FAQ Investment FAQ Investment.pdf

FREQUENTLY ASKED QUESTIONS
ON INVESTMENT

2015

FREQUENTLY ASKED QUESTIONS
ON INVESTMENT

The pocket book of Investment Guide – F e ue tly Asked Questio s o
I est e t is a olla o ati e o k of the follo i g I stitutio s:

Foreword

Invest in Remarkable Indonesia
I do esia s fo eig poli toda e phasizes o e o o i diplo a a d p o-people
diplomacy. Therefore, Indonesian missions should advance initiative in promoting
e o o i oope atio to suppo t the ou t s e o o i de elop e t poli . I the
context of bilateral relations between Indonesia and Singapore, our foreign policy is
primarily focused on investment cooperation, as Indonesia welcomes foreign direct
investment that promotes sustainable economic growth, and provides tangible benefits
for the people.

In recent years, Singapore has been ranked the top foreign investor in Indonesia.
“i gapo e s i est e t a ou ted $ .7 illio i
, a d i the thi d ua te of
its realized investment reached $ 4.9 billion or 22.5% of the total FDI. In term of sector,
“i gapo e s i est e ts ai l a e a ufactures and services that give value-added
a d p o ide jo s oppo tu ities fo I do esia people. Fu the o e, “i gapo e s
investment has also expanded beyond Jakarta and even beyond Java Island that
provides opportunities to realize an equitable economic development in Indonesia.
Taking into account of the above development, the Embassy of the Republic of
Indonesia in Singapore, the Embassy of the Republic of Indonesia in Malaysia, and the
Indonesia Investment Promotion Centre in Singapore (IIPC) took an initiative to publish a
handbook on investment in Indonesia, which will provide guidance related with
investment procedures. Every page in this handbook has been intended to provide
information on sequences of investment in Indonesia. The chapters incorporated in this
book are truly a collective effort, and I therefore would like to thank all the contributors
who involved in the writing of this book.

Singapore, 8 December 2014
ANDRI HADI
Ambassador of the Republic of Indonesia

to Singapore

Foreword

Invest in Remarkable Indonesia
Let me begin with these facts; Indonesia is the largest economy in Southeast Asia and
the only ASEAN member country who becomes the G-20 member. Indonesia is also a
pa t of the e g oupi g G o th Ma kets , a g oup of four countries who represent
1% of the total world GDP. Much less affected by the global financial crisis compared
to its eigh ou i g ou t ies, I do esia s e o o
ge
.7% i
, aki g
The Wo ld s Most “ta le E o o
i the Last Fi e Yea s a ording to The
Economist Magazine. Under such facts, it is safe for me to say that foreign investors
should put Indonesia on the top priority when they plan to invest abroad.
Especially for Singapore and Malaysia, Indonesia is the nearest neighbour. I believe,
investing in Indonesia will be much easier and more beneficial for Singaporean and
Malaysian businessmen rather than investing in any other countries.

B pu lishi g this po ket ook F e ue tl Asked Questio FAQ of I est e t i
I do esia , e ould like to assist the prospective investor to have better
understanding of investing and all matters related with doing business in Indonesia.
This book consists of answers of simple questions related to investment that are
frequently asked by prospective or potential investors. Realizing this book is far from
perfect, I encourage you to directly contact us for further information, while we are
improving the quality of this book from time to time.
I do hope this book helps. Thank you.

Kuala Lumpur, 5 December 2014
HERMAN PRAYITNO
Ambassador of the Republic of Indonesia
to Malaysia

List of Contents
-

Foreword from KBRI Singapore

-

Foreword from KBRI Kuala Lumpur

-

Introduction of BKPM One-Stop Service Centre

I.

Frameworks of Investment procedure

1-2

II.

Description on the Frameworks of Investment

3-7

III.

Taxation

8-9

IV.

Investment Incentives

10-14

V.

Land Ownership

15-16

VI.

Immigration

17-20

VII.

Labours Law

21-30

VIII.

Trade

31-34

IX.

Related Government Agencies

35-38

INTRODUCTION OF BKPM ONE-STOP SERVICE CENTRE (OSS-C)
The One-Stop Service Centre (OSS Centre) at BKPM office was officially
launched on 26 January 2015, with the prime objective of unifying
Investment related services and licenses matters. The platform was
formed by joint operation between BKPM and 22 Government bodies
consisting of various Ministries, Government agencies and Institutions.
The platform will enhance the systemic efficiency of investment
related matters by providing the renowned financial institution
method of separating the departments into Front and Back offices.
The Front offices will emphasis in facilitating various consultations,
inquiries, and document admission pertaining to investment subject
matter, while the Back Office will focus on due diligence groundwork
and processing of investment related licensing matters. Diagram below
shows the current frameworks on the flow of BKPM new OSS-C
concept.

