To establish a foreign direct investment company in Indonesia you must first decide what business sector you are going to invest based on Indonesian Classification for Business Sector (Klasifikasi Baku Lapangan Usaha Indonesia or KBLI).
Then, you must check whether the business sector is open with requirements or closed for foreign direct investment based on the Presidential Regulation about Negative Investment List (Daftar Negatif Investasi or DNI). If the business sector which you are interested in is not regulated, and no other restrictions from related technical ministries, then it means the business sector is open for foreign direct investment with a maximum foreign ownership of 100%.
The legal entity of the Foreign Direct Investment or FDI company should be a Limited Liability Company or Ltd (Perseroan Terbatas or PT). The ‘PT’ company should be owned by a minimum of 2 shareholders. Those can be individual or corporate shareholders or a combination of both.
The minimum investment for an FDI company is above IDR 10 billion (excluding land and building cost), while the minimum paid up and issued capital is IDR 2.5 billion. For each shareholder, at least IDR 10 million or its equivalent in USD is required.
The process of company establishment in Indonesia requires Investor to issue Article of Association and legalization of the company, including taxpayer number (Nomor Pokok Wajib Pajak or NPWP), through Public Notary.
Yes, a foreign investor could set up a Representative Office to study the market. Foreign Representative Office (Kantor Perwakilan Perusahaan Asing or KPPA) is an office incorporated by an overseas company to represent itself in Indonesia.
Foreign Representative Office usually has limited functionality and generally are prohibited from directly engaging in operational activities, signing contracts, issuing official invoices, receiving payments from its clients, and directly engaging are other profit-generating activities.
The requirements and procedure to form a representative office in Indonesia is governed by the Regulation of BKPM No. 6 of 2018 regarding Guidelines and Procedures for Licensing and Facility of Investment. To obtain the license, all requirements should be submitted online at https://nswi.bkpm.go.id
The functionality of KPPA is limited to:
Important Notes for KPPA:
The regulation of the Central Bank of Indonesia requires that all banking transactions (such as capital injection, administration of loans, payment of capital equipment, raw material, etc.) of a newly established PT. PMA should be administered through a special foreign investment bank account in Indonesia. In general, the required documents to open such account are as follows:
Basically, to start a business company should obtain the following licenses:
Yes, There are. You can get them through OSS (Online Single Submission). An online system creates by Indonesia Government to simplify your investment registration.
All new and existing individual or business entity (Include MSMEs) and representative office can register through OSS Account.
I. Registering OSS Account
II. Single Business Number (NIB)
III. Business License is a license to start business operations
IV. Location Permit (Izin Lokasi)
V. Environmental Permit (Izin Lingkungan)
An environmental permit is given to investors for conducting business and/or activity which requires an environmental protection plan (Analisis Mengenai Dampak Lingkungan or AMDAL, Upaya Pengelolaan Lingkungan Hidup - Upaya Pemantauan Lingkungan Hidup or UKL-UPL):
VI. Building Construction Permit (Izin Mendirikan Bangunan or IMB)
Building Construction Permit is issued by the local government (Regency/City) to the company in order to build new, alter, expand, decrease, and/or foster building:
Maximum 30 days after receiving a building permit from OSS, investors should start to fulfill its commitment to regional government or if the project required AMDAL, the fulfillment of commitment of ‘IMB’ is 30 days after the completion of AMDAL.
VII. Commercial/Operational License
The license is required when the company is ready for starting commercial/ operational stage:
The investor should make payment of non-tax state revenue (Penerimaan Negara Bukan Pajak or PNBP), retribution or regional levies as required and send payment receipt to OSS System:
IX. Expansion of Business Licenses and Data Renewal
Yes. Indonesian Government provides investment incentives as follows:
Import Duties as regulated in the Regulation of BKPM No. 6 of 2018 based on the Regulation of Minister of Finance No. 176/PMK.011/2009 of 2009 as amended by No. 188/PMK.010/2015 of 2015.
All investment projects of FDI as well as Domestic Direct Investment or DDI (Penanaman Modal Dalam Negeri or PMDN) projects which are issued by the Online Single Submission (OSS) system, will be granted the exemption of Import Duty so that the final tariffs become 0%. This facility applicable on:
According to the Regulation of Minister of Finance No. 66/PMK.010/2015, the exemption of import duty will also be granted to the importation of capital goods of electricity for an import period of 2 years and can be extended by a maximum 1 year. This facility is not applicable for transmission, distribution, supporting services and repairing equipment.
