Indonesia is widely recognised as one of the most resource-endowed mining jurisdictions globally, with substantial reserves of coal and a range of strategic minerals. Its key mineral commodities include nickel, coal, tin, copper, bauxite, and gold. Of particular significance, Indonesia possesses the largest nickel reserves in the world and remains a leading exporter of coal, while its copper, tin, and bauxite resources continue to underpin both domestic industrial development and export revenues.

The legal framework governing the mining sector is principally established under Law No. 4 of 2009 on Mineral and Coal Mining, as amended by Law No. 3 of 2020, further refined through Law No. 6 of 2023 (Job Creation Law), and most recently updated by Law No. 2 of 2025 (“Indonesia Mining Law”). These statutes collectively constitute the core regulatory architecture for mining activities in Indonesia, encompassing licensing regimes, state governance, environmental obligations, and the overarching principle of state control over mineral resources.

At the constitutional level, Article 33(3) of the 1945 Constitution provides that natural resources are controlled by the state and must be utilised to maximise the welfare of the people. This foundational principle informs the broader regulatory approach, whereby mineral resources are not subject to private ownership. Instead, mining activities are conducted pursuant to state-issued licences, including the Izin Usaha Pertambangan (“IUP” or Mining License) and Izin Usaha Pertambangan Khusus (“IUPK” or Special Mining License).

The statutory framework is further operationalised through implementing regulations, notably Government Regulation No. 96 of 2021, as subsequently amended by Government Regulation No. 25 of 2024 and Government Regulation No. 39 of 2025 (“GR Operational Mining”). These GR Operational Mining provide detailed provisions on licensing procedures, operational compliance, reporting obligations, and state supervision. They also reflect Indonesia’s strategic policy orientation towards downstream processing and value addition, requiring mining operators to contribute to domestic mineral processing and refining capacity.

Regulatory oversight of mining activities is primarily exercised by the Ministry of Energy and Mineral Resources (“MEMR”), which is responsible for the issuance of licences, regulatory supervision, and enforcement of compliance. In addition, other governmental authorities, including environmental and forestry regulators, play complementary roles in ensuring adherence to environmental standards and land use requirements.

Indonesia operates under a civil law system, characterised by codified legislation and a hierarchical regulatory structure. This legal tradition, inherited from the Dutch colonial period, ensures that mining regulation is implemented through a structured and formal legislative framework, with subordinate regulations deriving authority from primary legislation.

In the context of international dispute resolution, Indonesia is a contracting state to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), having ratified it through Presidential Decree No. 34 of 1981. This provides an important degree of legal certainty for foreign investors, as arbitral awards rendered in other contracting states are, in principle, recognisable and enforceable within Indonesia.

Overall, Indonesia’s mining regime is characterised by a strong assertion of state control, a licensing-based system of resource management, and an evolving regulatory landscape aimed at enhancing domestic value creation. This combination of robust legal foundations, active regulatory oversight, and alignment with international arbitration standards positions Indonesia as a significant, albeit tightly regulated, destination for mining investment.

In practice, Indonesia has developed a policy framework for critical and strategic minerals, although it is not articulated in a single, unified “critical minerals strategy” document. Rather, the approach is embedded across its mining, industrial, and investment regulatory regimes, with a clear emphasis on downstream value addition and the strategic utilisation of key mineral resources.

The principal legal basis is found in the Indonesia Mining Law, which mandates the domestic processing and refining of minerals. This obligation is further elaborated under GR Operational Mining, which requires mining business licence holders to increase the added value of mineral resources through in-country processing and refining. These provisions reflect a deliberate policy to treat certain minerals as strategically important for national development.

Minerals such as nickel, bauxite, and copper have been prioritised due to their significance in global supply chains, particularly in the context of energy transition technologies. Nickel has been afforded particular prominence. Through Minister of Energy and Mineral Resources Regulation No. 11 of 2019, Indonesia imposed a prohibition on the export of unprocessed nickel ore, thereby compelling investment in domestic smelting and processing facilities. This measure has been instrumental in positioning Indonesia as a key supplier within the global electric vehicle (EV) battery supply chain.

The strategic importance of such minerals is further reinforced by Presidential Regulation No. 55 of 2019 on the Acceleration of the Battery Electric Vehicle Programme, which integrates mineral resource policy with broader industrial and energy objectives. In addition, Law No. 3 of 2014 on Industry supports the development of downstream industries based on domestic natural resources, further aligning mining regulation with industrial policy.

