30 Oct 2025
New Local Content Rules: Key Changes Under MOI Regulation No. 35 of 2025

The Minister of Industry of the Republic of Indonesia (MOI) has issued MOI Regulation No. 35 of 2025 on the Provisions and Procedures for Certification of Domestic Component Levels (TKDN) and Company Utilization Point Ratings (BMP) (“MOI Reg. 35/2025”). This new regulation, which will become effective on 11 December 2025, introduces a more streamlined and incentive-driven framework designed to enhance local industry participation and investment. It also repeals several previous regulations, including the TKDN calculation provisions under MOI Regulation No. 16/M-IND/PER/2/2011 (“MOI Reg 16/2011”).

Understanding TKDN and BMP

TKDN refers to the percentage of domestic components contained in goods, services, or a combination of both. Under the new regulation, MOI has established updated calculation methods to ensure that locally produced goods and services can effectively participate in Indonesia’s industrial supply chain.

BMP, on the other hand, represents the value of recognition granted to business undertakings that invest and carry out production activities within Indonesia. This value is determined based on a set of weighted variables, which collectively contribute to the overall BMP score.

Key Takeaways

• TKDN Calculation Rules: 

  a. For goods

Previously, TKDN was calculated based on the ratio of domestic value (finished goods minus foreign components) to production cost, excluding profit, company overhead, and VAT.

Now, TKDN is determined by the weighted contribution of key production components per unit, namely:

• Direct Materials – 75%

• Direct Labor – 10%

• Factory Overheads – 15%

   

Moreover, business undertakings having engaged in research and development (R&D) may be eligible for 20% additional TKDN value.

b. For industrial services 

Under MOI Reg. 35/2025, the calculation of TKDN for services remains based on the ratio between the total cost of services (excluding foreign service components) and the total service cost, which includes labor costs, equipment/facility costs, and general services.

c. For combination of goods and services 

Under the new regulation, the method for calculating TKDN for a combination of goods and services has been updated. Previously, TKDN was determined by comparing the total domestic component value of goods and services against the overall value of both. Meanwhile, under the current regulation, TKDN is calculated based on the accumulated result of multiplying the TKDN value of the combined goods with the proportion of the acquisition value of the combined goods, and the multiplication of the services TKDN value with the proportion of the acquisition value of the services.

• BMP Calculation Rules:

   

  While the maximum BMP value remains capped at 15%, MOI Reg. 35/2025 introduces additional variables, each with its respective weighting, for determining the BMP value, as elaborated in the below table: 

   

These BMP value calculations do not apply to industrial services companies, business undertakings that produce a combination of goods and services, and business undertakings that cooperate with industrial companies to produce goods.

• Calculation and Verification:

   

  Calculation and verification of TKDN and BMP are carried out by the MOI, who appointed an Independent Verification Institution to perform these functions through SIINas. For small industry business undertakings, TKDN calculation may be conducted through a self-declaration mechanism, provided they are registered in the SIINas system and validated by MOI.

   

• Validity Period Extension: TKDN certificates and BMP values will now be valid for five years, extended from the previous three-year period.

   

• Administrative Sanctions: Under the previous regulation, goods and services providers who intentionally delivered products with actual TKDN values lower than those offered were subject to financial sanctions. 

   

  Meanwhile, MOI Reg. 35/2025 introduces administrative sanctions on the TKDN certificate holders, in the form of blacklisting, suspension and/or revocation of TKDN certificates, which may apply in cases of:

   

  • Submission of false documents or data

  • Failure to meet verified TKDN commitments

  • Misrepresentation of certified goods/services

  • Falsification of TKDN certificates

Despite the new framework, sector-specific TKDN calculation procedures will remain in effect upon MOI Reg. 35/2025 entering into force, namely for:

• Mobile devices (cellular phones, handheld computers, and tablet computers)

• Pharmaceuticals

• Electronics and telematics

• Battery electric vehicles

• Medical devices

• Solar modules

Commentary:

MOI Reg. 35/2025 marks a strategic update to Indonesia’s local content certification framework, aimed at maintaining industrial competitiveness and promoting the use of domestic products. By introducing a more agile, incentive-based system, the regulation reinforces the government’s commitment to supporting domestic manufacturing and simplifying access to public procurement. Key features, including TKDN incentives, streamlined certification procedures, and tailored support for small industries, demonstrate a clear intent to reduce barriers and encourage broader industrial participation.

From a compliance standpoint, the regulation also strengthens oversight by introducing administrative sanctions for violations such as TKDN washing, document falsification, misrepresentation, and failure to meet verified commitments.

Businesses operating in Indonesia, especially those engaged in government procurement, should review the new provisions carefully to ensure compliance and to take advantage of the potential benefits ahead of its effective date.

By partner Agus Ahadi Deradjat (aderadjat@abnrlaw.com), foreign partner Gustaaf Reerink (greerink@abnrlaw.com), senior associate Karina Widyaputri (mwidyaputri@abnrlaw.com), and associate Atika Rizka (afajrina@abnrlaw.com)

This ABNR News and its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.