront capital barriers for foreign investors while preserving the requirement for meaningful, large-scale investments. For Bali and property-centric markets, this opens the door to more agile development, new foreign partnerships, and greater flexibility in financing. But the law is not automatic—it demands careful structuring, compliance, and local insight. If you align your capital plan, KBLI classification, and project phasing wisely, this reform can shift the frontier of what’s possible in Bali investment.