Due diligence before investing in Indonesia is the structured process of verifying, before capital changes hands, that a sector is legally open to foreign ownership, a local partner or target company is who it claims to be, and any land or existing liabilities won’t surface as costly surprises after closing. Most deals that go wrong in Indonesia don’t fail because the opportunity was bad. They fail because something knowable went unchecked: a restricted KBLI code, a land title with an unresolved lien, a company with unreported severance obligations sitting on its books.
Key Takeaways
- Sector access is confirmed at the five-digit KBLI code level under the Positive Investment List (Presidential Regulation No. 10 of 2021, amended by No. 49 of 2021), not at the general industry label.
- Six business fields remain fully closed to any investment, foreign or domestic, including narcotics cultivation, gambling, and chemical weapons production.
- Due diligence splits into three distinct workstreams: market-level, company-level, and regulatory, and skipping any one of them leaves a blind spot the other two won’t catch.
What Is Due Diligence Before Investing in Indonesia?
Due diligence before investing in Indonesia means confirming, with primary sources rather than assumptions, that a planned investment is legally permitted, financially sound, and free of undisclosed liabilities. It is not a single checklist item. It runs across three separate tracks that answer different questions: whether the market and sector are open to you, whether the specific company or land you’re transacting with is clean, and whether the regulatory filings behind the deal are current and complete. Treating these as one undifferentiated task is where most gaps appear, since a clean sector check tells you nothing about a target company’s labor liabilities, and a clean company check tells you nothing about whether your intended activity is even open to foreign capital.
What Sectors Are Restricted for Foreign Investors in Indonesia?
Sector access in Indonesia runs on the Positive Investment List, introduced by Presidential Regulation No. 10 of 2021 and amended by Presidential Regulation No. 49 of 2021. The framework flips the old default: every business activity is treated as open, including to foreign investors, unless it’s explicitly restricted, conditional, or reserved. Six business fields sit fully closed to any investment: cultivation and processing of controlled narcotics, gambling and casino operations, collection of protected wildlife species and coral, chemical weapons manufacturing, production of ozone-depleting substances, and strategic public defense activities. Beyond those six, a wider set of sectors carries partial caps, from 49% in private broadcasting to 67% in most construction services.
The catch is that eligibility is confirmed at the KBLI level, Indonesia’s five-digit business classification code, not at the broad industry label a term sheet might use. Two businesses that both call themselves “healthcare” can carry completely different ownership caps depending on their specific code. Before any capital moves, your target sector’s Positive Investment List status needs checking against the exact KBLI code your business will register under, not the category you’d describe it as in a pitch deck.
Notes from InvestinAsia Consultants
A common pattern we see: investors check the Positive Investment List once, early in planning, then never revisit it once the actual KBLI code is selected. Ownership caps are set at the code level, and a shift in business model between the pitch deck and the notarial deed can quietly move you from a fully open code into a capped one. Recheck the specific code, not the sector name, right before the deed is drafted.
Is the KBLI Code and OSS License Actually Valid?
KBLI verification is a required due diligence step, not an administrative afterthought that happens after the deal closes. As of December 18, 2025, Indonesia’s active classification framework is KBLI 2025, issued under BPS Regulation No. 7 of 2025, with a national transition deadline of June 18, 2026, for companies still running on older codes. If you’re evaluating a company that hasn’t updated its classification, that gap is worth surfacing before closing, since an unresolved code mismatch can affect banking relationships and license renewals down the line.
Beyond the code itself, every KBLI carries an OSS-RBA risk level under Government Regulation No. 5 of 2021, which determines whether a business identification number (NIB) alone is sufficient or whether a Standard Certificate and further government verification are required. A company that looks fully licensed on paper can still be running on an NIB that never advanced past “not yet verified” for its risk tier. Our guide to choosing and verifying the right KBLI code walks through how the code, the risk tier, and the licensing status connect.
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What Land and Property Risks Should You Check Before Acquiring Land or a Company That Owns It?