Accordingly, Indonesia’s approach may be characterised as a functional critical minerals policy, grounded in resource governance, export controls, and industrial integration. The overarching objective is to maximise domestic economic value, strengthen resource sovereignty, and position the country as a central actor in strategic global mineral supply chains.

The Government of Indonesia provides a range of state support measures to the mining industry, primarily through fiscal incentives, regulatory facilitation, and downstream development policies, rather than through direct subsidies or grants. This support is grounded in the broader objective of enhancing domestic value addition and strengthening Indonesia’s position in global mineral supply chains.

A key form of support is the provision of tax and fiscal incentives for mining and downstream processing activities. Under Law No. 25 of 2007 on Investment, as further implemented through Government Regulation No. 78 of 2019 on Income Tax Facilities for Capital Investment, eligible mining and mineral processing projects may benefit from tax allowances, including reductions in taxable income, accelerated depreciation, and extended loss carry-forward periods. In addition, Minister of Finance Regulation No. 130/PMK.010/2020 provides for tax holidays for pioneer industries, which include certain mineral processing and refining activities, thereby incentivising investment in smelters and downstream facilities.

Further support is reflected in export and trade policies designed to promote domestic processing. For example, export restrictions on unprocessed minerals, which introduced pursuant to Law No. 3 of 2020 and its implementing regulations, operate as an indirect support mechanism by encouraging investment in domestic refining capacity. While restrictive in nature, such measures effectively channel capital into Indonesia’s downstream mining sector.

The Government also facilitates investment through state-owned enterprises (SOEs) and strategic partnerships. Entities such as MIND ID play a central role in consolidating state participation in mining projects and supporting large-scale developments, including in the nickel and battery sectors. These SOEs may engage in joint ventures, provide project support, and mobilise financing for strategic mining and processing initiatives.

In addition, financing support may be indirectly available through state-owned financial institutions, including export financing and infrastructure support for mining-related projects.

Overall, Indonesia’s model of state support is characterised by targeted fiscal incentives, regulatory measures that promote downstream investment, and active participation through state-owned enterprises, rather than direct financial subsidies. This approach reflects a policy preference for leveraging private and foreign investment while maintaining strong state oversight and strategic direction.

Foreign investment is permitted in Indonesia’s metals and mining sector, including both mineral and coal activities, as the sector is not classified as a closed business field under Presidential Regulation No. 10 of 2021 (as amended). However, participation by foreign investors is subject to structural regulatory requirements rather than outright prohibitions.

Mining licenses, namely the IUP, IUPK, Coal Mining Concession Work Agreement (Perjanjian Karya Pengusahaan Pertambangan Batubara or “PKP2B”), and Contract of Work (Kontrak Karya or “KK”), may only be held by Indonesian legal entities. Accordingly, foreign investment must be structured through an Indonesian limited liability company (Perseroan Terbatas), specifically a foreign investment company (PT PMA). This requirement applies to all foreign investors and investment structures in the upstream mining sector.

The principal restriction is the mandatory divestment obligation. Under GR Operational Mining, holders of IUP and IUPK, and following recent amendments, contract-based licences such as PKP2B and KK, are required to divest shares to Indonesian participants during the production operation stage. Foreign shareholders must ultimately reduce their ownership to a maximum of 49%, ensuring that at least 51% of the shares are held by Indonesian parties, including the central or regional government, state-owned enterprises, or national private entities. The applicable divestment percentages and timelines vary depending on factors such as mining methods and the extent of downstream integration.

These restrictions apply broadly to all types of investors and transactions involving mining licence holders. Minority acquisitions fall within the scope of the regime, as the divestment obligation is outcome-based rather than transaction-based. While foreign investors may initially acquire minority or majority interests, the shareholding structure must ultimately comply with the mandatory Indonesian ownership threshold. Any transaction resulting in non-compliance with the divestment requirement would not be permissible. Furthermore, all share transfers, whether involving minority or controlling interests, require prior approval from the Minister of Energy and Mineral Resources, providing an additional regulatory control mechanism.

The restrictions are directed at shareholding in licensed entities and do not apply to asset acquisitions.

As of 2025, amendments to the mining regulatory framework, including updates to Indonesian Mining Law, GR Operational Mining, and the issuance of MEMR Regulation No. 18 of 2025, have not materially altered the foreign investment restrictions described above, but have instead reaffirmed and reinforced the existing divestment regime.

