How to Apply for a Legal Business License in Indonesia

Establishing a business in Indonesia requires more than just capital and a business plan. To operate legally, entrepreneurs—both local and foreign—must obtain the appropriate business license in accordance with Indonesian law. This ensures compliance with government regulations, enhances credibility in the market, and protects businesses from legal risks.

In this guide, we will provide a comprehensive overview of the types of business licenses, required documents, and the step-by-step process to apply for a legal business license in Indonesia.

Why Business Licensing Matters in Indonesia

Indonesia is one of Southeast Asia’s largest markets, attracting investors, startups, and multinational corporations. To operate in this growing economy, businesses must comply with the Indonesian Business Licensing System, primarily regulated under:

• Law No. 11 of 2020 on Job Creation (Omnibus Law), which simplifies licensing procedures. 
• Government Regulation No. 5 of 2021 on Risk-Based Business Licensing, introducing the Online Single Submission (OSS) system. 
• Ministry of Law and Human Rights (Kemenkumham), which oversees company establishment and legal entity registration. 
• Indonesia Investment Coordinating Board (BKPM), which plays a role in investment-related licensing. 

Proper licensing ensures that businesses operate within the legal framework, gain easier access to financing, and build trust with customers and partners.

Types of Business Licenses in Indonesia

Depending on the nature of your business, different licenses and approvals may be required. Below are the most common ones:

1. Deed of Establishment & Kemenkumham Decree 
   • Required to legally establish a company in Indonesia. 
   • Issued by the Ministry of Law and Human Rights. 
2. Tax Identification Number (NPWP) 
   • Every business entity must register for NPWP to fulfill tax obligations. 
3. Business Identification Number (NIB) through OSS 
   • The NIB is the foundation of legal operations, functioning as both a company ID and an import/export license. 
4. Sector-Specific Licenses 
   • UKL-UPL: Environmental permits for businesses with potential environmental impact. 
   • BPOM License: For food, beverage, cosmetics, and pharmaceutical distribution. 
   • Other Licenses: Depending on sector, e.g., tourism (TDUP), alcohol distribution (SIUP-MB), excise permits (NPPBKC). 

Each license is tied to the company’s risk classification under the risk-based approach introduced by the Omnibus Law.

Required Documents for a Business License Application

To apply for a business license in Indonesia, applicants must prepare several key documents. While specific requirements vary by license type, the following are generally required:

• Valid Passport (for foreign nationals) with at least 6 months’ validity. 
• Recent Formal Photograph (passport size). 
• Bank Statement (personal or company, last 3 months). 
• Sponsor Identity (Indonesian citizen or company acting as sponsor). 
• Residential Address in Indonesia (for correspondence and legal domicile). 
• Company Documents: 
  • Deed of Establishment 
  • Articles of Association 
  • Kemenkumham Approval 
• Tax Documents (NPWP of the company or individual). 

Ensuring complete documentation from the start will help avoid delays in the licensing process.

How to Apply for a Legal Business License in Indonesia

The Indonesian licensing framework has been streamlined through the OSS (Online Single Submission) system. Below is the general process:

1. Company Establishment

• Draft and notarize the Deed of Establishment. 
• Submit the deed to Kemenkumham for approval. 
• Obtain the Ministry Decree confirming the company’s legal entity status. 

2. Tax Registration

• Apply for NPWP at the Tax Office. 
• Register for VAT (if applicable, based on business activities and revenue thresholds). 

3. Register with OSS

• Create an OSS account for your business entity. 
• Obtain the Business Identification Number (NIB). 
• NIB serves as the primary identifier and allows access to other permits. 

4. Obtain Sectoral Licenses

• Depending on the business type, apply for additional permits such as BPOM, UKL-UPL, TDUP, or SIUP-MB. 
• Provide additional documents (e.g., environmental assessments, product registrations). 

5. Fulfill Ongoing Compliance

• Renew licenses before expiration. 
• Submit regular tax filings and reports. 
• Comply with sector-specific regulations. 

Processing Duration and Costs

On average, the business licensing process in Indonesia takes around 20 working days, though this can vary depending on the type of license and completeness of documents.

The estimated cost for licensing services starts at IDR 10,000,000. Costs may increase depending on sector-specific licenses, legal consultations, or additional compliance requirements.

Common Challenges in Business Licensing

Many entrepreneurs encounter difficulties such as:

• Incomplete documentation leading to delays. 
• Misunderstanding regulations, especially with frequent updates in Indonesian law. 
• Language barriers for foreign investors. 
• Sector-specific complexity, such as environmental assessments or BPOM product registrations. 

This is why many businesses choose to work with professional consulting services, which provide legal accuracy, faster processing, and post-licensing support.

Key Insights and Best Practices

• Plan ahead: Start preparing documents early, especially bank statements and sponsorship letters. 
• Use OSS effectively: Familiarize yourself with the online system for smoother submissions. 
• Consult legal experts: Regulations in Indonesia are dynamic; legal professionals ensure accuracy. 
• Stay compliant: Remember that licensing is not a one-time process; renewals and reporting are equally important. 

Conclusion

Applying for a legal business license in Indonesia is a crucial step for both local and foreign entrepreneurs. With the OSS system, Kemenkumham approval, and sector-specific permits, the process is now more streamlined, but still requires careful attention to detail.

By understanding the types of licenses, required documents, and application steps, businesses can ensure smooth operations, legal compliance, and long-term sustainability.

For investors and entrepreneurs looking to enter the Indonesian market, professional assistance can significantly reduce complexity and help achieve compliance faster.