Running a business in Indonesia without proper licenses is more than a minor mistake—it carries significant legal and financial consequences. Whether you’re a local entrepreneur or a foreign investor, the consequences can be immediate and severe. Authorities are actively enforcing business compliance, and unlicensed operations can be shut down with little warning.
Also read: 25 Profitable Business Ideas and Opportunities in Indonesia
Immediate Administrative Penalties
Businesses without valid licenses face swift administrative sanctions. These range from warning letters with short compliance deadlines to substantial fines.
- Fines can reach IDR 4 billion for sectoral violations and up to IDR 3 billion for environmental breaches.
- Suspensions may halt operations indefinitely until compliance is achieved.
- License revocation is the ultimate penalty, often applied when violations cause serious harm or remain unresolved.
Enforcement by Local Authorities
The Satpol PP (Civil Service Police Unit) has broad powers to seal premises instantly. Cases across Indonesia show that even large chains have been shut down for incorrect or missing permits. During COVID-19 restrictions, dozens of companies were closed for three days due to non-compliance.
Also read: Is an LLC a Business License? Understanding the Difference
Immigration Consequences for Foreign Operators
Foreigners running unlicensed businesses face harsher penalties. Immigration authorities can deport violators, sometimes with a re-entry ban of up to 10 years. Those working without proper permits risk up to five years in prison and fines reaching IDR 500 million. Immigration authorities regularly conduct raids to find foreign businesses operating illegally, particularly in popular tourist destinations like Bali.
Criminal Liabilities
Some sectors carry specific criminal penalties. Mining and energy operations without the correct licenses can result in fines up to IDR 100 billion and imprisonment. Corporate criminal liability can also apply, with fines increased by one-third for companies.
Licensing Basics Every Business Must Know
The key permit for any business is the Business Identification Number (NIB), secured via the OSS platform.
- Low-risk businesses: NIB only.
- Medium-risk businesses: NIB + compliance statements or certifications.
- High-risk businesses: NIB + comprehensive sectoral permits.
Foreign-owned businesses must register as a PT PMA, meeting minimum capital requirements and obtaining BKPM approval before starting operations.
Also read: Risk-Based Business Licensing and OSS System in Indonesia
Operational and Financial Impact
Without licenses, businesses cannot open bank accounts, apply for loans, or register for taxes. They are barred from government tenders and may lose credibility with suppliers and customers. Insurance coverage is also unavailable, leaving the business exposed in legal disputes.
Also read: Top Questions Foreigners Ask Before Registering a Business in Indonesia
How to Stay Compliant
If you’re already operating without proper licenses, act quickly:
- Conduct a license audit.
- Register for NIB via the OSS portal.
- Apply for sector-specific permits.
- Consult legal experts to navigate complex requirements.
Why Proper Licensing Protects Your Business
Business licensing goes beyond paperwork—it safeguards your operations, reputation, and long-term success. Compliance opens access to banking, investment, government contracts, and legal protections.
This is where InvestinAsia can help. Our Indonesia company registration service streamlines the process, ensuring you meet every regulatory requirement the first time. From OSS registration to PT PMA setup, InvestinAsia’s team provides end-to-end guidance, reducing the risk of costly mistakes.
Learn more about InvestinAsia’s Indonesia Company Registration Services and safeguard your business from day one.
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FAQs
Which license is essential for operating in Indonesia?
The Business Identification Number (NIB), granted through the OSS platform.
Can I operate my business while waiting for my license?
No. Operating before obtaining required licenses can trigger fines, suspension, or closure.
What happens if a foreigner operates without a PT PMA?
They risk deportation, re-entry bans, and criminal charges for illegal work.
Are environmental permits always required?
Only if your business activities have an environmental impact, as defined by Indonesian law.
What is the typical timeframe for legally registering a company?
With expert assistance, company registration can be completed within a few weeks, depending on the sector.
References:
PWC. New Risk-Based Approach Omnibus Flash / November 2020 / No. 03 to Business Licensing Requirements in Indonesia. https://www.pwc.com/id/en/publications/omnibus/omnibus-flash-2020-03.pdf.
Kontrak Hukum. Criminal Penalty for Foreigners Working Illegally in Indonesia. https://www.hukumonline.com/klinik/a/criminal-penalty-for-foreigners-working-illegally-in-indonesia-lt641864968fb48/.
Makarim & Taira S. Regulation Sets Fines of up to IDR3 Billion for Environmental Non-Compliance. https://www.makarim.com/news/regulation-sets-fines-of-up-to-idr3-billion-for-environmental-non-compliance.