In principle, foreign investors in Indonesia are entitled to transfer and repatriate capital, profits, dividends, interest, and other lawful returns in foreign currency under the prevailing investment regime. There are no mining-specific prohibitions or quantitative limits on the remittance of profits from mining investments.

Repatriation is, however, subject to general regulatory compliance requirements. These include the settlement of outstanding tax obligations, such as withholding tax on dividends, interest, and capital gains, as well as the payment of applicable royalties and other non-tax state revenues (Penerimaan Negara Bukan Pajak or “PNBP”) in accordance with prevailing laws and regulations.

In addition, foreign exchange proceeds derived from the export of natural resources, including mining products, with a minimum export value of USD 250,000 are required to be placed in the Indonesian financial system for a minimum period of twelve (12) months, in accordance with Government Regulation No. 36 of 2023 (as amended). This requirement applies only to certain mining products as determined by the Minister of Finance. During the placement period, such proceeds may be utilized for limited purposes, including conversion into Rupiah at the same bank, payment of tax obligations, distribution of dividends, procurement of goods and services, and repayment of loans in foreign currency.

Indonesia imposes significant restrictions on the export of minerals and metals, particularly in relation to raw or unprocessed materials, as part of its policy to promote domestic downstream processing and refining industries.

This policy is reflected in MEMR Regulation No. 25 of 2018 (as amended), which requires certain mineral commodities to undergo value-added enhancement through processing and/or refining activities in accordance with prescribed minimum standards prior to export. These minimum processing and refining thresholds are set out in the regulation’s annex and apply to various minerals, including copper, nickel, cobalt, and tin.

The export restrictions are further reinforced under Minister of Trade Regulation No. 22 of 2023 (as amended), which designates certain raw mineral ores, such as copper ore, nickel ore, cobalt ore, and tin ore, as prohibited export goods. As a result, exporters are generally not permitted to export these commodities in raw form.

Accordingly, Indonesia’s regulatory regime effectively imposes a ban on the export of specified unprocessed mineral ores and mandates in-country beneficiation through processing and refining. Export of mineral products is permitted only where the applicable value-added requirements have been satisfied and the necessary export approvals have been obtained.

Both export and import tariffs on minerals and metals are taxable subject to the export restrictions applicable to raw materials. Export tariffs are limited in scope and apply only to certain processed mineral products meeting specific specifications. For example, export duties may be imposed on concentrates such as lead concentrate (with a grade of ≥ 56% Pb) and zinc concentrate (with a grade of ≥ 51% Zn), typically at a rate of around 5%. These tariffs are applied in addition to compliance with export control and beneficiation requirements.

Import tariffs are categorised into preferential and non-preferential tariffs. Preferential tariffs apply pursuant to international trade agreements entered into by Indonesia, such as the Regional Comprehensive Economic Partnership Agreement and the Indonesia–United Arab Emirates Comprehensive Economic Partnership Agreement. Under these agreements, Indonesia has committed to reducing or eliminating import duties, potentially to 0%, for certain mineral products, depending on the applicable tariff schedule and rules of origin.

Non-preferential tariffs apply in the absence of a relevant trade agreement and are imposed in accordance with Minister of Finance Regulation No. 26/PMK.010/2022 (as amended). The applicable tariff rates vary depending on the classification of the imported goods under the Indonesian customs tariff system.

To promote domestic interests, Indonesian law imposes explicit requirements for government and/or local participation across the metals and mining value chain, particularly in relation share ownership, mining services, and local community development.

As noted above, holders of IUP, IUPK, PKP2B, and KK with foreign shareholding are subject to mandatory divestment requirements. At the production operation stage, at least 51% of the shares must be owned by Indonesian participants, which may include the central or regional government, state-owned enterprises, regionally owned enterprises, and/or national private entities. This framework ensures majority Indonesian ownership during the production phase.

In addition, mining permit holders are required to prioritise the use of domestic mining services providers. Foreign-invested mining services companies, established as Indonesian legal entities, may only be engaged where no capable Indonesian company is available, reflecting a local content policy within the sector.

Furthermore, mining companies are subject to community development and empowerment obligations (Pengembangan dan Pemberdayaan Masyarakat). These include the requirement to allocate dedicated funding, implement structured programmes for local and indigenous communities surrounding the mining area, consult with relevant stakeholders, and submit periodic reports to MEMR.

