Small Island Utilization Permit in Indonesia: What PT PMA Operators Need to Do Before 20 May 2026

The deadline is 20 May 2026. If your Foreign Investment Company (Perseroan Terbatas Penanaman Modal Asing or PT PMA) is currently operating on a small island in Indonesia without a Small Island Utilization Permit (Izin Pemanfaatan Pulau-Pulau Kecil or IPPK), you are running out of time to regularize your position.

This is not a new obligation. It is an existing requirement that many operators have been non-compliant with for years. Minister of Marine Affairs and Fisheries Regulation (Peraturan Menteri Kelautan dan Perikanan or Permen KP) No. 10 of 2024 introduced a two-year transition period for operators already utilizing small islands without the required permit. That transition period ends on 20 May 2026, exactly two years from the regulation’s enactment date. After that date, enforcement of administrative and criminal sanctions resumes in full.

For PT PMA entities operating on small islands anywhere in Indonesia, including resort developments, marine tourism operations, aquaculture facilities, and waterfront commercial premises on islands of 2,000 km² or less, this deadline is material. The consequences of missing it are not administrative inconvenience. They include substantial fines, business license suspension, and in cases involving unauthorized change of spatial function, criminal liability.

What Is a Small Island Under Indonesian Law?

The definition matters because it determines whether your permit obligation applies. Under Law No. 1 of 2014 on the Amendment to Coastal Zone and Small Islands Management Law (Undang-Undang Nomor 1 Tahun 2014 tentang Perubahan atas Undang-Undang Nomor 27 Tahun 2007 tentang Pengelolaan Wilayah Pesisir dan Pulau-Pulau Kecil), a small island is defined as an island with an area of 2,000 km² or less, along with the surrounding waters. This definition captures the vast majority of Indonesia’s 17,374 registered islands, according to the latest data from the Geospatial Information Agency (Badan Informasi Geospasial or BIG) published in 2023.

Bali, Lombok, and Batam all fall within this definition. If your PT PMA operates from a physical location on any of these islands or surrounding smaller islands, including through a resort, a villa complex, a tourism facility, an aquaculture operation, or a commercial waterfront development, the permit obligation applies to your entity.

Why PT PMA Entities Face a Stricter Requirement Than Domestic Companies

This is one of the most consistently misunderstood aspects of the small island regulatory framework. The permit requirements differ significantly depending on whether the operating entity is a foreign investment company or a domestic company.

For a PT PMA, an Small Island Utilization Permit (Izin Pemanfaatan Pulau-Pulau Kecil or IPPK) issued by the Minister of Marine Affairs and Fisheries is mandatory, regardless of the island’s size, provided the island is 2,000 km² or less. This requirement applies under Article 26A of Law No. 6 of 2023 on Job Creation (Undang-Undang Nomor 6 Tahun 2023 tentang Cipta Kerja), which explicitly states that foreign investment utilization of small islands and surrounding waters must comply with central government business licensing under investment law.

For domestic companies, the obligation is lighter. A domestic entity is required to obtain a Small Island Utilization Recommendation (Rekomendasi Pemanfaatan Pulau-Pulau Kecil) only when utilizing islands with an area of less than 100 km². The documentation requirements and approval process are less onerous than the full IPPK applicable to PT PMAs.

This asymmetry reflects Indonesia’s longstanding policy of applying more stringent oversight to foreign capital operating in ecologically and strategically sensitive coastal and island environments.

The Legal Consequences of Operating Without a Permit

The sanctions framework for non-compliant PT PMA entities operating on small islands has two distinct tracks: administrative and criminal.

Administrative sanctions under Article 317 of Law No. 6 of 2023 include written warnings, government enforcement action, administrative fines, suspension of business licensing, and revocation of business licensing. The administrative fine for PT PMA entities operating on small islands without the required permit is calculated at 5% of total investment value. For any investment of meaningful scale, this represents a very substantial exposure.