I. DESCRIPTION ON THE FRAMEWORKS OF INVESTMENT PROCEDURE
INITIAL-STAGE
INVESTOR:

 Investor is expected to plan-out their investment activity thoroughly and submit an
investment proposal complete with business description to BKPM
BKPM:
 The Proposal will be screened by BKPM where it s classified into appropriate
business field as stipulated in KBLI (Indonesian Classification of Business Field) and
evaluated through whether it is closed or open with condition for foreign
investment.
 If the Business sector is open or open with condition, the foreign investor will be
able to apply for Investment Principal License, to begin the investment process,
subject to the condition stated in DNI (Indonesia Negative Investment List)
PREPARATION-STAGE
INVESTOR:
 Once the investment proposal is evaluated and allowed under the Indonesian
Negative Investment list, Investor will be able to apply for Investment Principal
License from BKPM, and start to set-up legal business entity in Indonesia.
 The BKPM PRINCIPAL LICENSE is the right given to foreign investor to certify that the
Investment activity is acknowledged and thus allowed to establish legal business
entity in Indonesia.
BKPM:
 All application for Principal License will be done through BKPM-Online service

platform. All Investor will always be able to approach BKPM office for advice and
assistance in the application process.
PUBLIC NOTARY:
 Once the Principal License is approved by BKPM, Investor will be able to set up its
Business entity by engaging any Public Notary office to draft the establishment of
PT. PMA Company Deed of Establishment. This draft will need to be ratified by
Ministry of Law and Human Rights to be legalized and officially posted in the State
gazette.
PROVINCIAL GOVERNMENT:
 In parallel to establishing PT. Company deed, Investor will also be able to apply for
the necessary provincial government licenses, which mainly refer to the regional
regulation and certification for operating business entity.

Investing in Indonesia - FAQ | 1

 Depending on the business sector, the licenses are Letter of Domicile,
Environmental License, Building Permit, Nuisance Ordinance permit, Location
Permit and Company registration certificate
MINISTRY OF LAW AND HUMAN RIGHTS, DIRECTORATE OF TAX, IMMIGRATION:
 These set of Ministries and Government Agencies, will issue the main licenses and

its related certifications needed by PT. PMA to start its construction/setting-up
process. These main licenses are Ratification on the Deed of Establishment, Tax
Registration Number, and the immigration license to employ foreign worker.
Information on the establishment of PT. PMA in more details is explained in the
INVE“TMENT BA“IC INFO‘MATION se tio , Questio 3, page 7-9.
SETTING-UP STAGE
BKPM ONE-STOP SERVICE CENTRE (OSS-C):
 In the set-up stage, Investor with Legal Business Entity will be able to start setting
up its business infrastructure and processing all the required licenses from Technical
Ministries. With the establishment of OSS-C, high officials from 22 Technical
Ministries and Government agencies will be positioned in BKPM to attend to all
Investment inquiries and also application of the technical licenses pertaining to their
business sector.
 Even at the Preparation stage of prior to committing to apply principal license,
Investor will be able to consult directly with these technical ministries to understand
in-depth pertaining to legal procedures and technicalities on their business licenses.
 During their Setting-up stage (Construction stage), Investor will be able to apply for
the technical licenses with the BKPM One-stop Service to simplify and expedite the
setting-up process, and start the business operation as soon as possible
FINAL-STAGE

BKPM:
 Once the company is ready for commercial stage, PT. PMA will be able to apply for
its Business license from BKPM to start its business operation.
* Additional Notes:
All foreign investors who set up business entities are mandatory to submit Investment
activity report (LKPM) periodically to BKPM.
The PT. PMA will be need to update the Investment activity report every quarterly
during its setting-up period (after owning principal license) and bi-annually after
receiving its operational (after owning business license)

Investing in Indonesia - FAQ | 2

Investing In Indonesia Frequently Asked Question (FAQs) for New Investors
II. INVESTMENT BASIC INFORMATION
Q-1: I want to invest in Indonesia. What are the basic things I should know first?
Answer:
First you have to check whether your business is open for foreign investment in
Indonesia in accordance to the investment negative list under the Presidential Decree
No 39 Year 2014 that stipulates the sectors which are closed or open to foreign
investment and sectors which are open with stipulation. If the business sector is not
listed in the negative list, the business will be considered open and allowed for up to
100% foreign ownership.
The legal entity of the foreign company should be a Limited Liability Company, or in
Indonesian Language called Perseroan Terbatas (PT). The PT company should be
owned by minimum two parties, each party is either individual or corporate.
According to Indonesian Law, any company with any percentage of foreign
shareholding is considered as a foreign company or foreign-owned-PT-company, in
short PT. PMA, stands for Penanaman Modal Asing.
Additionally, it is imperative that new investor has to learn more about the location of
their investment such as the market activity, office location, manpower procurement,
and the regulations pertaining to their business sector.
Q-2: What is the minimum investment for foreign investment company?
Answer:
Minimum investment for a PT. PMA is Rp. 10.000.000.000,- (ten billion Indonesian
Rupiah), or equivalent to around USD 1.2 million based on current exchange rate. This
applies to all business sectors and the amount of minimum investment is not
including the value of the land and buildings owned by the company. In addition, the
minimum paid up capital of a PT. PMA is 25% of investment or Rp. 2.500.000.000 (two
and a half billion Indonesian Rupiah).
Q-3: How does foreign investor incorporate a company in Indonesia?
Answer:
Once the Principal license is issued by BKPM, the investor will be able to establish the
legal entity of your company in Indonesia by engaging a public notary to issue a Deed
of Establishment. The Deed of Establishment of PT. PMA could be issued by public
notary in Indonesia and it is prepared in Indonesian Language.