Mining rights are administrative in nature and do not constitute proprietary rights over minerals in situ. Under the prevailing legal framework, including the Indonesia Mining Law and Article 33 (3) of the 1945 Constitution of the Republic of Indonesia, all mineral and coal resources in situ remain the property of the State. Mining licences, such as the IUP or IUPK, confer exclusive rights to conduct exploration and production activities within a specified area and period, but do not transfer ownership of the underlying resources. Title to minerals or coal arises only upon extraction and the fulfilment of royalty obligations.

Foreign investors cannot directly hold mining rights or assets. Mining licences must be held by Indonesian legal entities. Accordingly, foreign participation must be structured through an Indonesian-incorporated company (PT PMA), which may take the form of a joint venture with local partners, although a joint venture is not legally mandatory. Through such a structure, foreign investors may hold shares in the licence-holding company (subject to applicable divestment requirements), while legal ownership of the mining rights and related assets remains vested in the Indonesian entity as the administrative licence holder.

The Indonesian Mining Law regulates that mining tenure is legally distinct from surface land tenure. Mining rights, granted through licences such as the IUP or IUPK, provide the holder with the authority to explore and exploit minerals or coal within a designated area. However, such rights do not extend to ownership of the surface land.

Surface landowners retain their proprietary rights over the land. Accordingly, mining licence holders must obtain access to the land by settling land rights with the relevant landowners prior to commencing exploration or production activities. This typically involves compensation or other agreed arrangements in accordance with applicable laws and regulations. Land acquisition or compensation may be undertaken progressively, depending on the operational needs of the mining project.

In the event that no agreement can be reached between the mining licence holder and the landowner, the central government may intervene to facilitate mediation and resolve the dispute. Accordingly, while mining rights grant subsurface exploitation rights, they are conditional upon securing lawful access to the surface land and respecting existing land tenure rights.

Exploration rights are granted through the exploration stage of the IUP or IUPK. These licences form part of a two-stage system, consisting of Exploration and Operation Production phases. IUP applies to a broader range of commodities, including coal, metallic minerals, non-metallic minerals, and rocks, whereas IUPK is limited to coal and metallic minerals and typically relates to areas previously subject to special regimes, such as former contract areas, namely PKP2B and KK.

An IUP or IUPK for Exploration authorises the holder to conduct general surveys, exploration activities, and feasibility studies within a defined mining area. These activities are preparatory in nature and do not permit commercial extraction or sales.

The term of exploration licences varies depending on the commodity and licence type:

• IUP (Exploration): up to 8 years for metallic minerals, 7 years for coal and certain non-metallic minerals, and 3 years for other non-metallic minerals and rocks.
• IUPK (Exploration): up to 8 years for metallic minerals and 7 years for coal.

Exploration licences may generally be extended for one (1) year per extension, subject to regulatory approval.

The process to acquire exploration rights begins with obtaining a designated mining area, namely Wilayah Izin Usaha Pertambangan (“WIUP”) or Wilayah Izin Usaha Pertambangan Khusus (“WIUPK”). For coal and metallic minerals, WIUP or WIUPK is typically awarded through a competitive tender process administered by the Government, in which foreign-invested Indonesian entities may participate. WIUP or WIUPK may also be granted on a priority basis to specific eligible entities, such as cooperatives, small and medium enterprises, business entities owned by religious organisations, entities established for the benefit of higher education institutions, and companies engaged in downstream activities. Cooperatives and small and medium enterprises must be domestically owned and may not be controlled by foreign investors.

In contrast, for non-metallic minerals, certain non-metallic minerals, and rocks, WIUP may be obtained through a direct area application process for available mining areas. Following the award of the WIUP or WIUPK, the applicant must submit an application for an Exploration IUP or IUPK, demonstrating administrative, technical, environmental, and financial capability. The issuance of the exploration licence enables the holder to commence exploration activities within the designated area.

Exploration licence holders are required to carry out activities in accordance with good mining practices, comply with environmental and reporting requirements, submit periodic work plans and budgets, and maintain area boundaries. They must also fulfil financial obligations such as dead rent (Iuran Tetap).

Upon completion of exploration and approval of a feasibility study, the licence holder may apply to upgrade to an Operation Production IUP or IUPK. This application must be submitted no later than 30 days prior to the expiry of the exploration licence and is subject to the fulfilment of administrative, technical, environmental, and financial requirements.