Criminal liability under Article 73A of the same law applies specifically to cases where the unauthorized use of a small island has resulted in a change of spatial function. The penalty is imprisonment of up to four years and a fine of up to IDR 2 billion . This is not a provision that is invoked routinely, but it has been used in enforcement proceedings and its existence in the statute is unambiguous.

The 20 May 2026 deadline created by Permen KP No. 10/2024 was designed specifically to give existing operators who were already in breach of these provisions a structured pathway to regularize their position without immediate penalty. Once the transition period expires, the full enforcement framework applies without the transitional protection.

The Share Transfer Requirement Attached to the IPPK

One consequence of obtaining a Small Island Utilization Permit (Izin Pemanfaatan Pulau-Pulau Kecil or IPPK) that is not always understood at the point of application is the share transfer obligation it triggers.

Presidential Regulation (Peraturan Presiden or Perpres) No. 34 of 2019 on Share Transfer and Land Area in Small Island Utilization in the Context of Foreign Investment requires every PT PMA that obtains an IPPK to transfer a minimum of 20% of its company shares to an Indonesian Participant (Peserta Indonesia) within ten years of the permit being issued.

The transfer can be structured in two ways: direct sale to an eligible Indonesian entity or individual, or sale through the domestic capital market. If the transfer is made through direct sale, a priority order applies: the shares must first be offered to the central government, then to regional governments, then to state-owned enterprises (Badan Usaha Milik Negara or BUMN), then to regionally-owned enterprises (Badan Usaha Milik Daerah or BUMD), and finally to domestic private entities.

The ten-year window is not as long as it appears. For PT PMA entities already operating on small islands and applying before the 20 May 2026 deadline, the clock starts from the permit issuance date. Companies that have been operating for several years before seeking regularization will find that a portion of that ten-year window has already elapsed.

For companies in Bali and other island-based locations that have not yet considered how this obligation intersects with their shareholder structure, the share transfer requirement warrants legal planning before the permit application is submitted, not after. The XPND Bali office works with foreign investors across Bali, Lombok, and the surrounding islands on exactly this kind of pre-application structuring.

The Application Process Through OSS

The IPPK application for PT PMA entities is processed through the Online Single Submission (OSS) system at oss.go.id, under the PB-UMKU (Perizinan Berusaha untuk Menunjang Kegiatan Usaha) pathway.

The process follows these steps:

Step 1: Log into the OSS system. Access oss.go.id using the company’s registered OSS credentials. Navigate to PB-UMKU and initiate a new application.

Step 2: Select the relevant Indonesian Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia or KBLI) code and search for “Izin Pemanfaatan Pulau-Pulau Kecil” within the available licensing options.

Step 3: Upload all required documents. See the document checklist in the following section. Applications with incomplete documentation are rejected at the verification stage.

Step 4: Requirement verification. The application status moves to “Awaiting Requirement Verification.” The Minister of Marine Affairs and Fisheries must approve or reject the application within 14 working days of receiving a complete and verified submission.

Step 5: Non-Tax State Revenue (Penerimaan Negara Bukan Pajak or PNBP) payment. Upon approval, a PNBP payment order is issued. Payment must be completed within seven working days of the payment order being issued. The PNBP fee for PT PMA entities is calculated at 5% multiplied by the S Factor (a valuation of environmental system impact calculated at IDR 616,482,125 under Minister of Marine Affairs and Fisheries Regulation or Permen KP No. 24 of 2020) multiplied by the land area in hectares. For any meaningful-scale development, this is a significant upfront cost that should be budgeted before the application is initiated.

Step 6: Permit issuance. Upon payment confirmation, the OSS system issues the formal permit. The status changes to “Izin Terbit” (Permit Issued). The total standard processing timeline from a complete submission to permit issuance is approximately 17 working days.

Document Requirements for the IPPK Application

The following documents are required for a PT PMA IPPK application. All foreign-language documents must be translated by a sworn translator (penerjemah tersumpah) registered with the Indonesian government.

