Guide to Reclassification and Licensing of Small Enterprises under GR 5/2021 and the Upcoming GR 28/2025

Licensing Small and Medium Enterprises (SMEs) in Indonesia: GR 5/2021 and the Planned GR 28/2025

In recent years, Indonesia has been actively reforming its business licensing framework. A key milestone was the implementation of Government Regulation (GR) 5/2021, a law that introduced a risk-based licensing approach. As the next step in this reform, the proposed GR 28/2025 aims to enhance the current system with additional precision and automation.

This article provides an overview of the prevailing licensing rules under GR 5/2021, as well as expectations surrounding the upcoming GR 28/2025, which may redefine business classification and simplify procedures via the OSS platform.

What Is GR 5/2021?

GR 5/2021, enacted under the Omnibus Law — the Job Creation Law, introduced a risk-based business licensing model. The previous one-size-fits-all approach was replaced by a system tailored according to the type of business, scale of operations, and industry sector.

Key Reforms:

1. Risk Assessment over Universal Licensing

Under GR 5/2021, business activities are categorized into four risk levels. This system is designed to reduce the regulatory burden on micro-businesses and low-risk sectors.

Low Risk — Only OSS (Online Single Submission) registration is required. No additional licenses.
Lower-Medium Risk — Requires a Standard Certificate (Sertifikat Standar).
Upper-Medium Risk — Requires certification plus review or approval by relevant authorities.
High Risk — Requires a government-issued license, environmental impact assessments (AMDAL or UKL-UPL), and other special permits.

2. New Business Classification by Revenue

GR 5/2021 classifies businesses based on annual revenue:

Micro Enterprises — Up to IDR 1 billion per year.
Small Enterprises — Between IDR 1 billion and 5 billion.
Medium Enterprises — Between IDR 5 billion and 50 billion.

The size of the business impacts the required licensing, access to government support programs, and reporting obligations.

3. OSS Platform and Sectoral Regulation

All procedures are centralized through the OSS platform, though some highly regulated sectors remain under the oversight of relevant ministries:

Food Processing — Ministry of Agriculture and BPOM (Indonesian Food and Drug Authority).
Education and Healthcare — Ministries of Education and Health.
Construction and Transport — Ministry of Public Works and Housing, Ministry of Transportation.

What Do We Know About GR 28/2025?

GR 28/2025 is a proposed update to GR 5/2021 focusing on further digitalization of licensing and refinement of business classification requirements. As of December 2025, this regulation has yet to come into force, but it remains under active government and business community review.

Expected Improvements:

1. Automated Risk Assessment via OSS

Instead of manual assessment, the OSS system will automatically determine a business’s risk level based on:

KBLI classification (Klasifikasi Baku Lapangan Usaha Indonesia — similar to ISIC/NAICS codes);
Number of employees and annual revenue;
Location (based on spatial planning map — RDTR);
Potential environmental impact.

2. Transparent Licensing Workflow in OSS

The OSS platform is being upgraded with new modules: real-time license status tracking, automated reminders for missing documents, and direct notifications from line ministries.

3. New Mandatory Documentation Package

Most businesses, regardless of scale, must prepare the following baseline documents:

RDTR Compliance Letter — Confirms that the intended business activity is permitted in the chosen location.
Environmental Approval (Persetujuan Lingkungan) — Required if the business might impact the environment. This can be in the form of a simplified UKL-UPL or a detailed AMDAL.

Step-by-Step: How to Register a Small Business in Indonesia

1. Identify Your Business Activity Using KBLI

Choosing the correct KBLI code is critical. This code determines licensing, technical obligations, and the administrative risk level. Reference the KBLI directory on the OSS portal.

2. Register on the OSS Platform

Create an OSS account, specify your business's KBLI, and apply for:

NIB (Nomor Induk Berusaha) — Business registration number;
Sertifikat Standar — Required for lower-medium and upper-medium risk businesses;
Sectoral Licenses as required by regulatory bodies specific to your industry.

3. Review Local Government Requirements

At the municipal level, additional permissions may be necessary:

PBG (Persetujuan Bangunan Gedung) — Approval for building construction/use;
Supporting documents from local planning, trade, or environmental departments;
Sanitary and hygiene compliance certificates — Crucial for food-related and manufacturing businesses.

4. Prepare Required Documentation

Articles of Incorporation and business registration papers;
RDTR compliance permit (issued at local level);
Environmental approval (where applicable under the business's risk profile);
Financial statements (especially if registering as a medium-sized business).

Foreign Investors and UMKM: Key Considerations

Foreign capital-backed companies may now engage in the UMKM (Micro, Small, and Medium Enterprises) sector, especially in areas included in the Positive Investment List, which replaced the outdated Negative List.

Small businesses in fields such as IT, creative industries, agro-processing, and eco-manufacturing may include foreign shareholders via:

PMDN — Domestic capital-based companies;
PMA — Companies with foreign ownership (within allowed investment caps).

Regardless of structure, full compliance with registration, licensing, and transparency regulations remains mandatory.

Conclusion: How to Prepare for Business Registration in Indonesia

GR 5/2021 formed the bedrock of a new risk-based business licensing system. With the transition to the digital OSS platform, small and medium enterprises (UMKM) enjoy faster and simpler setup processes. If enacted, the upcoming GR 28/2025 will further streamline operations through automation and enhanced risk evaluation protocols.

Actionable Checklist:

1. Identify your KBLI business code;
2. Register on the OSS platform and obtain your NIB;
3. Confirm local regulatory obligations (infrastructure, environment, etc.);
4. Compile necessary documents — from company charter to environmental clearance;
5. If needed, consult a legal advisor on licensing and risk categorization.

Proper registration from the outset ensures a compliant, sustainable business in Indonesia—free from unnecessary bureaucratic delays.