Law
Scope of Regulation
Law No. 40 of 2007 concerning Limited Liability Companies regulates incorporation, management, administration, and dissolution of limited liability companies.
Law No. 25 of 2007 concerning Investment governs foreign and domestic investment frameworks, establishes parameters for foreign-owned entities (PT PMA), and enforces the Priority Investment List.
Law No. 6 of 2023 concerning Job Creation amends multiple legislative acts to streamline business licensing procedures and implement the unified Online Single Submission (OSS) system.
Indonesian Civil Code provides the fundamental legal foundation for contracts, obligations, property rights, and civil liability, inherited from Dutch colonial law.
Indonesian Commercial Code regulates specialized commercial institutions, maritime trade, insurance frameworks, and negotiable instruments alongside civil code provisions.
Law No. 4 of 2023 concerning Development and Strengthening of the Financial Sector modernizes and consolidates the regulatory framework for financial markets, banking institutions, non-bank financial sectors, and fintech operations.
Government Regulation No. 43 of 2025 concerning Joint Platform for Financial Reporting mandates the implementation of the Joint Financial Reporting Platform (PBPK) and standardizes corporate submissions via certified accountants.
Government Regulation No. 5 of 2021 concerning the Implementation of Risk-Based Business Licensing classifies all commercial activities by risk levels and structures the operational rules for the unified OSS ecosystem.
Government Regulation No. 50 of 2022 concerning Procedures for the Implementation of Tax Rights and Fulfillment of Tax Obligations defines the framework for tax audits, compliance mandates, penalty structures, and electronic tax filing systems.
The legal framework of Indonesia relies on a strict hierarchy of written legal sources that establish the regulatory boundaries for administrative, commercial, and civil relationships.
The legislative branch features a unique structural architecture often described as a quasi-tricameral system, where functions are distributed among three distinct bodies: the People’s Consultative Assembly (MPR) as the supreme constitutional organ, and a bicameral parliament comprising the House of Representatives (DPR) and the Regional Representative Council (DPD).
For international investors and PT PMAs, the primary legislative benchmark is the House of Representatives (DPR), which holds the exclusive mandate to enact statutes regulating commercial activities and approve sweeping fiscal reforms.
The primary sources of law within the jurisdiction comprise the following categories, structured in descending order of statutory authority:
| Source of Law | Description |
| Constitution (UUD 1945) | The 1945 Constitution serves as the supreme foundation of the legal system. All subsequent statutes, decrees, and regulations must align with its constitutional mandates. |
| Statutory Enactments (Undang-Undang / UU) | Primary regulatory frameworks are codified in statutes enacted by the House of Representatives (DPR) and formally ratified by the President of Indonesia. |
| Government Regulations (Peraturan Pemerintah / PP) | Statutory instruments issued by the central government to detail operational clauses, establish administrative mechanics, and execute primary statutes. |
| Presidential Regulations & Decrees (Perpres) | Executive orders issued by the Head of State to direct operational governance, configure ministerial structures, or implement specialized economic zones. |
| Regional Regulations (Peraturan Daerah / Perda) | Provincial and regency-level enactments issued by local governments (e.g., the Special Capital Region of Jakarta or the Province of Bali) to regulate regional mandates. |
| International Agreements | Bilateral and multilateral treaties, including Double Taxation Agreements (DTAs), bilateral investment treaties (BITs), and ASEAN integration frameworks, systematically ratified and integrated into national legislation. |
Indonesia does not recognize the doctrine of binding judicial precedent. A court judgment on a specific commercial dispute carries binding legal authority solely for the litigating parties and does not constrain other courts adjudicating parallel matters.
Despite the absence of a formal precedent system, landmark rulings by the Supreme Court play a vital role in addressing statutory gaps, establishing a framework officially recognized as “constant jurisprudence” (Yurisprudensi Tetap). When lower courts consistently and uniformly resolve a specific category of disputes over time, such statutory interpretation serves as an authoritative guidance for the entire judiciary, ensuring essential predictability in legal enforcement.
Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution mandates that written arbitration agreements strip state courts of jurisdiction. Under this statutory protection, contracting parties can explicitly opt out of the domestic judicial system.
Domestic Arbitration via the Indonesian National Arbitration Board (BANI), which operates under international procedural rules, and International Arbitration hosted in neutral regional hubs such as Singapore (SIAC) or Hong Kong (HKIAC), are available to the companies operating in Indonesia.
While Indonesia is a signatory to the 1958 New York Convention, the physical enforcement of foreign arbitral awards follows a centralized pathway. All international arbitral awards must be submitted exclusively to the District Court of Central Jakarta (Pengadilan Negeri Jakarta Pusat). No other regional or provincial court in Indonesia holds the statutory authority to process these filings or grant execution orders. To legally enforce an award against domestic assets, the Central Jakarta District Court must formally issue an exequatur.
When conducting business in Indonesia, international arbitration remains the most reliable tool for a foreign investor. Nevertheless, when planning the forced recovery of assets within Indonesian territory, it is necessary to allocate time and administrative resources for undergoing the exequatur procedure in the Central Jakarta District Court.
