5 Critical Mistakes Foreigners Make When Choosing Their KBLI Code – And How to Avoid Costly Setbacks

Introduction

Establishing a PT PMA (Foreign-Owned Company) in Indonesia involves navigating a range of legal and administrative requirements—and one of the most crucial steps is selecting the correct KBLI code. The KBLI (Klasifikasi Baku Lapangan Usaha Indonesia) is the official business classification system that determines how your company is categorized in the eyes of the government. This seemingly simple code has far-reaching implications: it defines the legal identity of your business, dictates tax obligations, and determines whether you’re eligible for specific sectoral licenses.

Unfortunately, many foreign investors underestimate the importance of choosing the correct KBLI code. Mistakes are common—and costly. A mismatch can delay your licensing process, restrict your foreign ownership rights, or even expose your business to unnecessary tax audits.

In this article, we’ll uncover the five most common KBLI code mistakes foreigners make when setting up a PT PMA in Indonesia—and more importantly, how to avoid them to ensure a smooth, compliant business journey.

Mistake #1: Choosing a KBLI Code That Doesn't Match Actual Activities

One of the most frequent mistakes foreign investors make when setting up a PT PMA in Indonesia is choosing a KBLI code that doesn’t accurately reflect their real business activities. Many entrepreneurs pick a code based on general assumptions or loose interpretations of their business model—without understanding the precise definitions set by Indonesian authorities.

For example, a foreign investor opening a café might mistakenly register under a KBLI code for general retail or hospitality consultancy. While it might seem close enough on paper, the OSS (Online Single Submission) system will flag this inconsistency. The result? Rejection of your NIB (Business Identification Number) application, delays in licensing, and even denial of sector-specific permits from institutions like the Ministry of Tourism, BPOM (National Agency of Drug and Food Control), or ESDM (Ministry of Energy and Mineral Resources).

A mismatched KBLI code also impacts your ability to apply for the correct sectoral licenses. For instance, if you plan to manufacture cosmetics but select a trading-related code, your business won’t qualify for the BPOM production license. Similarly, choosing a general services code for a villa rental business could prevent you from registering under the proper tourism classification, potentially leading to penalties or shutdowns.

To avoid this pitfall, it’s essential to conduct a KBLI code mapping exercise with qualified legal experts or business consultants who understand the Indonesian licensing ecosystem. Proper alignment between your actual operations and the registered KBLI code is not only crucial for compliance—it also speeds up your approval process and minimizes future legal complications.

Choosing the right KBLI code is not a task to be taken lightly. It’s the foundation of your PT PMA's legal identity in Indonesia—and getting it wrong can be a costly lesson.

Mistake #2: Using Outdated or Inactive KBLI Codes

Another critical mistake made by many foreign investors is using an outdated or inactive KBLI code when registering their PT PMA. Indonesia’s licensing system has evolved rapidly, and the implementation of the OSS RBA (Online Single Submission Risk-Based Approach) in 2021 brought significant changes—including the adoption of the KBLI 2020 revision as the standard classification system for businesses.

Unfortunately, not all online references or secondary sources have updated their information. Some investors mistakenly refer to older lists or business setup guides that still use KBLI codes from 2017 or earlier. The result? System rejection during NIB (Business Identification Number) registration, delayed business setup, or worse—obtaining a code that is no longer legally recognized or linked to your intended business risk level.

The OSS RBA system automatically validates your KBLI code against an integrated database to determine the risk level of your business activity (low, medium, or high). This classification affects whether your business requires additional licensing, environmental permits, or technical verifications. Submitting an outdated or non-compliant KBLI code means your application may be stalled or permanently rejected.

To avoid this, always cross-check your chosen KBLI code against the official OSS RBA portal before submission. If you're unsure, consult with legal professionals who are experienced in PT PMA setups under the current OSS RBA framework.

Being proactive about using valid and up-to-date KBLI codes ensures smoother registration, proper classification, and long-term compliance.

Mistake #3: Registering Under a Restricted or Negative Investment KBLI Code

One of the most critical and costly mistakes a foreign investor can make is registering a business under a KBLI code that falls under Indonesia’s restricted or negative investment list. While the country has made great strides in opening up many sectors to foreign ownership, not all business activities are fully accessible. The KBLI code you select directly affects your eligibility for foreign ownership under current regulations.