Investing in Indonesia - FAQ | 3

The Deed of Establishment contains the following information:
1. Name and address of the company
2. Line of business of the company
3. The articles of association
4. Identity of the founders of the company (minimum 2 shareholders)
5. The composition of the Board of Directors (BOD) and the Board of
Commissioners (BOC) of the company
6. The identity of the company shareholders and the share of ownership
After the establishment of the legal entity, the public notary will register the new
PT. PMA to the Ministry of Law and Human Right of the Republic of Indonesia. Once
registered, the establishment of new PT. PMA will be published in the state gazette.
The ratification of legal entity by the Ministry of Law and Human Right of Republic of
Indonesia will serve as the basis of establishment of PT. PMA. From this point, the PT.
PMA will be able to start setting up the company infrastructure and related
operational licenses.
Notes:
- Before establishing the PT. PMA, you should check the availability of the company
name that you want to set up from the Ministry of Law and Human Rights of the
Republic of Indonesia through public notary in Indonesia
- With respect to applications of any licences from BKPM or other
government institutions in Indonesia, a ll information on the application has to
refer to the Deed of Establishment of PT. PMA. Any changes of company s condition
which is not relevant with the Deed of Establishment, such as change or expansion of
business sector, change of company s location or business activity s location, should
be informed to the BKPM and related government agencies to get licenses
amendments.
- The additional documents in setting up the PT. PMA include, but are not limited to,
the following:
 Tax Identification Number or NPWP, can be applied through online service of
Indonesia Directorate General of Taxes at https://ereg.pajak.go.id (currently the
service is only available in Indonesian).
 Letter of Domicile or Surat Keterangan Domisili Perusahaan (SKDP), can be
obtained from the local (regional) authority where the PT. PMA is located and
applicable through the office of building management or industrial estate
management.
 Import Identification number or API-U/API-P is applicable through BKPM.

Investing in Indonesia - FAQ | 4

Q-4: Are there any other licenses required to start the business?
Answer:
It depends on the business sector. Generally, trading or service provider company
could start the business operation as soon as it receives the business license.
However, other business sectors, such as manufacturing, plantation, information and
technology, education, medical and health, as well as hospitality, should obtain
specific licenses pertaining to their business sector from relevant government
agencies/ministries.
PT PMA is required to obtain company registration number or Tanda Daftar
Perusahaan ( TDP ) when business license is already obtained from company
registration office, i sho t TPP , at the regional authority office.
The requirements for PT. PMA in obtaining TDP are as follows:
 Copy of deed of establishment
 Copy of deed of establishment amendment (if any)
 Original and copy of co pa s ratification of legal entity by Minister of Law
and Human Right
 Copy of director identity card / passport
 Copy of tax identification number
 Copy of business license
The company operations that could potentially impact the environment are also
required to undertake environmental impact analysis and gain approval from the
Ministry of Environment of Indonesia.
Q-5: Other than setting up PT. PMA directly, is there another method to evaluate
Indonesian market?
Answer:
Yes, foreign investor could set up a representative office to study the market for a
period of 3 years. A foreign company Representative office (Kantor Perwakilan
Perusahan Asing /KPPA) is not a legal entity because it only represents a foreign
company located within Indonesia. It could be established in the form of Foreign
Representative office or Sales Representative office. Stipulations pertaining to the
operations of Foreign Representative office in Indonesia are as follows:
 The office activities are limited to supervising, liaison, coordinator, and handling
o pa s i te est i I do esia a d its affiliated o pa ies.
 The office is prohibited from any business dealings and transaction activities.
 The office is not allowed to be involved in any management activities of a
company, subsidiaries or branch companies in Indonesia
 The head of Representative office is fully responsible for the office, must reside
in Indonesia, and is not allowed to have other job outside the office.

Investing in Indonesia - FAQ | 5

A Representative office shall be established with the approval of the BKPM and the
application is now applicable through BKPM online service as well. After getting the
approval, the Representative office should get Company Registration Certificate
(Tanda Daftar Perusahaan/TDP) from the local Department of Trade before the start
the operations.
Following are the required documents for applying BKPM KPPA:
1. Copy of Articles of Association and its amendment of the head office (parent
company);
2. Latest structure of Board of Directors
3. Copy of valid passport for the Director (Authorizer of Letter of Appointment)
4. Letter of appointment from the head office (parent company) to the Chief
Representative officer;
5. Copy of valid passport (for expatriate) or identity card (Kartu Tanda
Penduduk/KTP) and tax identification or NPWP (for Indonesian) of Chief
Representative officer;
6. Letter of statement from the Chief of the Representative office concerning the
willingness to stay and only work in the position as the head of the
Representative office without doing any other business in Indonesia; and
7. Power of attorney (if necessary).
A Representative office is required to submit following documents for to apply for
TDP:
1. Letter of Domicile (SKDU) from the relevant building management or the local
authority;
2. Taxpayer Registration Number (Nomor Pokok Wajib Pajak/NPWP);
3. BKPM KPPA Approval; and
4. Copy of head Representative officer Identification (KTP/Passport).
Q-6: Can I set up a company anywhere in Indonesia?
Answer:
Yes, you can set up a company in any part of Indonesia. However, there are
restrictions for some business sectors in certain regions. Manufacturing companies
should be located within the industrial estate park in Indonesia, unless it is otherwise
stated by regional regulations.
Q-7: For license registration, do I have to register at BKPM Jakarta Head Office?
Answer:
For the time being, application for Principal License has to go through BKPM-Online
service (http://online-spipise.bkpm.go.id). Other licenses such as Representative
office license, Import Identification Number and Business License still go through
BKPM Head office in Jakarta.