The District Court has the legal right to refuse the enforcement of a foreign arbitral award if it contradicts public policy. This regulation is phrased rather vaguely and is frequently used in court as a loophole to block the awards of international tribunals if they infringe upon strategic state or economic interests.
The Indonesian legal framework heavily regulates every phase of corporate structuring, demanding exact alignment with localized Standard Classification of Indonesian Business Fields (KBLI) codes, formal risk-level assessments, compliance verification of paid-up share capital thresholds, and synchronization with the OSS and Coretax ecosystems.
Tax Harmonization Law overhauled the fiscal system by amending multiple tax acts; regulates core tax brackets, administration workflows, and mandates the implementation of the digital Coretax and PBPK portals.
Income Tax Law governs corporate income tax (CIT), individual income tax (PIT), and withholding tax (WHT) frameworks.
VAT and Luxury Goods Sales Tax Law establishes assessment and collection parameters for Value Added Tax (PPN) and Luxury Goods Sales Tax (PPnBM) on products and services within Indonesia.
General Tax Provisions and Procedures Law serves as the primary procedural fiscal code governing tax administration, compliance rules, and taxpayers’ rights.
Regional Tax and Fiscal Decentralization Law structures financial relations between central and local governments, setting maximum statutory caps on regional land, commercial property, and local levies.
Implementation rules are governed by the Ministry of Finance Regulations (PMK) and Directorate General of Taxes Regulations (PER), which are updated continuously. These subsidiary enactments dictate real-time operational compliance, including exact withholding tax rates, fiscal incentive criteria, data formats, and filing deadlines.
The cornerstone of the Indonesian fiscal regime is the worldwide taxation principle for resident entities. All companies incorporated in Indonesia are subject to corporate income tax on their global income, regardless of where the transactions occur. Foreign tax credits for taxes paid overseas are available, subject to statutory limits. All tax administration is executed exclusively through the unified Coretax digital system.
Due to the frequency of amendments to subsidiary legislation, as well as the mandatory use of the Coretax system (where errors in monthly returns are automatically transferred to annual reporting), the calculation of liabilities requires the involvement of a certified local accountant. Independent administration by foreign companies without local expertise carries high risks of additional tax assessments and the freezing of digital portals.
Statutory requirements for maintaining proper books of account and preparing financial statements are codified under Law No. 40 of 2007 concerning Limited Liability Companies. Accounting records and financial statements must comply with the Indonesian Financial Accounting Standards (SAK), which are systematically harmonized with International Financial Reporting Standards (IFRS).
Indonesia enforces a robust intellectual property (IP) protection framework (Kekayaan Intelektual) aligned with WTO standards (TRIPS Agreement) and World Intellectual Property Organization (WIPO) protocols. The statutory framework operates on a first-to-file principle.
Key statutory instruments regulating IP frameworks comprise:
Trademark acquisition and protection are further streamlined through Indonesia’s accession to the international Madrid Protocol system. These statutes equip right holders with effective legal mechanisms to secure corporate assets, prevent commercial infringement, and obtain judicial remedies via specialized Commercial Courts.
The Directorate General of Intellectual Property (DJKI) acts as the central administrative and regulatory body under the Ministry of Law and Human Rights. The DJKI drives national IP policy, maintains the official national registries, issues patents and registration certificates, and administers intellectual property dispute resolution.
Official Portal of Indonesia
Ministry of State Secretariat
Ministry of Law
Companies Registry
Directorate General of Taxes (DJP)
Ministry of Finance
Indonesian Legislation Database
Audit Board of Indonesia
CentralBank Indonesia
Yes. Indonesia actively participates in the Common Reporting Standard (CRS) global framework for the automatic exchange of financial account information. On an annual basis, the Directorate General of Taxes (DJP) automatically transmits financial records of foreign account holders to the fiscal authorities of their respective tax resident jurisdictions.
This protocol covers both personal and corporate non-resident bank accounts, including year-end balances, investment yields, interest, and dividends. Additionally, Indonesia provides targeted financial data upon specific request under active Double Taxation Agreements (DTAs) and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
Under the automatic CRS mechanism, the Directorate General of Taxes collects and transmits the following structured data sets to foreign tax authorities:
Primary corporate operations are regulated by Law No. 40 of 2007 concerning Limited Liability Companies, as amended by Law No. 6 of 2023 concerning Job Creation (Omnibus Law). This statutory framework codifies rules for company incorporation, capital structure, and corporate governance.
For entities established with foreign ownership (PT PMA), operations are additionally governed by Law No. 25 of 2007 concerning Investment, which imposes elevated paid-up capital thresholds and market-access rules across various economic sectors.
Yes. Every commercial activity in Indonesia requires explicit regulatory approval through a risk-based licensing framework mapped directly to individual business activity classifications (KBLI).
For low-risk operations, securing a Business Identification Number (NIB) via the unified OSS system is sufficient and serves as the core operational license.
Medium-risk sectors demand an NIB alongside a formal Standard Certificate (Sertifikat Standar) verifying regulatory compliance.
High-risk activities require a full, bespoke Commercial License issued by the competent ministry, subject to rigorous pre-operational sector inspections.
