Doing business in Batam means working under two layers of rules at once: the national investment system run through OSS, and a local free trade zone regime run by BP Batam. This guide is for foreign investors who plan to open a PT PMA in Batam for manufacturing, logistics, shipbuilding, electronics or digital services. It explains how the zone is defined, which licences you need, how to choose an industrial estate, how goods move to the rest of Indonesia, and which capital and immigration rules apply. Batam sits about 20 km from Singapore on one of the busiest shipping lanes in the world, which is why investors keep returning to it.
What Makes Doing Business in Batam Different
Batam is a Free Trade Zone and Free Port (known in Indonesian as KPBPB) and it also hosts separate Special Economic Zones (KEK). The two are not interchangeable. The FTZ covers the wider area and its customs and tax treatment. A KEK is a defined site with its own administrator and its own incentive application process.
BP Batam, the Batam Free Trade Zone and Free Port Authority, manages land allocation, infrastructure and a share of the licensing for businesses located in the zone. The national investment rules also recognise this role. Under the investment ministry’s Regulation 5 of 2025 (Pasal 29(1)(f)), business licences for activities located in a KPBPB are issued by the head of the KPBPB authority, exercising delegated powers. In practice, you will deal with OSS and with BP Batam on the same project.
The Legal Basis: PP 46/2007, PP 41/2021 and PP 47/2025
Three government regulations matter, and they do different jobs:
- PP 46/2007 is the Batam-specific regulation. It designates the Batam zone and sets its area. It has been amended four times, most recently by PP 47/2025.
- PP 41/2021 is the general framework for free trade zones and free ports across Indonesia.
- PP 25/2025 amended PP 41/2021 in June 2025. Among other things, it changed the structure and licensing authority of the zone authorities, distinguishing between Batam and other zones.
If you cite only PP 41/2021 for Batam, you miss the regulation that actually defines the Batam zone. Your adviser should be able to tell you which of these applies to a given question.
The 22-Island Expansion Under PP 47/2025
PP 47/2025 was set and promulgated on 28 October 2025. It is the fourth amendment to PP 46/2007 and replaces the list of islands in the zone. The earlier zone covered eight items: Batam, Tonton, Setokok, Nipah, Rempang, Galang, Galang Baru and the Janda Berias island group. The new operative text lists 22 islands.
BP Batam describes the change as an expansion from 8 islands covering 71,500 hectares to 22 islands. The same BP Batam page quotes a figure of about 152,000 hectares, but treat the area figure as a BP Batam statement rather than a legal text. For a deeper look at the regulation, see our analysis of the FTZ Batam area expansion under PP 47/2025.
What the expansion does not do is turn every new island into a ready industrial site. Roads, ports, power and land allocation still have to follow. Check the status of any specific location with BP Batam before you plan around it.
The Business Sectors That Drive Batam’s Economy
BP Batam groups activity broadly into manufacturing and services. The clusters you will meet most often are:
- Electronics and precision manufacturing, centred on the Batamindo and Muka Kuning areas.
- Shipbuilding and ship repair, centred on Tanjung Uncang and other waterfront areas.
- Oil and gas support services and offshore fabrication.
- Logistics and port services, including the Batu Ampar port area.
- Aircraft maintenance, repair and overhaul (MRO) in the Batam Aero Technic KEK.
- Digital services and data centres in the Nongsa Digital Park KEK.
The business classification (KBLI) you select at incorporation drives the licensing path, the capital test and which authority issues which permit. Under the BPS Regulation 7 of 2025, KBLI 2025 applies to new registrations. Our guide to choosing KBLI 2025 codes walks through how to pick them before you file.
How the Dual Licensing Track Works in Practice
Track 1: OSS-RBA. Under PP 28/2025 on risk-based licensing, your PT PMA registers in OSS and receives a business identification number (NIB). Your KBLI codes and risk level decide which further licences you need.
