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Andi Refandi
Andi serves as a Senior Account Executive on Emerhub’s global team.
TKDN (Tingkat Komponen Dalam Negeri) or “Domestic Component Level” is Indonesia’s framework for measuring and mandating local content in goods and services. If you’re planning to manufacture or sell products and services in regulated sectors, you’ll likely need TKDN certification to operate legally.
This requirement affects major industries including smartphones, medical devices, agricultural machinery, power generation equipment, automotive parts, telecommunications infrastructure, and oil and gas equipment. Each sector must meet specific thresholds of Indonesian materials, workers, or facilities in their products or services.
Apple learned this the hard way in 2024. They couldn’t launch iPhone 16 for seven months because they lacked the required 35% TKDN certification, losing millions in sales while competitors captured market share. For the iPhone 17, Apple invested $160 million (approximately IDR 2.6 trillion) upfront to meet requirements and ensure on-time launch.
This guide explains TKDN policies, calculation methods, certification requirements, and strategies for compliance across different sectors.
Understanding TKDN Policy in Indonesia (for goods)
At its core, TKDN calculates what percentage of your product originates from Indonesia. The TKDN value of goods is calculated based on production factors, which include:
- Direct materials with a weighing of 75%
- Direct labour with a weighing of 10%
- Indirect factory overhead with a weighing of 15%
Indonesia uses TKDN to boost its economy by creating jobs and reducing imports. For businesses, if you want to operate in regulated sectors or win government contracts, meeting these requirements is mandatory.
Benefits of Obtaining a TKDN Certification
TKDN certification opens doors to fiscal incentives and aligns your business with national industrial policies. Here are benefits of obtaining a TKDN certification in Indonesia:
- Regulatory Compliance and Market Access: TKDN certification is mandatory for companies supplying goods or services to government projects or state-owned enterprises (SOEs). It allows companies to qualify for public tenders and government contracts.
- Preferential Treatment in Government Tenders: Companies with TKDN certification are prioritized in government procurement scoring, sometimes receiving price preference incentives, which can improve their chances of winning contracts.
- Economic and Industrial Benefits: promotes the use of local materials, labor, and technology, supporting Indonesia’s domestic industries, creating jobs, and reducing dependence on imported products.
- Tax and Fiscal Incentives: enjoy reduced import duties, tax incentives, and increased income tax revenue from domestic industrial production, which benefits both businesses and the government.
- Enhanced Brand Reputation and Partnerships: signals a commitment to Indonesia’s economic development and sustainability goals. It can improve a company’s reputation with stakeholders and attract partnerships, particularly with SOEs and local suppliers.
- Supply Chain Strengthening: certification encourages building a robust local supply chain as vendors invest in local factories and assembly operations, enhancing supply chain resilience.
TKDN Requirements by Sector
TKDN certification acts as both a regulatory requirement and market access advantage. Some sectors have specific ministerial regulations setting local content thresholds (in percentage) and certification processes.
Here are sectors that require TKDN and required local content requirements:
| Sector | Local Requirement Percentage | Examples |
|---|---|---|
| Medical Devices and Healthcare Equipment | >60% | Medical instruments, laboratory equipment, and healthcare technologies. |
| Agricultural Machinery and Tools | >43% | Tractors, harvesters, irrigation systems, and other mechanized farming tools. |
| Oil and Gas Equipment | 24%-40% (depending on specific equipment/usage) | Equipment for exploration, production, and supporting infrastructures |
| National Electricity Industry and Power Plants | 30%-70% | Applicable to power generation, substations, and transmission equipment.Special regulations for renewable energy projects and solar independent power producers (IPPs). |
| Automotive and Electric Vehicles (EV) | 50%-60% | Targeting localization in the electric mobility sector per Ministry of Industry regulations. |
| Electronics and Telecommunications Devices | 35% for smartphones, tablets, and 4G/5G devices | Also applies to telecommunication infrastructure components. |
| Textile and Footwear Industry | No fixed percentage but a structured roadmap for local sourcing.Encourages integration of local raw materials and labor in the supply chain. | Garments, footwear, fashion items, and accessories. |
How is TKDN Calculated for Businesses?
