Foreign Ownership Restrictions and Negative Investment List

Foreign Ownersihp restrictions

How much of the shares can you own in a company in Indonesia? Are foreigners allowed to hold shares in an Indonesian company?

All foreign ownership restrictions are regulated by Law of Investment (25/2007) and  presidential decree (36/2010) called the Negative Investment List (DNI). Latest update on 2014 Negative Investment List can be found here.

Note that one of the biggest myths that foreign investors have is that every company must have at least 5% local owners. This was overruled already years ago and is not correct!

Legal entity formats open to foreign investors

According to Law of Investment (Article 5/2), foreign citizens are only allowed to have shares in limited liability companies (PT PMA). All other legal entities, such as non-corporate or individual  businesses, are reserved to domestic investors.

Business activity classification

Foreign ownership restrictions are regulated based on their Standard Classification of Indonesian Business Sectors (KBLI) and/or International Standard for Industrial Classifications (ISIC). Any sector is open to foreign investors as long as it is not included to the Negative Investment List (DNI).

The sectors included to the Negative Investment List are either closed or open with certain conditions to foreign investors. Therefore before you start planning your business activities, make sure to check the DNI to see whether you need to involve a local partner or whether adjusting your activities can allow you to have a bigger foreign ownership.

Company registration with Indosight

Grandfathering principle

Foreign investors are often concerned about the legal certainty in Indonesia – what if my industry will fall under stricter regulation in the future?

When it comes to Negative Investment List, a “grandfathering” principle applies. Foreign companies that were approved under the previous DNI will not have to comply with the future DNIs and therefore won’t have to divest or sell their shares. This is an important principle to understand as it gives you the certainty as a foreign investor.

Nominee arrangements to comply with Negative Investment List

Sometimes foreign investors see nominee arrangements as a way around DNI. While it is quite commonly used, be sure to understand the risks you are undertaking. There are plenty of stories of ex-wives or business partners who through nominee arrangement obtained complete control over the company and foreign investor had to leave the country empty-handed.

Be especially careful about nominee arrangement involving people you don’t know or trust. Remember that by the law you have no rights over the nominee shares.

photo credit: Adam Foster | Codefor

Indosight

Market entry services in Indonesia

Indosight provides legal and payroll services to companies entering and expanding in Indonesia. Get in touch with our consultants regarding our company registration, payroll, compliance or visa services.


The information provided will remain confidential to Indosight and will only be used to schedule and prepare for the meeting.

2 thoughts on “Foreign Ownership Restrictions and Negative Investment List

  1. mohamad nashad

    How I invest .what is the ninimam invest

Leave a Reply

Your email address will not be published.

Related articles

indosight_imta_1
New Work Permit Regulations in Indonesia

To work legally in Indonesia, you must have a work permit (IMTA). Based on the work permit (IMTA), the Indonesian Immigration will issue your limited stay permit (VITAS) and the limited stay permit card (KITAS). In this article, I should explain what it will take to obtain a work permit (IMTA), what can be expected […]

Minimum capital requirement in Indonesia
Minimum capital requirement for setting up PT PMA

Foreign owned companies, called PT PMAs, are required to have a minimum capital of at least Rp. 10 billion (~$US750,000 with current exchange rates). This is Indonesia’s government way to protect local small businesses from foreign competition and limit the foreign investments only to large scale companies. In the past the enforcement of the law […]

Registering company in Indonesia
Foreign Owned Company Registration In Indonesia

All foreign owned companies in Indonesia are classified as PT PMA-s (stands for limited liability company with foreign direct investment). A company is a PMA as long as any of the shares are owned by foreigners. An exception is representative office where foreign company is exploring business opportunities in Indonesia and is not generating any […]

Calculate your Import Tax and Custom Duty

Any goods coming from oversea to Indonesia custom territory are treated as import. Those goods are subjected to custom duty with tariffs vary from 0%-5% ; 5%-10% and more than 10%, based on the goods classification follow HS code.

Indonesia Company Registry
Company registry in Indonesia

Indonesian government has an online Indonesian company registry where you can search for the existing companies, both local and foreign, that are already registered in Indonesia. This can be useful for at least two reasons: See which names are already taken Find out whether your potential business partner is (already) registered in Indonesia Find the […]

Importing Goods To Indonesia Without Licenses And Incorporating

photo credit Becoming an importer in Indonesia is time consuming and complicated process.  Here’s our thorough guide on how to start an import company. Given the huge domestic demand it can be well worth the struggle. The good news though- in this article I will tell you about an alternative, legal, method to get your […]


PT. Indosight
Epicentrum Walk, Unit K-501
Jl. HR Rasuna Said
Jakarta Selatan 12940, Indonesia
P: (+62) 21 2994 1626

Indosight is market entry consultancy offering corporate services to foreign companies entering Indonesia.

All articles in this blog are the intellectual property of PT. Indosight. You are allowed to share this content only by giving credit to Indosight and linking to the respective article.