Investing in Indonesia - FAQ | 6

Q-8: What sector is recommended for foreign investors like me to invest in
Indonesia?
Answer:
As of 2015, Indonesian Government has laid the new focus on several business
sectors as planned in the investment strategic planning for the period of 2015-2019.
These priorities sectors were selected based on the economic advantages, growth
factors and productivity aspects. The sectors are as follows:
Sectors

Industries, Eg.

Power Generation

35 GW new projects, 7 GW projects in the
pipeline

Labour-intensive industry

Textile, Food & Beverages, Furniture, Toys

Import-substitution industry

Chemical & Pharmaceutical, Iron & Steel

Export-oriented Industries

Electronics, CPO & its derivatives, Wood
Product, Pulp& Paper, Automotive, Machinery,
Rubber Products, Fish & its derivatives, Shrimp

Downstream industry of
natural resources

Cacao, Sugar, Smelter

Maritime

Shipping, Ship Building, Sea port, Cold Storage,
ICT for maritime

Tourism

Strategic Tourism areas, MICE

Q-9: How to open a bank account?
Answer:
The regulation of 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 Foreign Investment Company be transacted
through a special foreign investment bank account in Indonesia. In general, the
required documents to open such account are as follows:
1. BKPM Principal License, deed of establishment, domicile letter, tax
identification number
2. The power of attorney to the person who is given the authority to open bank
account
3. Copy ID/passport of the authorized person to open bank account
4. Photo of the authorized person to open bank account
5. Minimum deposit of Rupiah 10 million or US$ 1.000
Note:
Banks may have additional document requirements.
Investing in Indonesia - FAQ | 7

III. TAXATION
Q-10: How is the tax structure for foreign investment?
Answer:
The basic tax obligation is income tax which is progressive and applied to both
individual(s) and enterprises. A PT. PMA that is located and carries out business
activities in Indonesia and foreign individual who is working and earn income in
Indonesia generally have to assume the same tax obligations as resident taxpayers. A
self-assessment method is used to calculate income tax.
Tax rates for individual(s) and corporate are described in the following tables:
a. Tax rates for individual(s)
Taxable annual income

b.

Income tax rate

Up to Rp. 50 million

5%

Over Rp. 50 million to Rp. 250
Million

15%

Over Rp. 250 million to Rp. 500
Million

25%

Over Rp. 500 million

30%

Tax rates for corporate(s)
Year
2009
2010 and onwards

Income tax rate
28%
25%

Limited company which 40%
of their shares trade in stock
exchange market

5 % Lower than
normal rate

Gross turnover up to Rp.
50 billion

50 % deduction
from normal rate

Withholding tax system is used in Indonesia to collect the income tax. Where a
particular item of income is subject to withholding tax, the payer is responsible for
withholding or collection of the tax. For example, employers are required to withhold
income tax of the salaries payable to their employees and pay the tax to the tax office
on their behalf.
Note:
Detailed information on income tax should refer to The Income Tax Law No. 36 Year
2008.
Investing in Indonesia - FAQ | 8

Q-11: Is there any other information related to tax obligation for
foreign investors?
Answer:
Land & building tax. The owners of land & buildings have to pay tax annually on land,
buildings and permanent structures. The effective rates are nominal, typically not
more than one tenth of one percent per annum (0.1%) of the value of such assets.
Value Added Tax. In normal cases, 10% Value Added Tax (VAT) is applied to imports,
manufactured goods and most services. However, according to the government
regulation No. 7 Year 2007, Free Charge of VAT to the importation of certain VAT
charged goods having the strategic term which consist of:
1. Capital Goods in the form of machineries and factory equipment, either in
installed or separated, including spare parts;
2. Feed of poultry and fish and raw materials to make feed;
3. Seed and/or seeding of agricultural material, plantation, forestry, livestock,
aquaculture, or fishery; and
4. Agricultural products.
Sales Tax on Luxury Goods. These tax ranges from 10% to 75%. The list of the tax
should be referred to the Government Regulation No. 12/2001 jo. No. 43/2002 jo.
46/2003 and other related tax implementation regulations.
Stamp Duty. The stamp duties nominal are either Rp.3,000 or Rp. 6,000 on certain
documents. The rate of Rp.6,000 is applicable for letters of agreement and other
letters, su ch as Notary Deed and Land Deed including its copies. For all
documents bearing a sum of money, the rate is Rp. 6,000 when the value stated in
the document is more than Rp. 1 million, and Rp. 3,000 when the value is between
Rp. 500,000 and Rp. 1 million. Below Rp. 500,000 is not subject to stamp duty. For
cheques, the rate is Rp. 3,000 regardless of money value stated.
Deemed withholding tax applicable for Trade Representative office in Indonesia.
Decree of Directorate General of Taxation, KEP -667/PJ./2001, states that deemed
withholding tax for Trade Representative office is payable at the rate of 0.44% out of
1% gross export value. This is only applicable to foreign taxpayer that has no doubletax treaty agreement. For more information of the payment details, please refer to
Directorate General of Taxation Circular no SE-2/PJ.03/2008.
Tax aside, local government at provincial or municipal level sometimes apply
retribution for some business sectors. It varies from each region.

