Franchising in Indonesia: the 2027 guide for foreign franchisors

Government Regulation (PP) 35/2024 on Franchising, which took effect on 2 September 2024 and replaced PP 42/2007. It sets the franchisor criteria, the prospectus, registration through the STPW certificate and administrative sanctions.

Surat Tanda Pendaftaran Waralaba, the Franchise Registration Certificate. Under PP 35/2024 franchisors, master franchisees, franchisees and sub-franchisees, foreign ones included, must hold one. Applications go through the OSS system; the Minister of Trade issues them for franchisors and regional governments for franchisees.

Three consecutive years, with the last two years of financial statements showing a profit and audited with an unqualified opinion. Micro and small businesses are exempt from the audit. The old five-year test no longer applies.

Restaurants, bars and cafés have been open to full foreign ownership since 2016 and are understood to remain open under the Positive Investment List. A foreign-owned company (PT PMA) needs at least IDR 2.5 billion paid-up capital and a planned investment above IDR 10 billion per business line per location, excluding land and buildings.

20% Article 26 income tax on the gross royalty unless a tax treaty lowers it, plus VAT that the Indonesian franchisee self-assesses: 12% on a base of 11/12 of the value, an effective 11%. Since 31 December 2025 treaty relief follows PMK-112/2025.