“Investors who enter the Indonesian market without adequate due diligence are not taking measured risks. They are leaving unknown risks unsupervised.”
Due diligence before entering the Indonesian market is not a formality that can be skipped to save time. It is the process that determines whether an investment plan that looks promising on paper can actually be implemented lawfully, efficiently, and sustainably under Indonesia’s evolving legal system. This article presents a practical checklist covering the most critical dimensions, from ownership structures to immigration compliance, that should be examined before a final investment commitment is made.
JHY Legal regularly supports foreign investors through this process, and that experience reveals a consistent pattern: the earlier due diligence is performed, the greater the likelihood of executing the investment plan on schedule without costly structural revisions.
Why Due Diligence in Indonesia Has Particular Dimensions
Indonesia’s business law system has several characteristics that distinguish due diligence here from other Southeast Asian markets. Regulatory layers involve multiple authorities, including OSS for general licensing, BKPM for foreign investment, sectoral authorities for special permits, the Ministry of Law and Human Rights for corporate legality, and the Directorate General of Immigration for expatriate placement.
Each layer has its own requirements, procedures, and processing times, and they are not all visible from a single viewpoint. Investors who examine only one or two layers, for example by checking OSS without verifying the DPI or arranging the deed of establishment without planning expatriate KITAS, often encounter unforeseen obstacles in later phases.
Due Diligence Checklist for Foreign Investors
Dimension 1: Eligibility of the Business Sector for Foreign Ownership
This is an essential starting point. Before addressing other aspects, foreign investors need to verify whether the planned business sector is open to foreign ownership and under what conditions.
- Identify the KBLI (Indonesian Standard Industrial Classification) code most relevant to your business plan. Use KBLI 2025, effective from 2026.
- Verify the code’s status in the Positive Investment List (DPI): fully open, open with foreign ownership limits, open subject to certain conditions, or closed.
- If foreign ownership limits apply, ensure the planned ownership structure stays within the permitted limits.
- For business sectors requiring partnership with a local party, identify the implications of this ownership structure for operational control of the company.
Dimension 2: Capital Requirements and Corporate Structure
PT PMA companies have capital requirements that differ from local PT companies. Under regulatory changes effective from October 2025, the minimum paid-up capital was reduced to IDR 2.5 billion. However, the minimum investment value remains more than IDR 10 billion, excluding land and buildings, per KBLI code per project location.
- Determine whether the planned investment meets the required minimum value.
- Consider whether the existing overseas holding structure is compatible with DPI requirements, because shareholders may be foreign legal entities or individuals.
- Plan the composition of directors and commissioners: PT PMA companies require at least one director domiciled in Indonesia, which affects expatriate placement needs.
- If the business plan covers several KBLI codes, check whether each code has different capital requirements or foreign ownership restrictions.
Dimension 3: A Complete Licensing Map
Knowing that an NIB can be issued is the starting point rather than the endpoint of the licensing map. Adequate due diligence includes understanding all permits needed before operations can lawfully begin.
- Determine the risk level of the chosen KBLI code: low, medium-low, medium-high, or high.
- For medium or high risk, identify the Standard Certificate or sectoral Permit that must be obtained after the NIB, including the competent authority and estimated processing time.
- Check whether special sectoral permits apply outside the OSS system, for example OJK permits for the financial sector, Ministry of Health permits for healthcare services, or BPOM registration for food and pharmaceutical products.
- Include estimated time for every licensing layer in the operational timeline. Do not treat the date of NIB issuance as the date the business can operate.
“A complete licensing map shows the permits required, how long each takes, and what must already be completed before the next permit can be applied for.”
Dimension 4: Immigration Planning for Expatriates
If the operational plan involves placing foreign directors, commissioners, or specialists in Indonesia, immigration needs to be part of due diligence from the planning stage, rather than after the company has been established.
- Determine whether each planned expatriate will enter as a shareholder (the Investor KITAS route) or a foreign worker (the Work KITAS route requiring RPTKA).
- For the Work KITAS route, the RPTKA process at the Ministry of Manpower needs to begin well before the expatriate’s scheduled arrival because it requires approval that is not instantaneous.
- Check whether restrictions on certain positions for foreign workers apply in the sector you are entering.
- Plan coordination between PT PMA establishment, NIB issuance, and KITAS processing so that all three are completed before the target operational date.
Dimension 5: Cross-Border Tax Implications
Adequate tax planning is part of due diligence that is often handled separately from regulatory matters, even though the two are closely connected. Several points need to be checked:
- Does Indonesia have a tax treaty with the shareholder’s country of domicile, and how does that treaty affect tax on dividends, interest, and royalties to be paid?
- Will transactions between entities in the corporate group be subject to Indonesian transfer pricing rules?
- Does the planned investment value meet the threshold for fiscal facilities such as a tax holiday or tax allowance from BKPM?
Dimension 6: Readiness of Documents Across Jurisdictions
For shareholders or company officers who are foreign legal entities or individuals, document requirements need to be prepared well before the deed of establishment can be signed.
- Foreign corporate documents, such as articles of association, the deed of incorporation, and evidence of signatory authority, must be legalized through an apostille for countries party to the Hague Apostille Convention or through consular legalization.
- All foreign-language documents must be translated into Indonesian by a sworn translator.
- If the signatory cannot attend in person in Indonesia, a notarized power of attorney must be prepared in a format that meets Indonesian legal requirements.
- Estimate the time required to prepare all these documents. Apostille or consular legalization processes in some countries can take several weeks.
JHY Legal’s Experience Supporting Pre-Investment Due Diligence
JHY Legal is a legal advisory firm focused on immigration, corporate actions, and regulatory licensing in Indonesia, founded by legal practitioners with litigation and corporate backgrounds. In pre-investment due diligence, we help foreign investors map all the dimensions discussed in this article, from DPI verification and the licensing map to KITAS planning and document coordination across jurisdictions. We also conduct due diligence where foreign investors plan to acquire or invest in an existing Indonesian company, including examining the target’s corporate compliance before the transaction is finalized.
Make Due Diligence Part of Planning, Rather Than an Afterthought
The checklist above may feel long, and it is. Entering the Indonesian market involves many dimensions that need to be checked simultaneously. Its length, however, is no reason to postpone due diligence until a problem forces it. The opposite is true: the more complete the checks at the outset, the lower the risk of something unexpected arising during execution.
The most concrete step you can take now is to begin with Dimension 1: verification of the KBLI code and its DPI status. That one step can provide an initial picture of the feasibility and complexity of the planned investment. For more thorough mapping covering all the dimensions discussed here, JHY Legal is ready to help design a comprehensive and efficient due diligence process from the starting point until the investment is ready to execute.