Beneficial ownership has become a cornerstone of modern corporate governance, indicating a growing emphasis on transparency regarding who ultimately controls and benefits from a legal entity. In Indonesia, this principle is reinforced by the Minister of Law and Human Rights Regulation (Peraturan Menteri Hukum dan Hak Asasi Manusia/Permenkumham) Number 49 of 2025 concerning Requirements and Procedures for the Establishment, Amendment, and Dissolution of Limited Liability Companies.
The regulation improves transparency of ownership as part of broader corporate governance reforms and efforts to uphold the integrity of Indonesia’s legal system.
Understanding Beneficial Owner in a Limited Liability Company
In general terms, a beneficial owner is an individual who ultimately controls a company, whether directly or indirectly, or who is entitled to receive its economic benefits. Control may arise through:
- majority share ownership;
- dominant voting rights;
- the authority to appoint or dismiss directors and commissioners; or
- other arrangements that substantively demonstrate control.
Permenkumham Number 49 of 2025 provides a more detailed definition. A beneficial owner is an individual who:
- has the authority to appoint or dismiss directors, commissioners, managers, administrators, or supervisors;
- exercises control over the corporation;
- is entitled to and/or receives benefits from the corporation, directly or indirectly;
- is the true owner of the corporation’s funds or shares; and/or
- meets other criteria as stipulated under prevailing laws and regulations.
This approach stresses that beneficial ownership is determined not merely by formal shareholding records, but by actual control and economic interest.
Reporting Obligations for Beneficial Owners
Permenkumham Number 49 of 2025 requires every limited liability company to submit beneficial owner information through the legal entity administration system managed by the Directorate General of Legal Administrative Affairs. The required information includes the beneficial owner’s full identity, citizenship, identification number, ownership or control relationship, and a declaration confirming the accuracy of the data.
Companies must update this information whenever there is a change in ownership or control. Failure to comply may result in the rejection or suspension of legal administrative services.
Required Documentation
The beneficial ownership reporting process generally involves three documents:
- a power of attorney from the board of directors authorizing the notary to submit beneficial ownership information;
- a statement from the board of directors identifying the beneficial owner; and
- a letter of consent from the individual designated as the beneficial owner.
Beneficial Ownership and Corporate Transparency
The obligation to disclose beneficial ownership aligns with Indonesia’s commitment to combating money laundering and terrorist financing. Institutions such as the Financial Transaction Reports and Analysis Center have consistently emphasized the importance of transparency in ownership to prevent companies from being used as shell entities or vehicles for concealing illicit assets.
At the international level, beneficial ownership transparency is also promoted by the Organisation for Economic Co-operation and Development (OECD) as part of its broader framework on tax governance and cross-border information exchange.
Tax Implications of Beneficial Ownership
From a tax perspective, beneficial ownership disclosure carries significant implications. The DGT requires accurate identification of the true recipients of income to ensure proper taxation.
In cross-border transactions, beneficial ownership status determines eligibility for reduced withholding tax rates under tax treaties. If an entity merely acts as an intermediary or conduit company, treaty benefits may be denied.
The concept is also closely linked to the substance-over-form principle. Tax authorities may disregard formal ownership structures established primarily for tax avoidance if the actual controller or beneficiary differs from the party recorded in official documents.
Data Accuracy and Legal Consequences
Permenkumham Number 49 of 2025 accentuates the importance of maintaining accurate and up-to-date beneficial ownership data. Companies are responsible for ensuring that the information they disclose reflects actual conditions.
Inaccurate or manipulated data may lead to administrative sanctions, including denial of legal services. From a tax perspective, discrepancies may result in tax adjustments, administrative penalties, and potentially criminal consequences if intentional misconduct is involved.
Beneficial Ownership and Global Information Exchange
The relevance of beneficial ownership is further strengthened by the implementation of automatic exchange of information (AEOI) between jurisdictions. Beneficial ownership data may assist tax authorities in tracing undisclosed foreign assets, reducing opportunities for tax evasion, and enhancing oversight of high-risk taxpayers.
By aligning corporate law requirements with tax transparency measures, Indonesia continues to move toward a more accountable, transparent, and equitable economic system.
Also Read:
https://ideatax.id/articles/updates-to-the-05-msme-final-income-tax-and-its-business-impact
https://ideatax.id/articles/article-26-withholding-tax-on-foreign-taxpayers
