Indonesia continues to strengthen its position as a leading investment hub in Southeast Asia. Significant changes have taken place following the implementation of the Job Creation Law (UU Cipta Kerja), reinforced by Law Number 6 of 2023 (UU Nomor 6 Tahun 2023).
These regulations have shifted the business licensing system from a permit based approach to a risk based approach. This new framework aims to create faster and more transparent investment processes.
Within this context, joint ventures have become one of the most strategic business structures for investors.
Understanding the joint venture structure in Indonesia is essential to ensure legal compliance and long term business sustainability.
This article provides a comprehensive overview of joint venture structures, the latest regulatory changes in 2025, and relevant investment strategies for both foreign and domestic investors.
Understanding the Two Main Joint Venture Structures in Indonesia
In Indonesian legal practice, there are two primary forms of joint ventures commonly used.
Each structure differs in terms of legal status and liability.
Corporate Joint Venture Structure
A Corporate Joint Venture is established by forming a new legal entity in the form of a Foreign Investment Limited Liability Company (Perseroan Terbatas Penanaman Modal Asing or PT PMA).
This company operates as an independent legal entity separate from its shareholders.
This structure provides protection through limited liability. Shareholders are only responsible up to the amount of capital they have invested.
PT PMA also follows a formal corporate governance system through a Board of Directors and a Board of Commissioners. This model is ideal for long term partnerships and sustainable business expansion.
Contractual Joint Venture Structure
A Contractual Joint Venture does not involve the creation of a new legal entity. The cooperation is fully governed by contractual agreements between the parties.
This structure is commonly used in construction projects and the oil and gas sector. It is generally temporary and project based.
Risks and profits are shared according to the contract terms. This model offers flexibility but requires highly detailed agreements.
Capital Reform Under BKPM Regulation Number 5 of 2025
One of the most significant changes in the joint venture structure in Indonesia relates to capital requirements. The government has substantially reduced the minimum paid up capital for PT PMA.
The minimum paid up capital is now set at IDR 2.5 billion. This policy opens broader opportunities for mid sized investors.
However, there is an important distinction between paid up capital and total investment value. The total investment value must still exceed IDR 10 billion per five digit KBLI business classification.
This means companies must realize the full investment commitment within a certain period. The realization is reported periodically to the government.
In addition, a capital lock in policy has been introduced for a minimum of twelve months. Paid up capital may not be transferred out of the company except for core operational needs.
Funds may only be used for asset acquisition, facility leasing, employee salaries, or other productive business activities. This ensures that investments are genuinely implemented.
Positive Investment List and Foreign Ownership Limits
Indonesia now applies the Positive Investment List (Daftar Positif Investasi or DPI) under Presidential Regulation Number 49 of 2021 (PP Nomor 49 Tahun 2021). This approach emphasizes openness across business sectors.
In principle, most business sectors are open up to 100 percent foreign ownership. However, several specific categories must be considered.
Priority Sectors
These sectors are considered strategic for national development. Investors may receive fiscal incentives such as tax holidays or tax allowances.
High technology industries, renewable energy, and strategic manufacturing fall into this category. Priority sectors offer strong long term joint venture opportunities.
Mandatory MSME Partnerships
Certain sectors require large investors to partner with local micro, small, and medium enterprises (Usaha Mikro Kecil dan Menengah or UMKM).
Partnerships may take the form of core plasma schemes, franchising, subcontracting, or supply chain cooperation.
The objective is to strengthen the local economy. Failure to comply may affect business licensing approvals.
Restricted Sectors
Some sectors still impose foreign ownership limitations. For example, the aviation transportation sector is capped at 49 percent foreign ownership.
These restrictions are implemented for national interest considerations. Investors must carefully review sector specific rules when structuring share ownership.
Risk Based Licensing Mechanism Under Government Regulation Number 28 of 2025
After understanding sector openness, the next step is ensuring licensing compliance under the risk based system.
The government applies a risk based licensing framework through the Online Single Submission Risk Based Approach (OSS RBA). All business licensing processes are integrated into a single digital platform.
Business activities are classified into four risk levels.
Low Risk
Business operators only require a Business Identification Number (Nomor Induk Berusaha or NIB). The NIB functions as both company identification and operational license.
Medium Low and Medium High Risk
A Standard Certificate is required. Some certificates must be verified by relevant authorities.
High Risk
Businesses must obtain an NIB and a formal business license. This typically involves environmental documents and technical approvals.
The system provides certainty in processing timelines. If authorities fail to respond within the designated period, approvals may be automatically granted.
Investment Activity Reporting Obligations (LKPM)
Every joint venture company is required to submit an Investment Activity Report (Laporan Kegiatan Penanaman Modal or LKPM). Reporting is conducted online through the OSS system.
Recent regulations have extended the reporting deadline to the 15th of the following month. This provides greater flexibility for business operators.
Medium and large enterprises must report quarterly. Small enterprises report semi annually.
Reported data includes capital realization, workforce numbers, and ongoing business activities. LKPM serves as the government’s primary monitoring tool for investment commitments.
Failure to comply may result in administrative sanctions. These range from written warnings to permanent license revocation.
Investor Visa and Residence Permit Requirements
Foreign investors involved in the joint venture structure in Indonesia must also consider immigration requirements.
Although the company’s paid up capital may be IDR 2.5 billion, the minimum individual shareholding value for an Investor Stay Permit (KITAS Investor) remains IDR 10 billion.
If this requirement is not met, investors must apply for a Work Stay Permit. This process is generally more complex and involves additional approvals.
The government also offers Entrepreneur Visas (Visa Entrepreneur C12) and Pre Investment Visas (Visa Pra Investasi D12). These visas facilitate early stage market research and partner negotiations.
Such policies allow investors to prepare their business presence before formal company establishment.
The Role of XPND in Supporting Compliant Joint Ventures in Indonesia
Establishing a joint venture in Indonesia under the latest regulatory environment involves more than selecting the right business partner. Investors must navigate risk based licensing, new capital structures, and strict reporting obligations.
Many promising collaborations face delays due to limited technical regulatory understanding.
Issues such as PT PMA establishment errors, incorrect risk classification, and late LKPM submissions are common challenges.
This is where XPND serves as a strategic partner for investors seeking secure and efficient joint venture implementation.
XPND supports the entire PT PMA establishment process as a corporate joint venture structure, from ownership planning to legal entity approval.
This approach ensures compliance with updated paid up capital requirements and total investment commitments. Investors are guided not only through legal setup but also toward operational readiness.
On the licensing side, XPND manages the OSS risk based process comprehensively.
This includes NIB issuance, Standard Certificate processing, and high risk sector licensing under Government Regulation Number 28 of 2025.
XPND also plays a key role in ensuring timely and accurate LKPM reporting. This helps companies maintain regulatory compliance and avoid administrative penalties.
For foreign investors, XPND facilitates pre investment visas, investor stay permits, and work permits in line with shareholding structures. This enables direct business management without immigration complications.
With professional expertise in Indonesia’s evolving regulatory landscape, XPND helps joint ventures grow in a stable and structured manner. Investors can seize market opportunities without being burdened by legal complexity.
For companies seeking to build an optimal joint venture structure in Indonesia, XPND bridges strategic business goals with regulatory compliance.