Track 2: BP Batam. BP Batam runs its own online system, IBOSS (Indonesia Batam Online Single Submission), launched in May 2021. On IBOSS, BP Batam states that businesses moving goods into or out of the Batam FTZ must first hold an Izin Usaha Kawasan (IUK). You apply for it after you hold your NIB through OSS. IBOSS lists several IUK types:
| IUK type (as listed on IBOSS) | When it is relevant |
| IUK Luar Daerah Pabean (LDP) | Activity treated as outside the customs area |
| IUK Tempat Lain Dalam Daerah Pabean (TLDDP) | Activity located in another place within the customs area |
| IUK Kontraktor Kontrak Kerjasama (K3S) | Oil and gas production sharing contractors |
| IUK Sementara Untuk Kegiatan Tertentu (SUKT) | Temporary permits for specific activities |
| IUK Logistik | Logistics operators |
Which type applies depends on your activity, so confirm it with BP Batam before you file. The IUK is listed in the annexes to PP 41/2021 as amended by PP 25/2025, which also provides that BP Batam issues the basic requirements and business licences for activities in Batam and carries them out through OSS (Pasal 20). BP Batam’s current implementing regulation for these services is Perka BP Batam 5 of 2025 (August 2025). The IBOSS page still cites older rules and does not publish document lists, fees or processing times, so ask BP Batam for the current checklist before you file.
Documents. Expect to be asked for corporate documents (deed, ministerial approval, tax number), the passports of foreign shareholders and directors, a business plan, evidence of land or premises and proof of capital. Capital evidence follows the investment ministry’s Regulation 5 of 2025, which we cover below. Environmental documents depend on risk and location. Businesses inside an industrial estate, KEK or KPBPB that are covered by an estate-level environmental approval must prepare a detailed RKL-RPL based on it (Regulation 5 of 2025, Pasal 166), which the estate manager reviews and approves.
Sequencing matters. Choose your estate and secure land or premises early, because BP Batam and the estate operator will ask where the activity will take place. Settle your export versus domestic sales split before you declare your investment plan in OSS, because it affects tax planning (see goods movement below).
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Industrial Estate Selection: A Decision That Shapes Operations
Land in Batam is allocated through BP Batam, and many investors lease from BP Batam or from an approved estate operator. Lease length, upfront fees and renewal terms differ by plot and operator, so ask for them in writing before you sign.
| Area | Typical use | Regime | Check before you commit |
| Tanjung Uncang | Shipbuilding and marine services | FTZ | Waterfront access, depth at your berth, local subcontractors |
| Batamindo and Muka Kuning | Electronics, precision components, export manufacturing | FTZ | Utilities, labour supply, existing tenant mix |
| Nongsa Digital Park | Technology, data centres, digital and tourism-related activity | KEK (PP 68/2021, 166.45 ha) | Separate KEK incentive application and administrator |
| Batam Aero Technic | Aircraft MRO | KEK (PP 67/2021, 30 ha) | Aviation licences and KEK administrator requirements |
On shipbuilding, treat headline numbers with care. BP Batam’s 2021 shipyard directory lists 26 companies at Tanjung Uncang and 46 across Batam, and quotes a depth range of 6 to 18 metres for the area without a date. Ask for current figures for the exact berth you intend to use.
The area around Hang Nadim airport is also being positioned for air logistics and high-technology manufacturing. Confirm its zoning status and the infrastructure timeline with BP Batam before treating it as an operating estate.
KEK incentives such as tax holidays and investment allowances are not automatic. They require a separate application to the KEK administrator.
Goods Movement Between the FTZ and the Rest of Indonesia
The FTZ gives a customs and tax advantage for goods used inside the zone. The Directorate General of Taxes lists facilities covering customs duty, VAT, luxury goods sales tax and excise for the KPBPB. The facilities come with procedures, so do not read them as automatic.
For example, VAT “not collected” on taxable goods brought into the KPBPB from elsewhere in Indonesia depends on an endorsement, which is given when the tax invoice code 07, the customs notification and the release approval are recorded, and when goods enter through a designated port. The KPBPB entrepreneur must also file a notification (PPBJ) before the seller issues the invoice. If the endorsement is missing, the buyer in the KPBPB has to pay the VAT.
