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)
- 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 operational expenses, asset purchases, or construction projects, even during the initial 12-month period.
2. The Total Investment Plan (Project Commitment)
- 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 full projected cost of the business, including feasibility studies, licensing, equipment, and working capital. The initial IDR 2.5 billion paid-up capital forms part of this total investment value.
- Exclusion/Exception: Land and building costs are excluded from the IDR 10 billion minimum, except for sectors like real estate, accommodation, agriculture, and plantations, where they can be included.
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. Investors can now commit a lower initial sum while gradually fulfilling their IDR 10 billion investment plan through growth and asset acquisition.
For Current Investors (Existing PT PMAs)
Existing PT PMAs that established their company with the IDR 10 billion paid-up capital may improve capital efficiency. Subject to approval, they can apply for a capital structure amendment to reduce their paid-up capital to the new IDR 2.5 billion minimum, provided that at least 25% of authorized capital remains 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.
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 market entry or considering a capital restructure for your existing PT PMA, our team can guide you through compliance and strategic opportunities under the new framework.