Investing in Indonesia - FAQ | 9

IV. INVESTMENT INCENTIVES
Q-12: Is there any investment incentive provided by the Indonesian Government
for foreign investors?
Answer:
Yes. Indonesian government provides incentives as follows:
A. Import Duties
All investment projects of PMA as well as PMDN projects which are approved by the
Investment Coordinating Board or by the Office of Investment in the respective
districts, including existing PMA and PMDN companies expanding their projects to
produce similar product(s) in excess of 30% of installed capacities or diversifying
their products, will be granted the following facilities:
1. Relief from import duty so that the final tariffs b e co m e 0 % . Th i s
fa ci lity ap p l ic ab l e on :
• The importation of capital goods namely machinery, equipment, spare parts
and auxiliary equipment for an import period of 2 (two) years, started from
the date of stipulation of decisions on import duty relief.
• The importation of goods and materials or raw materials regardless of
their types and composition, which are used as materials or components
to produce finished goods or to produce services for the purpose of two
years full production (accumulated production time).
• The decree as above mentioned is not applied to the assembling of cars
and motor bikes except for its component industries.
2. Exemption from Transfer of Ownership Fee for ship registration deed / certificate
made for the first time in Indonesia.
B. Tax Facilities (Tax Allowance)
Based on the latest Government regulation No 18 of 2015, 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. This latest regulation replace its previous preceding Government
regulation no 52 of 2011.
Facilities provided by the new Government regulation no 18 of 2015 are:
 Reduction of net income by 30% (thirty percent) of the total investment
for 6 (six) years respectively at 5% (five percent) per annum.
 Accelerated depreciation and amortization.
 Income Tax on dividend income paid to foreign tax subject other than the
form of permanent establishment in Indonesia, amounted to 10% (ten
percent) or at lower rates.
Investing in Indonesia - FAQ | 10

 Compensation for losses that are later than 5 (five) years but not more
than ten (10) years, for:
 Company located in the Industrial Area and / or Bonded zone
 Company operating in Construction development for infrastructure
sector
 Company that use domestic raw materials at least 70%
 Company that is absorbing 500-1000 of domestic workforce
 Company that is conducting research and development (R & D)
 Company that is doing a re-investment
 Company that exports at least 30% of sales/export.
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 18
year 2015. There are 66 business sectors listed in Attachment I and 77 business
sectors listed in Attachment II.
Some of the differences in Government Regulation No. 18 Year 2015 compared to
Government Regulation No. 52 of 2011:

Criteria for companies that can get the facilities Tax Allowance in
Government Regulation No. 52 Year 2011 is now part of the
requirements in the main body of the Regulation. The main criteria to
receive Tax Allowance facilities include:
i) High investment value or export-oriented
ii) High labour employment absorption
iii) High domestic component usage

Additional facility for company who reinvest and for company that export
30% of its sales value.
In regards to Green Investment, several business sectors that received Tax
allowance are as follows:

No

Business Sector

KBLI

1.

Beef cattle breeding and cultivation

01411

2.

Cultivation of Teak forest

02111

3.

Cultivation of Pine forest

02112

4.

Cultivation of Mahogany forest

02113

5.

Cultivation of Sonokeling forest

02114

Investing in Indonesia - FAQ | 11

6.

Cultivation of Albisia/Jeunjing forest

02115

7.

Cultivation of Sandalwood forest

02116

8.

Cultivation of Acacia forest

02117

9.

Cultivation of Eucalyptus forest

02118

10. Cultivation of other forestry

02119

11. Gasification of Coal at Mine site

05102

12. Geothermal power plant

06202

13. Industry of semi-conductor and other
electronic components

26120

(Including Silica ingot, cell devices,
photovoltaic modules, and optical pick up,
LCD TV Panel, 3d TV Panel, OLED TV Panel,
IC, smartcards)
14. Industry of gas tube lights

27402

(Compact lamp from LED)
15. Industry of steam engines, turbines and
windmills

28111

16. Power plant

35101

(Renewable
energy
Electrical energy)

conversion

into

17. Procurement of natural gas and artificial
gasses

35201

Investing in Indonesia - FAQ | 12

18. Collection, purification and distribution of
clean water

36001

19. Urban Transport

49413

(Land transport non-bus, e.g tram, street
car, cable car, overhead train, monorail)
20