Land title verification matters whenever a deal involves property, whether you’re buying land directly through a PT PMA or acquiring a company that already holds it. Indonesian agrarian law reserves full freehold title, Hak Milik, exclusively for Indonesian citizens. A PT PMA can hold Hak Guna Bangunan (HGB, right to build) or Hak Guna Usaha (HGU, right to cultivate), both registered at the National Land Agency (BPN), but never Hak Milik directly. The first priority in any land-related due diligence is confirming the registered holder, the exact nature of the title, the remaining tenure, and whether the certificate is clear of mortgages (Hak Tanggungan) or other encumbrances at the BPN land-book database.
If you’re buying shares in an existing PT PMA that already owns land, rather than forming a new entity, the land stays registered to the company and ownership changes through the share transfer, not a title transfer. That structure is common and legally sound, but it means the land title inherits whatever history the company carries. Zoning compliance also needs checking separately: the OSS system validates whether a registered KBLI is compatible with the spatial zoning (RDTR) at the business address, and a mismatch can block licensing even after the land itself checks out clean. Our property and real estate due diligence guide covers the full document checklist, including tax records and building permits, beyond the title itself.
Is Your Local Partner or Target Company Who They Say They Are?
Verifying a local partner or acquisition target in Indonesia means checking three separate government systems, since no single search covers all of them. AHU Online, run by the Directorate General of General Legal Administration under the Ministry of Law, is the authoritative source for legal registration, directors, shareholders, and articles of association. OSS, run separately by the Ministry of Investment, covers business licensing and the NIB. The Directorate General of Taxes’ Coretax system confirms tax registration status. A company can look perfectly legitimate on the legal registry and still be operating without a valid license, or licensed but tax non-compliant, which only surfaces once you check the second and third systems separately.
Beneficial ownership adds another layer. Companies incorporated in Indonesia must identify and report anyone holding 25% or more ownership or effective control to the Ministry of Law, under Presidential Regulation No. 13 of 2018 and its 2025 update. As of mid-2026, this beneficial ownership data is filed with the government but not openly searchable by the public, so a Complete Profile request or a professional due diligence service is the practical route to that information. Our guide to checking company details in Indonesia walks through what each of the three systems shows and what each costs. If you’re structuring a joint venture rather than an acquisition, the same due diligence discipline applies before you sign; see our guide to setting up a business partnership in Indonesia for what to verify about a partner before formalizing an agreement.
Notes from InvestinAsia Consultants
We routinely see investors treat a clean AHU Online result as the whole answer and skip OSS entirely, since AHU Online is the system most guides mention first. In practice, legal registration, business licensing, and tax status are three separate questions with three separate blind spots. Run all three before a signature goes on anything.
What Hidden Liabilities Come with an Existing Company in Indonesia?
Acquiring an existing company in Indonesia, rather than incorporating from scratch, brings labor liabilities that a market or land check won’t surface. Under the Manpower Law and Government Regulation No. 35 of 2021, permanent employees (PKWTT) are entitled to severance pay, service pay, and compensation upon termination, calculated by tenure and salary. If a share acquisition leads the buyer to end existing employment relationships, or employees decline to continue under new ownership, those severance obligations become the buyer’s to fund, and they are rarely fully reflected on a target’s balance sheet without an actuarial valuation. BPJS Ketenagakerjaan and BPJS Kesehatan contribution arrears are a related, commonly overlooked liability worth confirming directly with the local manpower office rather than taking a target’s self-reported figures at face value.
Company-level due diligence should also confirm the target’s UBO filings are current, since the 2025 update to beneficial ownership rules introduced annual reconfirmation requirements and cross-checking against tax records, and a lapsed filing can flag the company as non-compliant on the public AHU list. This is where a legal background check earns its cost: it’s the layer that catches liabilities a clean corporate registry search alone would miss.
Acquiring a target company instead of starting fresh changes what you’re liable for on day one.
Considering an Acquisition Instead of a Fresh PT PMA?
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Market-Level vs. Company-Level vs. Regulatory Due Diligence: What’s the Difference?
