Guidelines and Procedures for Risk-Based Business Licensing in Indonesia

Indonesia has adopted a single window licensing system known as the Online Single Submission (OSS). This system is expected to accelerate investment and simplify procedures compared to the previous manual regime.

However, it is important to first identify your business activities before applying for a business license. Since the license requirements depend on the risk level and characteristics of the activities, business actors must ensure that the chosen business classification aligns with the company’s objectives.

For details on the process and mechanism of obtaining a business license, please refer to the information below:

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Scope and Implementation of Services

1. Service Implementers: Business licensing services in Indonesia are carried out by several institutions in accordance with their respective authorities, as follows:
   1. OSS Institution (BKPM);
   2. Relevant Ministries/Institutions (K/L);
   3. DPMPTSP at the provincial and district/city levels;
   4. Special Economic Zone (SEZ) Administrators;
   5. Free Trade Zone and Free Port Management Agencies (KPBPB).

2. Scope of Services: Regulated services cover two main areas:
   1. Issuance of Business Licenses – covering business actor data, issuance of NIB, Standard Certificates, permits, licenses supporting business activities (UMKU), as well as services for data amendments, business expansion, mergers, and dissolution.
   2. Investment Facilities – consisting of fiscal facilities (such as import duty exemptions and tax incentives) and non-fiscal facilities (such as immigration recommendations).

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Main Concepts of Risk-Based Business Licensing

This system categorizes each business activity (based on the Indonesian Standard Industrial Classification – KBLI) into four risk levels that determine the required type of licensing:

• Low Risk: Business legality is fulfilled with a Business Identification Number (NIB). The NIB functions as both the business actor’s identity and legal authorization to conduct operational and commercial activities.

• Medium-Low Risk: Requires an NIB and a Standard Certificate. The Standard Certificate is an independent statement (self-declaration) by the business actor declaring compliance with applicable business standards. This certificate is automatically issued by the OSS System and can be used immediately for operations.

• Medium-High Risk: Requires an NIB and a Standard Certificate, which must be verified by the central or local government. Business actors may begin business preparations after obtaining an NIB and an unverified Standard Certificate, but operational and commercial activities may only commence once verification is complete.

• High Risk: Requires an NIB and a Permit. The Permit is issued by the central or regional government once all requirements have been met. Business operations may only begin after the Permit has been issued.

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Investment and Capital Provisions

1. Micro, Small, and Medium Enterprises (MSEs):
   1. Micro Business: Capital up to IDR 1 billion;
   2. Small Business: Capital of more than IDR 1 billion up to IDR 5 billion;
   3. Medium Enterprise: Capital of more than IDR 5 billion up to IDR 10 billion.

Note: The above capital provisions exclude the value of land and buildings where the business is located.

2. Large Enterprises (including Foreign Investment – PMA):
   1. Total Investment: Must exceed IDR 10 billion, excluding land and buildings, per 5-digit KBLI per project site.
   2. Investment Value Exceptions:
      • Large Trade: More than IDR 10 billion per initial 4 digits of KBLI;
      • Food & Beverage Services: More than IDR 10 billion per initial 2 digits of KBLI per location;
      • Construction Services: More than IDR 10 billion per initial 4 digits of KBLI in a single activity.

3. Capital Requirements for PMA: Paid-up capital of at least IDR 10 billion, unless otherwise stipulated by laws and regulations.

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Process of Obtaining Permits through the OSS System

1. Access Rights: Business actors must first obtain access rights to the OSS System.

2. Data Submission: Business actors must submit required data.

3. Fulfillment of Basic Requirements: Before the NIB is issued, the OSS System will verify three basic requirements:
   1. Suitability of Space Utilization Activities (KKPR) – verified against the Spatial Plan (RDTR). If RDTR is unavailable, KKPR approval is processed;
   2. Environmental Approval – in the form of AMDAL, UKL-UPL, or SPPL, depending on environmental impact. For low-risk activities, SPPL is integrated into the NIB;
   3. Building Approval (PBG) and Certificate of Functional Fitness (SLF) – required if business activities involve construction.

3. NIB Issuance: Once the data submission and spatial verification are completed, the OSS System will issue the NIB. The NIB also functions as registration for social security participation and the initial mandatory employment report.

4. Fulfillment of Advanced Licensing: After the NIB is issued, business actors engaged in medium- and high-risk

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Disclaimer

The information contained in this document is not intended as legal advice, legal opinion, or legal recommendation for your business. The authors have prepared this document in good faith and with reasonable due diligence. However, no representation or warranty, express or implied, is made as to the accuracy, completeness, or timeliness of the information provided. Readers acknowledge that each company operates differently, and the information herein may not apply to all business activities.

It is strongly recommended that readers consult with a professional advisor or contact us directly before taking any legal action based on this document. By reading this document, the reader agrees to release the authors from any claim, liability, compensation, lawsuit, fine, or penalty arising from the use of the information provided herein.