Management and disposal of non-hazardous
waste

38211

C. Export Manufacturing
There are many incentives provided for exporting manufacture products. Some of
these incentives are as follows:
1. Restitution (drawback) of import on the importation of goods and materials
needed to manufacture the exported finished products.
2. Exemption from Value Added Tax and Sales Tax on Luxury goods and materials
purchased domestically, to be used in the manufacturing of the exported products.
The company can import raw materials required regardless of the availability of
comparable domestic products.
D. Bonded Zones
The industrial companies which are located in the bonded areas are provided with
many incentives as follows:
1. Exemption from import duty, excise, income tax of Imported goods (Income tax
article 22), Value Added Tax on Luxury Goods, of the importation of capital goods
and equipment including raw materials for the production process.
2. Allowed to divert their products amounted to 50% of their export (in term of value)
for the final products, and 100% of their exports (in term of value) for other than
final products to the Indonesian customs area, through normal import procedure
including payment of customs duties.
3. Allowed to sell scrap or waste to Indonesian custom area as long as it contains at
the highest tolerance of 5% of the amount of the material used in the production
process.
4. Allowed to lend their own machineries and equipment to their subcontractors
located outside bonded zones for no longer than 2 (two) years in order to further
process their own products.

Investing in Indonesia - FAQ | 13

5. Exemption of Value Added Tax and Sales Tax on Luxury Goods on the delivery of
products for further processing from bonded zones to their subcontractors outside
the bonded zones or the other way around as well as among companies in these
areas.
E. Free Trade Zone
The companies operating in Free Trade Zone areas enjoy several incentives such as
exemption of import duty and excise, import-related taxes (VAT, Withholding tax
/PPh) not collected. Additionally, free trade zone also offer faster issuance on
investment related licenses and immigration clearance in terms of foreign employee.
The limitation for operating in Free trade zone is that exporting goods out of Free
trade zone into Indonesian custom area, will apply the tax duty and excise back on
the previously duty-exempted goods.
Q-13: What about Tax Holiday for foreign investors?
Answer:
In August 2011, the Ministry of Finance of Indonesia introduced Regulation No.
130/PMK.011/2011 regarding tax holidays for large scale investments up to 5 - 10 years.
Applications for such projects must meet the specified criteria and are to be submitted
to the Ministry of Industry which will evaluate the eligibility of investment summary of
Ministry of Finance Regulation No. 130/ PMK.011/2011.
The company should meet the following criteria:
1. The company was established as an Indonesian business entity after 15th
August 2010.
2. The capital investment must be greater than 1 trillion Rupiah with a minimum
of 10% of the investment held as a deposit on a bank account in Indonesia until
commercial production begins
3. Be i ol ed i
pio ee i dust ies su h as pet o he i al efi e ies,
infrastructure, renewable energy, telecommunication equipment and base
metals production.
It is, then, eligible for the following incentives:
1. An exemption from corporate income tax for a period from 5 and up to 10
years, beginning from the first date of commercial production
2. Afte the i itial ta holida pe iod e pi es, a additio al i e ti e of a %
reduction in the amount of corporate income tax payable may be made
available for an additional two year period.

Investing in Indonesia - FAQ | 14

V. LAND OWNERSHIP
Q-14: Can I buy and own land in Indonesia?
Answer:
According to the Investment Law no. 25 Year 2007, the investors can buy and own land
in Indonesia for a specified period of time by means of the following rights:
1. Right to Cultivate or Hak Guna Usaha (HGU) is the right to exploit land that is
owned by the state for farming, fishery and livestock purposes. HGU may be
given for 95 years by giving the right in advance for 60 years and could be renewed
for 35 years.
2. Right to Build or Hak Guna Bangunan (HGB) is the right to construct and own
buildings on land owned by the state or individuals and which are not farm lands.
HGB may be given for 80 years by giving the right in advance for 50 years and
could be renewed for 30 years.
3. Right to Use or Hak Pakai is the right to use and/or earn income from land owned
by the state or individuals. The stipulation on the right to use is set by a relevant
official or under an agreement with the land owner. The right to use may be
given for 70 years by giving the right in advance for 45 years and could be renewed
for 25 years.
HGU and HGB rights can be held by Indonesian citizens and corporate bodies that are
established under Indonesian law and are based in Indonesia (including PT. PMA) but
not by foreign individuals or foreign representative offices. The ownership of these
rights is allowed to change during the validity of contract period.
Right to Use can be held by Indonesian citizens and corporate bodies that are
established under Indonesian law and are based in Indonesia (including PMA) as well
as by foreign individuals or representative offices. If the land belongs to the state, the
Right to Use can be transferred to another party with approval of the relevant
government official. The Right to Use land belonging to individuals can also change
hands.