Timelines depend on the tender or application process and regulatory review periods. Costs typically include tender or data compensation fees, area reservation fees, exploration guarantees, and administrative charges, as prescribed under applicable regulations.

As part of the two-stage licensing system described above, IUP or IUPK for Operation Production authorises the holder to undertake construction, mining, processing and/or refining (or development and/or utilisation), as well as transportation and sales.

The term of operation production varies depending on the commodity and licence type:

• IUP (Operation Production): up to 20 years for metallic minerals, coal, and certain non-metallic minerals; 10 years for other non-metallic minerals; and 5 years for rocks.
• IUPK (Operation Production): up to 20 years for both metallic minerals and coal.

Both IUP and IUPK Operation Production licences may be extended, including for longer durations where the mining activities are integrated with processing and/or refining facilities, subject to prevailing regulations.

The process of obtaining an IUP or IUPK for Operation Production is undertaken through an upgrade from the exploration stage, subject to approval from the MEMR. Accordingly, the licensing process is continuous, beginning with the acquisition of a WIUP or WIUPK, followed by the grant of an IUP or IUPK for Exploration, and culminating in the issuance of the corresponding operation production licence upon satisfaction of the relevant requirements.

Holders of IUP or IUPK for Operation Production are subject to extensive regulatory obligations, including compliance with good mining practices, environmental protection, reclamation and post-mining requirements, and occupational health and safety standards. They must also undertake resource conservation, implement domestic processing and refining, prioritise local labour and goods/services, conduct community development and empowerment programmes, submit periodic reports, install boundary markers, and comply with mandatory divestment requirements for foreign shareholding.

Holders of IUP or IUPK are required to pay state and regional revenues in connection with their mining activities. State revenue comprises both taxes and Non-Tax State Revenue (Penerimaan Negara Bukan Pajak or “PNBP”).

Taxes are imposed in accordance with prevailing tax and customs laws. PNBP obligations specific to mining licences primarily consist of (i) dead rent (iuran tetap) and (ii) production fees (royalties). Dead rent is calculated based on the size of the mining concession area and is payable during both the exploration and operation production stages. Production fees or royalties are calculated based on the volume or value of minerals or coal sold, multiplied by a tariff determined by the MEMR, which may fluctuate in line with applicable benchmark prices.

In addition, holders of IUPK at the Operation Production stage are subject to an additional obligation to pay a share of net profits, comprising 4% to the central government and 6% to the relevant regional governments.

Failure to comply with these payment obligations may result in administrative sanctions, including suspension or revocation of the relevant mining licence.

Mining licences such as the IUP or IUPK cannot be freely assigned. The rights and obligations arising from such licences are vested in the licence holder and, as a general rule, are not transferable to another party. Any change in control over a mining project is therefore typically effected through a transfer of shares in the licence-holding company, which is subject to prior approval from the MEMR.

In addition, pursuant to Article 93B of the Indonesia Mining law, an IUP or IUPK may not be pledged or otherwise encumbered as security, including over the mining commodities produced therefrom. As a result, mining licences cannot be used as collateral in financing arrangements.

Indigenous and local community rights in Indonesia’s mining sector are recognised within a broader constitutional and statutory framework, although their implementation, particularly in relation to Free, Prior, and Informed Consent or “FPIC”, remains evolving in practice.

At the constitutional level, Article 18B paragraph (2) of the 1945 Constitution acknowledges the existence and rights of masyarakat hukum adat or customary law communities, provided that these remain in accordance with national interests and prevailing legislation. This recognition is reinforced by Law No. 39 of 1999 on Human Rights, which affirms the protection of traditional community rights. In the natural resources context, Law No. 41 of 1999, as interpreted by Constitutional Court Decision No. 35/PUU X/2012, clarifies that customary forests or hutan adat are not part of state forests, thereby strengthening the legal standing of indigenous communities over certain land areas.

Within the mining sector, the Indonesian Mining Law requires mining business licence holders to respect land rights and to address land acquisition through compensation and settlement mechanisms. However, the law does not explicitly adopt FPIC as a formal legal requirement. Instead, elements of consultation and community participation are incorporated through related regulatory processes.

FPIC related principles are most clearly reflected in the environmental regime. Law No. 32 of 2009 (as amended) requires proponents of mining projects to prepare an Environmental Impact Assessment or AMDAL, which includes public consultation with affected communities. This process is intended to ensure that communities are informed and able to provide input prior to project approval, although it does not amount to a strict requirement for consent.