The reverse flow is where many Batam business plans go wrong. Goods that leave the FTZ for the rest of Indonesia are not simply “imports” or “exports” in the regulation’s wording: PP 41/2021 records goods entering from abroad as imports and goods leaving for abroad as exports (Pasal 38), and treats the domestic leg separately. For that domestic leg, Ministry of Finance Regulation 34/PMK.04/2021 requires a customs declaration in which the filer self-assesses the import duty, excise and taxes that should be paid (Pasal 30). VAT and luxury goods tax apply on a taxable sale to a buyer elsewhere in Indonesia, and income tax under Article 22 applies to foreign-origin goods sold there (PP 41/2021, Pasal 53). Goods without proof that they come from the zone or from within Indonesia are treated as foreign-origin (PMK 34/2021, Pasal 31). In plain terms, domestic sales out of Batam can carry import-style costs, and the split between export and domestic sales should be modelled before you commit to Batam. Our tax compliance guide for foreign companies explains the wider tax framework.
Capital Requirements, Physical Address and Immigration
Two capital tests. Under the investment ministry’s Regulation 5 of 2025, a PT PMA is treated as a large business. It must meet two separate tests:
- Paid-up capital of at least IDR 2.5 billion per company (Pasal 26(10)). Before this regulation the figure was IDR 10 billion.
- Investment value above IDR 10 billion, excluding land and buildings, for each five-digit KBLI code at each project location (Pasal 26(2)). A location means a regency or city, so for Batam that is the city. The regulation lists exceptions, including wholesale trade, food and beverage, construction and manufacturing, which are counted differently (Pasal 26(3)).
Our PT PMA minimum capital guide explains the paid-up capital rule in full. If you plan several KBLI codes or add a second activity later, see our BKPM 5/2025 capital planning guide for worked examples.
12-month retention. Paid-up capital cannot be moved out of the company account for at least 12 months from the date it is paid in, except for buying assets, constructing buildings and funding operations (Pasal 27(1)). You declare this in OSS and breaches carry administrative sanctions (Pasal 27(2) to (4)).
Physical address. Industrial activity in Batam needs a real location. Land use, estate approvals and BP Batam’s processes all attach to a specific site, so a virtual office will not support a manufacturing or marine operation. A virtual office may still work for a pure office-based service business, but confirm that with your adviser for your KBLI.
Investor KITAS. A foreign shareholder can obtain a limited stay permit based on their investment, but the share ownership threshold is a separate immigration test of IDR 10 billion per individual, not the BKPM capital rule. Our Investor KITAS guide covers it in detail.
Expatriate staff. The old IMTA work permit no longer exists. Since PP 34/2021, an employer needs an approved foreign worker utilisation plan (RPTKA) before foreign staff can obtain a visa and stay permit, and the plan is tied to the specific positions you intend to fill. Engineering, plant management and quality assurance are the roles most often filled by expatriates in Batam.
Post-Incorporation Compliance in Batam
LKPM. As a large business, a PT PMA files an investment activity report (LKPM) every quarter, due on the 15th of April, July, October and January (Regulation 5 of 2025, Pasal 285 and 286). The report tracks realisation of your investment plan.
Tax. Corporate income tax, monthly PPh 21 withholding on employee income, VAT where applicable and BPJS contributions all apply. Our PPh 21 guide covers payroll withholding.
Corporate administration. Permenkum 49/2025 sets the rules for establishing, amending and dissolving a PT, and, according to a third-party summary, requires directors to report the shareholders’ approval of the annual report to the Ministry within 30 days. Missing these filings can block later changes to your company data.
Treating compliance as an afterthought is more expensive than building it into your operating calendar from the first quarter.
How XPND Helps With a Batam PT PMA
XPND supports foreign investors from KBLI selection and capital planning through OSS registration, BP Batam coordination, tax set-up and immigration. If you are weighing Batam against another location, or you already have a site in mind, reach out to the XPND Batam team and we will map the licences, capital and timeline for your activity. To start the entity itself, see our service for establishing a PT PMA in Indonesia.