As stated in the Regulation of Minister of Finance No. 259/PMK.04/2016, the importation of goods in term of Contract of Work or CoW (Kontrak Karya or KK) or Coal Mining Business Work Agreement (Perjanjian Karya Pengusahaan Pertambangan Batubara or PKP2B) will be granted the exemption and/or relief from import duty based on the owned contract.
The application can be requested by attaching a recommendation letter from Directorate General of Mineral and Coal, Ministry of Energy and Mineral Resources of the Republic of Indonesia.
Tax Facilities (Tax Allowance) as regulated in the Regulation of BKPM No. 6 of 2018:
Based on the latest Government Regulation No. 18 of 2015 as amended by No. 9 of 2016, pertaining to Income Tax facilities for investment in certain business sectors and/or in certain locations, the domestic and foreign investors will be granted tax allowances in certain sector and/or area.
Facilities provided by the Government Regulation No. 18 of 2015 as amended by No. 9 of 2016 are:
For detailed information on the list of business sectors that are eligible for tax allowance, please refer to the Attachment I & II of Government Regulation No. 9 of 2016. There are 71 business sectors listed in Attachment I and 74 business sectors listed in Attachment II.
Procedure on the Application for Tax Allowance
Below is the framework on the application procedures:
Approval on the tax allowance application to be submitted to Ministry of Finance of the Republic of Indonesia
Rejection of the tax allowance application
Pending decision on the tax allowance application
Approval on the tax allowance application
Rejection of the tax allowance application
The following procedures are the simplified framework on tax allowance application procedure. The full and complete detail of it is available in the Regulations of BKPM No. 6 of 2018.
According to the Regulation of the Ministry of Finance No. 35/PMK. 010/2018 and the Regulation of the Chairman of BKPM No. 5 of 2018 the applicant or company should meet the following criteria:
Upstream metal base industry (iron steel and not steel) with or without derivatives, which are integrated.
Refining industry and/or refining oil and gas with or without derivatives, which are integrated.
The petroleum-based petrochemical industry, natural gas or coal with or without derivatives, which are integrated.
Inorganic basic chemical industry with or without derivatives, which are integrated.
Basic organic chemical industry originating from agricultural, plantation or forestry products with or without derivatives, which are integrated.
Pharmaceutical raw material industry with or without derivatives, which are integrated.
Manufacture of semiconductors and other major computer components such as semiconductor wafers, backlights for Liquid Crystal Display (LCD), electrical drivers, or Liquid Crystal Display (LCD) that are integrated with the computer manufacturing industry.
The industry for the manufacture of major communication equipment components such as semiconductor wafers, backlights for Liquid Crystal Display (LCD), electrical drivers, or Liquid Crystal Display (LCD) that are integrated with the manufacturing industry of mobile phones (smartphones).
The industry of making major components of medical devices that are integrated with the industry of manufacturing irradiation, electromedical or electrotherapy equipment.
Industrial manufacture of major industrial machinery components such as electric motors or internal combustion motors that are integrated with the machinery manufacturing industry.
Industry for making major engine components such as pistons, cylinder heads, or cylinder blocks that are integrated with the manufacture of four-wheeled or more motorized vehicles.
The manufacture of robotic components integrated with manufacturing machinery manufacturing industries.
Industrial manufacture of main components of ships integrated with the shipbuilding industry.
The industry for manufacturing major aircrafts components such as engines, propellers, rotors, or structural components integrated with the aircraft manufacturing industry.
Industry for the manufacture of major train components such as engines or transmissions integrated with the railroad manufacturing industry.
The power plant machinery industry, including the waste power plant machinery industry.
As regulated in the Ministry of Finance No.35/PMK.010/2018 of 2018 and the Regulation of BKPM No.5 of 2018, reduction in Corporate Income Tax (Tax Holiday) is given at 100% (one hundred percent) of the amount of the Corporate Income Tax owed. The period of the reduction is provided with the following conditions:
Starting in 2016, the government accelerates the customs clearance process for imported capital goods, aiming at speeding up a project under construction. Capital goods no longer need screening at the ports. So, it will cut the processing time from five days to only 30 minutes.
Since September 2015, the Indonesian government has been issuing several economic policy packages, among others, to improve the investment climate. We set a minimum wage formula so investors can predict the annual increase of wage, considering inflation and economic growth.
We support business to reduce their production costs, by cutting the price of fuel, gas, and electricity for industry. We revised the Negative Investment List (DNI) to be more open for foreign investment, specifically intended for sectors: industrial, creative economy, and tourism.