• Application letter addressed to the Minister of Marine Affairs and Fisheries, on company letterhead and signed by the authorized director. 
• Company deed of establishment and all amendments, legalized by the Ministry of Law. 
• Business Identification Number (Nomor Induk Berusaha or NIB) issued through OSS.
• Tax Identification Number (Nomor Pokok Wajib Pajak or NPWP) of the company.
• Evidence of land rights or right-of-use agreement for the island location. 
• Site plan or master plan showing the intended area and scope of utilization. 
• Environmental document: Environmental Impact Assessment (Analisis Mengenai Dampak Lingkungan or AMDAL) or Environmental Management and Monitoring Effort (Upaya Pengelolaan Lingkungan dan Upaya Pemantauan Lingkungan or UKL-UPL), depending on the scale of the activity. 
• Proof of access guarantee for public use of the island. 
• Statement of cooperation or commitment to work with Indonesian Participants as required under Perpres No. 34 of 2019. 
• Statement letter confirming no prior or existing dispute over the island area.

Why This Is Particularly Relevant for Bali-Based PT PMA Entities

Bali is Indonesia’s highest-profile island for foreign investment in tourism, hospitality, real estate, and marine-adjacent businesses. It is also, under Indonesian law, a small island for the purposes of this permit framework.

Foreign investors who have established PT PMA entities for villa operations, resort development, tourism services, or waterfront businesses in Bali, Lombok, the Gili Islands, or the Nusa Islands group are within the scope of this requirement if their operations involve utilization of the island’s coastal or waterfront zones in a manner covered by the IPPK framework.

The intersection of the IPPK requirement with Bali-specific regulatory complexities, including spatial zoning regulations, Balinese customary land arrangements (hak ulayat), and the AMDAL requirements specific to coastal and marine environments, makes early engagement with local legal and regulatory expertise especially important. XPND’s Bali office handles PT PMA establishment, licensing, and compliance for foreign investors operating in Bali and the surrounding island group. For investors who need to assess whether their current operations require an IPPK and how to structure the application to meet the 20 May 2026 deadline, a free initial consultation is the appropriate starting point.

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How This Intersects with Your PT PMA Structure

The IPPK is a sectoral license, not a substitute for the foundational PT PMA structure. A PT PMA must be properly established and have a valid Business Identification Number (Nomor Induk Berusaha or NIB) before an IPPK application can be submitted through the OSS system. Companies that have been operating informally or under incorrect entity structures may need to resolve their corporate foundation before pursuing the permit.

For PT PMA entities that are correctly structured but have never applied for the IPPK, the 20 May 2026 deadline makes the permit a priority compliance item. For investors currently planning a PT PMA setup for island-based operations, integrating the IPPK application into the incorporation and licensing sequence from the outset avoids the need to retrofit the permit after operations have begun. The guide on PT PMA setup in Indonesia explains the foundational structure requirements that must be in place before sector-specific licenses can be pursued.

It is also worth noting that the IPPK affects quarterly Investment Activity Report (Laporan Kegiatan Penanaman Modal or LKPM) reporting obligations. Licensed operations on small islands should be reflected accurately in LKPM submissions, as the OSS system cross-references permit status against declared investment realization. Gaps between declared activities and permit coverage create compliance flags that require correction. The guide on how to report LKPM covers the current LKPM reporting framework and what investors need to disclose.

Key Dates and Action Points

20 May 2026 is the expiry of the two-year transition period established under Permen KP No. 10/2024. PT PMA entities already operating on small islands without an IPPK must have submitted a complete application before this date to benefit from the transitional protection.

Given the 17 working day standard processing time, and accounting for the preparation of environmental documentation, which can take several weeks depending on the assessment required, companies that have not yet initiated their application should treat this as an urgent priority.

The practical action sequence is: confirm whether your operations fall within the IPPK requirement, assess your shareholding structure against the Perpres No. 34/2019 share transfer obligation, commission or verify environmental documentation status, and initiate the OSS application with a complete document set. For PT PMA entities operating in Bali and surrounding islands, XPND’s Bali office is available for a free initial consultation to assess permit requirements, application readiness, and structuring considerations specific to your operations. Contact our team here.