Additional protections are provided under Law No. 2 of 2012, which mandates consultation and compensation for affected parties.

In summary, Indonesian law recognises indigenous and local community rights and incorporates participatory elements that align with FPIC principles. However, FPIC is not yet established as a comprehensive and binding legal standard, and its application continues to depend on sectoral regulation and administrative practice.

As a prerequisite to upgrading an Exploration IUP or IUPK to the Operation Production stage, the licence holder must obtain environmental approval. This requires the preparation of an Environmental Impact Assessment (Analisis Mengenai Dampak Lingkungan or “AMDAL”). Mining activities are classified as activities with significant environmental impact and therefore, pursuant to Minister of Environment and Forestry Regulation 4/2021, mandatorily require an AMDAL. Without such approval, the licence holder cannot proceed to the production stage.

Licence holders are required to prepare reclamation and post-mining plans, which must be approved by the relevant authority. These plans include the determination of financial guarantees. Reclamation plan and guarantees are required for both Exploration and Operation Production stages, while post-mining plan and guarantees apply only at the Operation Production stage. Upon approval, the licence holder must place the guarantees in the prescribed form and amount as a condition of continuing operations.

Upon the cessation of mining activities, whether partially or entirely, the licence holder must implement post-mining (mine closure) activities in accordance with the approved post-mining plan. Such activities must commence no later than 30 calendar days following the cessation of operations. During implementation, the licence holder is required to submit periodic reports, typically on a quarterly basis, to the MEMR or the relevant regional authority. Where, based on the evaluation of the post-mining implementation, the activities are deemed to have fully satisfied the prescribed success criteria, the IUP or IUPK holder may formally apply for the release of the post-mining guarantee.

Failure to prepare an AMDAL or obtain environmental approval will prevent the upgrade of an exploration licence to the production stage. Non-compliance with reclamation and post-mining obligations, including failure to provide the required guarantees, may result in administrative sanctions, such as written warnings, temporary suspension of activities, and ultimately revocation of the mining licence.

Specific health and safety regulations apply to the mining industry in Indonesia as part of the broader “good mining practice” obligations imposed under MEMR Regulation 26/2018. These obligations are binding on all holders of IUP or IUPK.

A key requirement is the appointment of a Mine Technical Head (Kepala Teknik Tambang or “KTT”), who is responsible for overseeing the implementation of mining safety and occupational health standards. Mining operations may not commence prior to the formal appointment and approval of the KTT. Licence holders are also required to establish an internal health, safety, and environment (HSE) function, supported by adequate personnel, equipment, facilities, and budget.

In practice, mining companies must implement comprehensive safety management systems, including risk management, accident and fire prevention programmes, safety training, inspections, emergency response procedures, and incident investigation mechanisms. Occupational health obligations include worker health programmes, hygiene and sanitation measures, monitoring of workplace conditions, and prevention and management of occupational diseases.

Overall, the regulatory framework requires mining companies to adopt systematic and proactive measures to ensure a safe and healthy working environment.

Obligations relating to the disclosure of climate change risks in Indonesia are not governed by a single, mining-specific instrument, but are instead embedded within a broader environmental and financial reporting framework applicable across sectors, including the mining value chain.

At the core of the regime is Financial Services Authority Regulation No. 51/POJK.03/2017, which requires financial institutions, issuers, and public companies to prepare and publish annual sustainability reports. These reports must include environmental performance indicators, such as energy use, emissions reduction, and climate-related initiatives, thereby indirectly capturing climate change risks relevant to mining operations.

Further requirements are reflected in OJK Circular Letter No. 16/SEOJK.04/2021, which prescribes the content of annual reports, including disclosures on sustainability strategies, risk management, and environmental metrics. In addition, Presidential Regulation No. 98 of 2021 on Carbon Economic Value introduces obligations for businesses to measure and report greenhouse gas emissions through the National Registry System (SRN PPI), including mitigation and adaptation actions.

From an environmental law perspective, Law No. 32 of 2009 requires the preparation of an AMDAL, which includes the identification of environmental risks that may encompass climate-related impacts, although it does not explicitly mandate climate risk disclosure in financial terms.