Investing in Indonesia - FAQ | 15

Q-15: Can a foreigner or PT. PMA purchase a property in Indonesia?
Answer:
It depends on the type of property:
1. For a landed building (house, office, factory) it is only allowed for a PT. PMA
and the status of the land is HGB or the Right to Use (Hak Pakai).
2. For a condominium or apartment and office space, the foreign individual or PT.
PMA can own it as long as it is t a part of a government-subsidized housing
development and the land status of the building is strata title status under the
Right to Use (Hak Pakai).
Q-16: I want to buy plantation land in Indonesia. What will be the status of the
land?
Answer:
- The title of the plantation land is Land Cultivation Right (Hak Guna Usaha or HGU)
for agricultural, fishery or animal husbandry purposes. You may buy and own the
land, but the status of the land is state-owned land and the HGU is only valid for
certain period of time.
- The type of plantation crops should be suitable with the HGU.
- This right can be held by Indonesian individuals/entities as well as government
approved PT. PMA (foreign joint venture) companies, and may be mortgaged.
Q-17: What is the status of land for a PT. PMA who is a property developer?
Answer:
- PT. PMA who is a property developer may buy a land in Indonesia to develop the
property. The status of the land is Right to Build or Hak Guna Bangunan (HGB)
which will be split to small lots accordingly. Later on, the buyer of the property could
apply to change the status of the land lots to freehold right (Hak Milik) which is
allowed only for Indonesian citizen.

Investing in Indonesia - FAQ | 16

VI. IMMIGRATION
Q-18: Do I need a visa to visit Indonesia? Answer:
Yes, certain nationalities need to obtain a visa to visit Indonesia. This depends on
the purpose of visit and the length of stay. For nationalities of ASEAN countries, they
do not need visa to visit Indonesia for socioculture and tourism purpose. They may
stay up to 30 days in Indonesia. For the government official of ASEAN countries who
hold official and diplomatic passport, they may visit Indonesia without visa for 30
days.
For the other purposes, such as business trip, ASEAN countries nationalities should
apply visa from the Indonesian Embassy in their respective countries.
The visa purpose to foreigners who will travel to Indonesia as follows:
a. Tourist
b. Family Visit
c. Social and Culture
d. Government
e. Sport (but not commercial)
f. Short Course
g. Give a counseling
h. Unexpected working
i. Journalism
j. Movie Making
k. Business purpose
l. Sale/reseller commodity
m. Seminar
n. International Exhibition
o. Open a branch office in Indonesia
p. Transit
Visa-On-Arrival (VOA) is available at the designated point of entry (by
airport/seaport). The 62 eligible countries for VOA as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Algeria
Arab Emirate
Argentina
Australia
Austria
Bahrain
Belgium
Brazil
Bulgaria
Canada

Investing in Indonesia - FAQ | 17

22.
23.
24.
25.
26.
27.
28.
29.
30.
31.

Iceland
India
Ireland
Italy
Japan
Kuwait
Latvia
Libya
Liechtenstein
Lithuania

43. Poland
44. Portugal
45. Qatar
46. Romania
47. Russia
48. Saudi Arabia
49. Slovakia
50. Slovenia
51. South Africa
52. South Korea

11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

Cyprus
Czech Rep.
Denmark
Egypt
Estonia
Fiji
Finland
France
Germany
Greece
Hungary

32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.

Luxembourg
Maldives
Malta
Mexico
Monaco
Netherlands
Norway
New Zealand
Oman
PR of China
Panama

53. Spain
54. Suriname
55. Sweden
56. Switzerland
57. Taiwan
58. Turkey
59. Timor-Leste
60. Tunisia
61. USA
62. United
Kingdom

Q-19: What are the general requirements to apply visa?
Answer:
All the applicants for any types of visa must comply with the general requirements
below:
1. Provide complete and signed visa application form. The application form is
available in the Embassy or could be downloaded from the website of respective
embassy of intended application.
2. The original passport and the copy.
*For non-Malaysian passport holders, the applicant must provide copy of
Malaysian visa/Malaysian entry stamp/Malaysian IC/permanent resident IC.*
3. The passport must have at least 2 blank pages left for the use of visa sticker and
stamps. For single entry visa, the passport must be valid for at least 6 months
after the date of entry, and for the multiple business visa and temporary stay visa
(VITAS), it must be valid for at least 18 months after the date of entry.
4. A guarantee of the available of funds to cover living expenses while in Indonesia
(e.g the last 3 months bank statements or traveller s cheque)
5. 2 (two) photographs (with colour backgrounds, passport size)
6. The applicants are not in the immigration alert list and come in person.
Notes:
- The embassy has the authority to reject any applicants
- Additional documents will be required, depending on the purpose of stay

Investing in Indonesia - FAQ | 18

Q-20: How much should I pay for the visa?
Answer:
In regards to Visa Application fees, Due to the currency fluctuation visa fees are
adjusted a o di gl to the ea h ou t s u e . Fo this easo , ea h isa appli a t
is recommended to contact directly to the Indonesian Embassy/Consulate General
located at the respective country. In the case where Indonesian Government
representative is not available at the applicant resident city/area, please do contact
Indonesian Minister of Foreign affairs at the following links www.kemlu.go.id.
Q-21: How to apply for visa to work and stay in Indonesia?
Answer:
The applicant can apply online by go to website www.imigrasi.go.id and click Visa
Section or come directly to Directorate of Immigration
Any foreigner intending to work and stay in Indonesia must get temporary stay visa
(Visa Izin Tinggal Sementara/VITAS). To get VITAS, applicant must have a sponsor both
in their home country and in Indonesia.
The application should be submitted by sponsor in Indonesia to the Directorate
General of Immigration in Jakarta. Once the application approved, the Directorate
General of Immigration in Jakarta will give the approval letter to the
sponsor/counterpart in Indonesia and to the Indonesian Embassy where the visa will be
collected.
The Embassy will issue the VITAS only after receiving approval letter from the
Directorate General of Immigration in Jakarta. Once the foreigner enters Indonesia by
using VITAS, they should apply for temporary stay permit card (Kartu Izin Tinggal
Terbatas/KITAS) from the local immigration office.
Note: Application of working permit will be explained further in the labours law below.
Q-22: Can I bring my family to Indonesia?
Answer:
Yes, you can bring your family to Indonesia. They should get VITAS and KITAS by
following the same procedures mentioned above.
Q-23: Is there any facilitation of VISA for Investors?
Answer:
Yes, there is Visa facilitation scheme applicable for Investor in the Special Economic
Zone. Currently, Head of Integrated Investment Services Unit (Kepala Unit Pelayanan
nvestasi Terpadu-UPIT), which has been designated by the Director General of
Immigration to implement the licensing authority in the provision of facilities for
licenses and investment to investors who are in a Special Economic Zone (SEZ) which
cover certain areas in Batam, Bintan and Karimun in Riau Islands.
Investing in Indonesia - FAQ | 19

