The Ministry of Industry (“MOI”) has issued MOI Regulation No. 35 of 2025 regarding the Provisions and Procedures for Certification of Domestic Component Level (in Bahasa Tingkat Komponen Dalam Negeri or “TKDN”) and Company Utilisation Value (in Bahasa Bobot Manfaat Perusahaan or “BMP”) which will be effective on 11 December 2025 (“MOI Reg 35/2025”).
The regulation replaces MOI Reg. 16/2011 and MOI Reg. 46/2022 and introducing the most comprehensive reform of TKDN framework in over a decade. This reform reshapes the way domestic content is calculated, certified, and monitored, and introduces a new concept of that measures broader economic contributions beyond the product itself.
Further, MOI Reg. 35/2025 encourages greater localisation of production, engineering, testing, and R&D. Decisions on plant investment, assembly locations, sourcing, and technology transfer will have immediate TKDN consequences.
| Businesses operating in Indonesia should reassess their TKDN strategies, prepare audit-ready documentation, and plan early to align with the new verification standards coming into effect in 2026. | For manufacturers: the new weighted formula benefits companies with strong domestic sourcing, local labour absorption, and domestic facility investment. Research and development (R&D) localisation is now financially rewarded through the brainware uplift. Manufacturers heavily dependent on imported inputs should anticipate lower TKDN scores unless local content is developed.
For EPC, construction & integrated projects: mixed goods-services TKDN calculations will reshape procurement strategies. EPC contractors may need to restructure supply chains and engage domestic subcontractors to maximise TKDN compliance in tenders. For regulated sectors (e.g., electronics, pharma, EV, medical): we foresee these industries will operate under a dual compliance environment, applying both sector-specific TKDN rules and the new horizontal framework where relevant. This increases compliance complexity but also provides opportunities to optimise TKDN through R&D and domestic processing. For the supply chain: domestic suppliers gain a strategic advantage, as their components directly raise buyers’ TKDN scores. Foreign suppliers may need to establish Indonesian operations or contract with local partners. |
Details of key changes under MOI Reg 35/2025 are as follows:
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New TKDN Calculation Methodology for Goods
The new method adopts a production-factor–based approach, replacing the prior simple cost-ratio model.
1.1 Formula for TKDN (Goods)
TKDN = (0.75 X Material Value) + (0.10 X Direct Labour Value) + (0.15% X Overhead Value)
Where:
- Material Value (75%)
Measures the domestic contribution of each input material/component, based on:- local sourcing
- local producer status
- domestic processing
- TKDN value of sub-components
Value ranges from 0–100% depending on conformity.
- Direct Labour Value (10%)
Measures domestic labour participation and production location. TKDN from labor is determined based on the ratio of Indonesian citizens to the total direct labor involved in production. - Overhead Value (15%)
Includes domestic facility investment, utilities, depreciation of local machinery, and local operational expenditure.
1.2 “Brainware” / R&D Credit (Up to +20%)
A new feature allows up to 20% uplift for companies that demonstrate:
- existence of an R&D division
- historical R&D investment in Indonesia
- measurable implementation of R&D results
- domestic IP generation
Final TKDN score is capped at 100% even with R&D credits.
1.3 TKDN Calculation for Small-Scale Industries
Entities with capital ≤ IDR 5 billion (excluding land/building) may use self-declaration, easing regulatory burden.
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TKDN for Services and Mixed Goods–Services
2.1 TKDN for Services
TKDN (Services) = (Domestic Service Cost / Total Service Cost) X 100%
Note: only service activities classified under Indonesian business fields (KBLI) qualify.
2.2 TKDN for Combined Goods + Services or Multiple Goods
Formula to be used for EPC, turnkey, and integrated procurement projects
TKDN (Combined) = ∑ (Value Weight of Component X TKDN of Component)
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BMP
BMP is introduced as a complementary metric capturing a company’s broader economic contribution beyond product composition. BMP is capped at 15% and applies only to companies producing industrial goods.
It does not apply to:
- industrial services companies
- goods–service mixed entities without manufacturing
- contract manufacturing partners where BMP responsibility lies with the principal manufacturer
Factors considered in BMP:
- employment absorption and local manpower ratio
- domestic capital expenditure and reinvestment
- collaboration with domestic suppliers
- use of local machinery and equipment
- sustainability / ESG practices
- export performance
- technology transfer and industrial training
Each factor receives a weighted score determined by MOI verification.
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Certification, Verification & Enforcement
4.1 Certification Process
Applications for TKDN certificates, BMP certificates, and TKDN calculation-statement letters must be submitted through SIINas (National Industrial Information System).
Verification is conducted by Independent Verification Agencies (in bahasa Lembaga Verifikasi Independen or “LVI”) appointed by MOI.
4.2 Validity of Certificates
- TKDN certificate: 5 years
- BMP certificate: 5 years from initial TKDN certificate with BMP value
- For project-specific procurement: validity applies only to the certified project.
4.3 Compliance Monitoring
MOI and LVI will conduct periodic and ad-hoc audits.
4.4 Administrative Sanctions
- written warnings
- suspension or revocation of LVI accreditation
- revocation of TKDN/BMP certificates
- blacklisting (minimum 1-year prohibition on re-application)
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Conclusion and Practical Recommendations for Companies
MOI Reg 35/2025 significantly reshapes Indonesia’s domestic-content regime. The shift to a production-factor model, introduction of R&D credits, and formalisation of BMP mark a strategic move to strengthen Indonesia’s industrial base, drive localisation, and promote sustainable manufacturing.
Companies should proactively prepare for a more stringent compliance environment in 2026 and beyond. The following are recommended:
- Conduct internal TKDN readiness assessment: map current materials, labour, overhead and R&D contributions to the new formula.
- Localisation roadmap: as part of readiness assessment, create a 3 to 5 year plan for local sourcing, assembly, or gradual technology transfer.
- Re-evaluate supply chain strategy: identify imported components that can be replaced with certified domestic inputs.
- Build R&D and brainware capabilities: consider to establish or formalize R&D divisions to benefit from up to 20% uplift.
- Prepare documentation for LVI verification: ensure bills of materials, supplier certificates, labour data, and cost breakdowns are audit-ready.
- Early engagement with LVI: early consultation, in general, helps to avoid challenges during certification and surveillance audits.
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