Splitting due diligence into three distinct workstreams keeps you from assuming one check covers a gap it doesn’t touch. Each answers a different question and draws on different sources.
| Workstream | Core Question | Primary Sources |
|---|---|---|
| Market-level | Is this sector, and this specific business activity, open to foreign investment at all? | Positive Investment List (Perpres 10/2021), KBLI code, sector-specific ministry rules |
| Company-level | Is this specific company or land parcel clean, and what liabilities come attached? | AHU Online, OSS, DJP Coretax, BPN land records, labor contracts, BPJS records |
| Regulatory | Are the filings, licenses, and reports behind the deal current, valid, and complete? | NIB and license status, UBO filings, LKPM reporting history, KBLI 2025 transition compliance |
A clean result on one workstream says nothing about the other two. A sector can be fully open (market-level clean) while the specific target company carries unreported severance liabilities (company-level gap) and a lapsed UBO filing (regulatory gap). Running all three, in this order, is what separates a due diligence process from a single background check.
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Frequently Asked Questions
How long does due diligence take before investing in Indonesia?
It depends on scope. A market and sector check against the Positive Investment List can be confirmed within days. Company-level due diligence involving AHU, OSS, DJP, and land records typically takes one to three weeks, longer if beneficial ownership or labor liability questions require direct inquiries to a manpower office or the target company.
Can I do due diligence on an Indonesian company myself, without a local team?
Partially. AHU Online and OSS are both publicly accessible, including to overseas users, though AHU Online has no English interface and no public API. Beneficial ownership data is filed with the government but not publicly searchable as of mid-2026, so verifying who actually controls a company typically requires a paid profile request or professional assistance.
What’s the biggest due diligence mistake foreign investors make in Indonesia?
Treating a clean company registry result as a complete answer. A company can be legally registered on AHU Online and still be unlicensed on OSS or non-compliant on tax filings. Each government system answers a narrower question than investors expect.
Do I need to check KBLI codes if I’m buying an existing PT PMA rather than starting a new one?
Yes. An existing company’s KBLI code determines its foreign ownership eligibility and licensing status regardless of when it was registered. Codes issued before KBLI 2025 need reclassification if they were removed or substantially changed, with a national transition deadline of June 18, 2026.
Who is responsible for an acquired company’s severance obligations in Indonesia?
In a share acquisition, the acquiring party generally inherits the company’s existing employment relationships and associated severance obligations if those employees are subsequently terminated. This makes an actuarial or legal review of labor liabilities a standard part of company-level due diligence before closing.
What is the Positive Investment List and how does it affect due diligence?
The Positive Investment List is Indonesia’s framework, under Presidential Regulation No. 10 of 2021, for determining which business sectors are open to foreign investment and at what ownership percentage. Confirming a target’s exact KBLI code against this list is the first market-level due diligence step before any capital commitment.
References
1. Republic of Indonesia, Ministry of Investment/BKPM. (2021). Peraturan Presiden Nomor 10 Tahun 2021 tentang Bidang Usaha Penanaman Modal. Retrieved from
https://jdih.bkpm.go.id/en/document/peraturan-presiden-nomor-10-tahun-2021-tentang-bidang-usaha-penanaman-modal19289
2. Badan Pusat Statistik (BPS), via Ministry of Investment/BKPM legal database. (2025). Peraturan Kepala Badan Pusat Statistik Nomor 7 Tahun 2025 tentang Klasifikasi Baku Lapangan Usaha Indonesia (KBLI 2025). Retrieved from
https://jdih.bkpm.go.id/id/document/peraturan-kepala-badan-pusat-statistik-nomor-7-tahun-2025-tentang-klasifikasi-baku-lapangan-usaha-indonesia
3. Badan Pusat Statistik (BPS). (2025, December 19). BPS Releases the 2025 Indonesian Standard Industrial Classification (KBLI 2025). Retrieved from
https://www.bps.go.id/en/news/2025/12/19/828/bps-rilis-klasifikasi-baku-lapangan-usaha-indonesia-kbli-2025.html