Looking forward, Indonesia is in the process of strengthening its climate disclosure regime. A significant development is the introduction of the Sustainability Disclosure Standards or Pernyataan Standar Pengungkapan Keberlanjutan (PSPK), which are expected to take effect from 1 January 2027. These standards include specific requirements for climate-related disclosures aligned with international frameworks such as the IFRS Sustainability Disclosure Standards. Climate-related disclosures are expected to become mandatory under this framework, marking a shift towards more comprehensive and standardised reporting.

In summary, while current obligations are largely indirect and apply primarily to listed entities and regulated financial institutions, Indonesia is moving towards a more formalised and mandatory climate risk disclosure regime with broader applicability across sectors, including mining.

Decarbonisation obligations for participants across Indonesia’s mining value chain are currently addressed within a broader environmental and climate regulatory framework rather than through sector-specific legislation. These obligations include both direct and indirect requirements, with an increasing emphasis on emissions management and alignment with national climate targets.

Under Law No. 32 of 2009, as operationalised through Government Regulation No. 22 of 2021, mining companies are required to identify, monitor, and mitigate environmental impacts, including emissions, through mechanisms such as AMDAL and environmental permits. While not explicitly framed as decarbonisation obligations, these provisions effectively encourage companies to adopt practices that reduce greenhouse gas emissions and improve environmental performance.

More targeted measures are established under Presidential Regulation No. 98 of 2021 on Carbon Economic Value, which introduces a national framework for greenhouse gas control. This includes mechanisms for carbon trading, results-based payments, and emissions offsetting, providing mining operators with pathways to manage and account for their emissions in line with Indonesia’s Nationally Determined Contribution commitments.

Additional legal instruments support these efforts. Law No. 4 of 2023 on Financial Sector Development and Strengthening, together with implementing regulations issued by the Financial Services Authority, provides the legal foundation for carbon market participation, while Presidential Regulation No. 14 of 2024 establishes a regulatory framework for carbon capture and storage activities relevant to extractive operations.

Although Indonesia does not yet impose sector-specific, mandatory decarbonisation targets for mining companies, the evolving regulatory landscape indicates a gradual tightening of climate-related obligations. Emerging policies on carbon markets, emissions reporting, and low-carbon technologies suggest that more prescriptive decarbonisation requirements are likely to be introduced as part of Indonesia’s broader energy transition and net zero objectives.

In addition to existing obligations under environmental and carbon market regulations, Indonesia has introduced a number of decarbonisation and climate change measures that could materially affect participants across the mining value chain.

A key development is the introduction of a carbon pricing mechanism, implemented under Government Regulation No. 98 of 2021. This regulation establishes both a carbon trading system and a carbon tax applicable to entities with significant greenhouse gas emissions, including large-scale mining and mineral processing operations. The carbon tax is designed to incentivise emission reductions while generating revenue to support climate mitigation and adaptation initiatives.

Complementing this, Presidential Regulation No. 55 of 2019 on the Acceleration of the Battery Electric Vehicle Programme indirectly affects mining operators by prioritising the development of low-carbon industries and the domestic processing of strategic minerals such as nickel and cobalt. Mining companies supplying raw materials to these industries may be required to meet environmental standards that align with national emissions reduction objectives.

Law No. 16 of 2016 on Ratification of the Paris Agreement and Indonesia’s Nationally Determined Contributions (NDCs) provide an overarching policy framework, obliging all sectors to contribute to greenhouse gas reduction targets. This legal framework underpins sectoral regulations, including emissions reporting and sustainability reporting requirements under Financial Services Authority Regulation No. 51/POJK.03/2017 and the forthcoming Sustainability Disclosure Standards effective in 2027.

Further, Presidential Regulation No. 14 of 2024 on Carbon Capture and Storage introduces regulatory oversight for technologies that mitigate emissions from extractive activities. Mining operators engaging in fossil fuel extraction or processing may need to integrate carbon capture solutions to comply with future emission reduction expectations.

Taken together, these measures create a multi-layered regulatory environment in which market participants across the mining value chain must consider carbon taxation, emissions reporting, low-carbon industry obligations, and carbon capture implementation as part of compliance and strategic planning. This evolving framework signals Indonesia’s commitment to decarbonisation while providing pathways for mining companies to align operations with national climate goals.

Indonesia’s mining sector operates under a distinct fiscal regime that extends beyond conventional corporate income tax and income-related obligations. These sector-specific taxes and levies reflect the state’s control over mineral resources, support environmental stewardship, and incentivise domestic processing, creating a unique investment and compliance environment for market participants.

