INDONESIA Law and Practice Contributed by: Maria Sagrado, Frederick Simanjuntak and Stephanie Kandou, Makarim & Taira S.
Offshore loan reporting or approval and prudential principle requirements An Indonesian company receiving an offshore loan must comply with reporting requirements to both Bank Indonesia and the Ministry of Finance. The report includes a preliminary report (before signing) and a post-signing report. In addition, an Indonesian company receiving an offshore loan in foreign curren- cy must adhere to prudential principle requirements, which include obtaining a credit rating of at least BB- from a rating agency recognised by Bank Indonesia. If the borrower is an Indonesian state-owned com- pany, prior approval from the Ministry of Finance is required before receiving the offshore loan. Restrictions on Foreign Investment The Indonesian government has been moving toward greater leniency, opening more business activities to foreign ownership. However, certain sectors still have restrictions, with some closed or only partially open to foreign investment. It is necessary for foreign lenders to understand the borrower’s business plan and any relevant foreign ownership restrictions when providing convertible loans to the borrower. Applicable Tax Benefits Under Tax Treaties Generally, any interest or fee payments made by an Indonesian borrower to a foreign lender are subject to income tax. However, the withholding tax rate may be reduced if the lender’s country and Indonesia are par- ties to a tax treaty that provides a favourable tax rate. 8.6 Common Financing Sources and Typical Structures The most common source of financing for project finance transactions in Indonesia is bank loans. Addi- tionally, subordinated shareholders loans are often provided for any further financial support required by the borrower. Lenders typically require that all assets in the project finance be encumbered in their favour. They also com- monly require that material contracts (such as conces- sion agreements) be assigned to them as part of the security package. Since the financial viability of the special purpose vehicle (SPV) developing the project often relies on the sponsors, it is also common for the
sponsors to issue letters of undertaking. These letters typically commit the sponsors to ensure project com- pletion, cover any cash deficiencies, repay any out- standing loans of the SPV, and fulfil other obligations. 8.7 Natural Resources Under Bank Indonesia Regulation No 7 of 2023 as amended by Bank Indonesia Regulation No 3 of 2025 on Foreign-Exchange Export Proceeds and Foreign- Exchange Import Payments (“BI 7/2023”), exporters of foreign-exchange export proceeds derived from the business, management and/or processing of natural resources (“Natural Resources Export Proceeds”) with a minimum export value of USD250,000 (or its equivalent) must deposit these proceeds into a special account designated for Natural Resources Export Pro- ceeds (“Special Account”). This Special Account must be opened with either an Indonesian bank licensed to engage in foreign exchange activities (“Indonesian FX Bank”) or with the Indonesian Export Financing Insti- tution ( Lembaga Pembiayaan Ekspor Indonesia – LPEI) in the case of export transactions involving debtors to the LPEI. Under its overarching regulation, Government Reg- ulation No 36 of 2023 as amended by Government Regulation No 8 of 2025 on Foreign-Exchange Export Proceeds From Business, Management, and/or Pro- cessing Activities of Natural Resources, 100% of the Natural Resources Export Proceeds deposited into the Special Account (as previously outlined) must be placed in the Indonesian financial system for a mini- mum of 12 months as of the date of the deposit. The full deposit requirement can be met through the fol- lowing instruments: • the same Special Account; • any banking instruments; • any financial instruments issued by LPEI; and/or • any instruments issued by Bank Indonesia. Therefore, any income derived from the Natural Resources Export Proceeds must comply with these requirements. 8.8 Environmental, Health and Safety Laws Under Government Regulation No 22 of 2021 on the Implementation of the Protection and Management
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