Recent reforms formalized in September 2025, simplified the TKDN calculation methodology. Instead of requiring comprehensive cost-based estimation, it focuses on simpler indicators and corresponding weightage.
| Component | Details | Weight |
|---|---|---|
| Direct Materials | Measures the local content value of raw materials and parts. | 75% |
| Direct Labor | Accounts for the use of local workforce in the production process. | 15% |
| Factory Overhead or Indirect Cost | Covers expenses related to local production facilities, such as factory ownership, local investment in production infrastructure, and using local resources. | 10% |
Let’s calculate TKDN for a manufacturer with:
- Total direct material cost: IDR 100 million
- Local materials: IDR 60 million (60% local)
- Workforce: 100% Indonesian
- Factory overhead: 80% local (owns facility in Indonesia)
Calculation:
- Materials: 60% × 75% weight = 45% TKDN
- Labor: 100% × 15% weight = 15% TKDN
- Overhead: 80% × 10% weight = 8% TKDN
- Total TKDN: 68%
This 68% TKDN would qualify for most sectors except those with higher thresholds like medical devices.
Main reforms under Permenperin No. 35/2025: Small industries can now self-declare their TKDN percentage. This allows you to surpass 40% TKDN and obtain certificates valid for 5 years instead of the previous 3 years.Companies investing domestically with local production facilities and predominantly Indonesian workforce automatically receive a minimum 25% TKDN value.Additional TKDN value of up to 20% is granted for companies engaging in research and development (R&D or litbang) activities within Indonesia.
What are Requirements for TDKN Certification?
The Ministry of Industry oversees TKDN certification and verification. Foreign direct investment companies (PT PMA) are required to comply if their products/services participate in government procurement or fall under regulated strategic sectors.
Here’s what you need to be TDKN-certified in Indonesia:
- Company Information Documents
- Deed of Establishment
- Business registration certificates.
- Valid operational licenses as applicable to the industry.
- Product or Service Specific Documentation:
- Detailed production or service process descriptions.
- Cost breakdown showing domestic vs. foreign components, including raw materials, labor, overhead, and other costs.
- Data on machinery, equipment ownership, and factory location for goods manufacturing.
- Service cost components such as labor, equipment, and project management costs for service sectors.
- Production and Organizational Information:
- Organizational structure related to the production or service delivery.
- Reports on production outputs or services rendered in the last period (commonly one year).
- Proof of R&D investment for applicable goods/services.
- Independent Self-Assessment and Verification:
- Initial TKDN calculation by the company for domestic content percentage.
- Submission of the self-assessment and supporting documents to an independent verification body appointed by the Ministry of Industry, such as PT Sucofindo, PT Surveyor Indonesia, or PT Biro Klasifikasi Indonesia.
- On-site factory inspections or service audits conducted by the verifier.
Emerhub provides expert guidance on obtaining a TKDN certificate. As part of our comprehensive corporate services, Emerhub assists with company registration, licensing, and compliance. This includes securing industry-specific permits that align with TKDN standards. Emerhub also supports ongoing compliance management after certification, helping you navigate Indonesia’s regulatory landscape smoothly and efficiently.
Contact us below to discuss your TKDN strategy and receive a detailed assessment of requirements for your specific products or services.
FAQs About TKDN Policy in Indonesia
Yes, foreign companies can apply for TKDN certification as long as your products or services meet the required local content thresholds. Foreign investors operating in key sectors are especially encouraged to comply with TKDN regulations. However, compliance usually requires having a local presence or partnerships in Indonesia to meet the local sourcing and production criteria.
The TKDN certificate in Indonesia is officially issued by the Ministry of Industry (MoI). The compliance verification for TKDN is conducted by independent verification agencies that are appointed by the Ministry of Industry. These agencies review the documentation, perform inspections, and confirm the percentage of local content (TKDN) before the MoI issues the final certification. The TKDN certificate is typically valid for three years.
TKDN certification cannot be transferred or sold between companies. The certification is issued specifically to the company that submits the application, undergoes the audit, and demonstrates compliance with the local content requirements.
Since TKDN certification is based on a detailed assessment of a company’s own production processes, materials, labor, and value-added activities within Indonesia, it is non-transferable and non-assignable to other entities. Each company must independently apply for and obtain its own TKDN certification to qualify for government projects and procurement advantages.
Companies may receive written warnings, face temporary business closures, be blacklisted, or have their business licenses suspended or revoked. Financially, companies can be fined up to three times the price of imported goods if similar TKDN-compliant goods are available domestically, or face bid price reductions of up to 15% during government tenders if their local content does not meet required levels.
Additionally, companies without TKDN certification risk disqualification from government tenders, loss of preferential treatment in public procurement, and reputational damage.