According to Presidential Regulation No. 10 of 2021 (Perpres 10/2021), foreign investors must refer to Indonesia’s Positive Investment List, which outlines sectors open to full foreign ownership, those that require joint ventures, and those entirely closed to foreign investment. For example, registering a travel agency or small-scale retail shop under a KBLI code listed as restricted could result in your application being denied, or worse, push you toward risky local nominee arrangements.

Your chosen KBLI code determines not only licensing pathways but also how much of the company you are legally allowed to own. In certain cases, foreign investors are only permitted to own a minority share, necessitating a partnership with an Indonesian national or legal entity. Without accurate guidance, this can complicate your business structure, financial planning, and long-term control over your investment.

To avoid this, it's essential to consult the latest version of the Positive Investment List and verify whether your intended KBLI code is open for 100% foreign ownership. Legal professionals can also help assess whether an alternative KBLI code—still compliant with your business goals—might offer a more flexible or foreign-friendly path.

Choosing the wrong KBLI code here can lead to costly restructuring or legal disputes down the line. Prevention is always better than correction in the Indonesian investment landscape.

Mistake #4: Using Multiple KBLI Codes Without Strategy

Indonesia allows companies to operate under multiple business activities by registering more than one KBLI code, but doing so without a clear strategy can lead to serious regulatory and operational complications. Many foreign investors make the mistake of lumping unrelated business lines under a single PT PMA without understanding the implications for licensing, compliance, and taxation.

For example, combining a KBLI code for import-export (46900) with one for retail (47111) in a single company may sound efficient, but it can trigger conflicts during sectoral license applications, especially if the capital structure or documentation doesn’t meet the specific requirements of each activity. The OSS RBA system may flag mismatches between the declared activities and submitted documentation, causing delays or outright rejections.

Each KBLI code has its own regulatory expectations, including minimum investment thresholds, sector-specific licenses (e.g., API-U for importers or SIUP for trading), and sometimes even differing tax treatments. Failing to align these properly can complicate annual reporting and increase your risk of non-compliance.

In some cases, it’s more efficient and legally sound to separate distinct business lines into different legal entities or establish branch offices with their own sets of KBLI codes. This allows each unit to fulfill sector-specific obligations without cross-interference.

A strategic legal consultation can help map out your KBLI code structure in line with your actual business activities and long-term plans—minimizing conflict and maximizing growth opportunities.

Mistake #5: Ignoring the Tax Implications of Your KBLI Code

One of the most overlooked but critical aspects of choosing a KBLI code is its direct impact on your company’s tax obligations. Every KBLI code registered under your PT PMA determines not just your business classification, but also how the Indonesian tax office (DJP) treats your income, VAT liability, and eligibility for tax incentives.

For instance, a business mistakenly registered under a KBLI code for wholesale trading (e.g., 46900) when it’s actually providing consulting services may trigger a red flag during audits. The mismatch can lead to penalties, backdated VAT calculations, and credibility issues with regulators.

Certain KBLI codes also unlock access to fiscal incentives. Codes that fall under Indonesia’s priority sectors—such as renewable energy or technology—may qualify for tax holidays or reduced corporate income tax rates. On the other hand, some codes, like those associated with luxury goods or real estate, may involve additional taxes like VAT on luxury items (PPnBM).

Aligning your KBLI code with your actual business model and projected revenue structure is essential for building a fiscally compliant and efficient company. Poor alignment can result in missed opportunities for incentives—or worse, non-compliance with tax laws.

A thorough review with legal and tax professionals can help ensure that your KBLI selection supports both your operational goals and financial health in Indonesia.

Conclusion & Pro Tips

Choosing the correct KBLI code from the very beginning is crucial for ensuring smooth business operations, legal compliance, and maximizing investment potential in Indonesia. The five common mistakes outlined—mismatched activities, outdated codes, restricted sectors, poor multi-KBLI strategies, and tax misalignments—can all cause costly delays, legal troubles, or lost opportunities.

Fortunately, these pitfalls are avoidable with professional legal consultation and thorough planning. Engaging experts who understand the complexities of the KBLI code system will help align your business activities with the right codes, ensuring your PT PMA’s licenses and tax filings are error-free.

Remember, your KBLI code is more than just a bureaucratic formality—it forms the legal backbone of your company’s identity, compliance, and growth in Indonesia. Start strong with the right code, and your business will be set for long-term success.

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