Royalties on Mineral Production
A core feature of Indonesia’s mining fiscal regime is the royalty system, established under the Indonesian Mining Law. Mining companies are required to pay royalties based on a percentage of the sales value of extracted minerals or coal. Royalty rates vary according to mineral type, grade, and processing stage, with higher rates applied to refined or exported products. For example, unprocessed nickel ore typically attracts a lower royalty rate than refined nickel products, consistent with Indonesia’s policy of promoting domestic value addition and downstream industrialisation. Royalties are payable to both central and regional governments, depending on concession location, and are a material component of mining project economics.

Land and Resource Levies
Mining operations also incur fees related to the use of state land and resource management. These include mining area rentals, land utilisation fees, and contributions to environmental management funds. Companies are obliged to establish reclamation and post-mining funds to cover environmental restoration costs, effectively creating a long-term financial liability. The calculation of these fees typically considers concession area, mineral type, and potential environmental impact, linking fiscal obligations directly to operational scale and environmental risk.

Profit Sharing
The holders of IUPK at the Production Operation stage for metallic mineral and coal mining are subject to a mandatory profit-sharing obligation. In this regard, such holders are required to allocate a portion of their net profits, amounting to 4% (four percent) to the Central Government and 6% (six percent) to the relevant Regional Governments. This obligation becomes effective from the commencement of commercial production and shall be fulfilled in accordance with the prevailing laws and regulations.

Export Levies and Import Duties
Export levies on unprocessed minerals constitute another distinctive fiscal instrument. These levies are designed to encourage domestic smelting and refining by imposing higher charges on exports of unprocessed ores. Conversely, import duties on mining equipment and technology may be adjusted to support local industry development and strategic objectives.

Community Development and Empowerment
Community development and empowerment initiatives shall be implemented in accordance with the Community Development and Empowerment Program Master Plan, which outlines the planned programs to be carried out throughout the Production Operation phase and continuing through the post-mining stage. The funding for such programs shall be sourced from the operational expenditures of the IUP or IUPK holder.

Policy Implications
Collectively, these fiscal obligations create a multi-layered and somewhat unique tax environment for mining operators in Indonesia. They highlight the government’s approach to resource sovereignty, environmental protection, and domestic industrial development. For market participants, these taxes and levies represent significant components of project costs and require careful integration into financial planning, feasibility studies, and operational strategy.

Understanding the interplay of royalties, land and environmental levies, profit sharing, export levies, and regional taxes is essential for investors seeking to navigate Indonesia’s mining sector. These obligations reflect both regulatory priorities and strategic policy goals, including maximising state benefit, encouraging downstream processing, and ensuring responsible environmental stewardship.

Below is the summary of tax applicable to mining industries.

An additional regulatory aspect in Indonesia’s mining sector relates to forestry laws, as many mining areas overlap with designated forest zones. A WIUP or WIUPK may be located partially or entirely within areas classified as forest areas (kawasan hutan), which are further categorised as Conservation Forest, Protected Forest, or Production Forest. Mining activities are strictly prohibited in Conservation Forest areas, while limited mining (i.e., underground mining) may be conducted in Protected Forest areas, and broader mining activities are permitted in Production Forest areas, subject to regulatory approvals.

In such cases, mining activities may only be undertaken upon obtaining a Forest Area Use Approval (Persetujuan Penggunaan Kawasan Hutan or “PPKH”) from the relevant authority. This approval is a prerequisite for lawful mining operations within forest areas and imposes specific conditions and boundaries on the use of the land.

In practice, however, there have been instances of mining activities conducted without a valid PPKH or beyond its approved boundaries. In response, the Government has strengthened enforcement through the establishment of the Forest Area Enforcement Task Force (Satuan Tugas Penertiban Kawasan Hutan or “Satgas PKH”), a multi-agency task force comprising, among others, the Public Prosecutor’s Office, the Police, the Indonesian National Armed Forces, the Ministry of Forestry, and the MEMR.

The Satgas PKH is authorised to impose administrative sanctions, including significant fines. Such fines are calculated based on the area of the violation, the duration of the infringement, and a commodity-based tariff determined by the MEMR. Recent tariff levels are substantial, for example, approximately IDR 6.5 billion per hectare for nickel and IDR 1.7 billion per hectare for bauxite.

Accordingly, mining licence holders must carefully verify the forestry status of their concession areas, ensure that the requisite PPKH has been duly obtained, and strictly adhere to its approved boundaries to mitigate regulatory and financial risks.