Immigration officials can grant approval of Limited Stay Visa to Foreigners who live in
the SEZ for people coming as:
- Investors
- Working as an expert
- Spouse of Limited Stay Permit holders
- Parents of child under 18 (eighteen) years old
- Foreign home owner and / or elderly in accordance with existing regulation
Officials at the Overseas Indonesian Representative can grant a Limited Stay Visa for 2
(two) years for Investors/Investor after receiving approval from the Immigration Officer
at Integrated Services Unit (UPIT) in Special Economic Zones.
In the framework of assessment or business development in the Special Economic Zone
(SEZ), Authorized Overseas Indonesian Representatives are allowed to provide a
Multiple-Trip VISA on his which is applicable for one (1) year for foreigners with a
period of stay of 60 (sixty) days.
In regards to provision of short-term work for the development of Special Economic
Zones (SEZs), foreigners with access to visa-free temporary visit (Bebas Visa Kunjungan
Singkat- BVKS) can be given visa on arrival / Visa On Arrival for a period of 7 (seven)
days.
Limited Stay Visa Requirements (for SEZ area):
- A request from the Company/Sponsor
- Fill out the Application and Guarantee Form
- Company Profiles / Sponsors
- RPTKA (Plan to Employ Foreign Employees)
- CVs or Resumes of Applicant
- Copy of Passport
- Photo 4x6 cm (2 copies)
Multiple Visit Visa Requirements (for SEZ area):
- Application from the Company
- Fill out the Application and Guarantee Form
- Company Profiles / Sponsors
- CVs Applicant
- Copy of Passport
- Photo 4x6cm (2 copies)

Investing in Indonesia - FAQ | 20

VII. LABOURS LAW
Q-24: What is the minimum wages in Indonesia?
Answer:
In Indonesia, minimum wage is the monthly wage payable to labour. It is mainly
consist of fixed basic wage that is stipulated by Regional Governor as safety net.
Q-25: What is the list of Minimum wage in Indonesia for the year of 20xx?
Answer:
Minimum wage in Indonesia is reviewed every year by in-depth evaluation process
and consensus among the tri-partite group which consist of Government body,
Business Association and Labour Association.
Additionally, the evaluation and discussion is done at every provincial down to each
regencies/municipalities level based on the demographic and economic condition of
the region. The official determination of minimum wage per provincial region will be
legally issued by the Governor or the Provincial Government.
In this regards, Investor are encouraged to check the provincial minimum wage based
on the Provincial Government decree that will be issued each year. The Decree will
list the official minimum wage within the province and also its validity periods.
Investor could also inquire this information to BKPM office, subject to latest
information available at their disposal.
Q-26: How does Provincial Minimum wage apply to workers?
Answer:
Provincial minimum wage is applicable to labour intensive industry and other
industries as well. In the case where Provincial Minimum Wage is higher than the
current stipulated wage between companies and labour, further agreement can be
negotiated.
Q-27: Is there any obligation for employer to pay employees provident fund or
other social security fund?
Answer:
Yes, based on State Law no. 24 of 2011, employer will have to contribute a certain
share based on employee monthly wage in to the Social Security funding
p og a
e. The p og a
e ill p o ide e o o i assu a e fo e e e plo ee s
well-being.
The new Social Security agency, BPJS will continue to ensure that employer takes
part in the mandatory social security programmes such as Pension guarantee, Life
insurance, and Work-accident Insurance.
Investing in Indonesia - FAQ | 21

1. Pension guarantee programme (Jaminan Hari Tua)
Pension guarantee programme is basic protection for employee/labour to
guarantee against social-economic security risk.
The pension rate contribution by employer is 3.7% of employee monthly wage,
while the employee contribution is 2% of his/her monthly wage.
2. Life insurance programme (Jaminan Kematian)
In the event of non-related death occurrence, the programme will provide
economic assistance to the immediate family of the employee in form of
allowance amounting to Rp. 21.000.000,-.
Employer will contribute the insurance fee of 0.3% of monthly wage.
3. Work-accident Insurance (Jaminan Kecelakaan Kerja)
Work accidental insurance will cover the loss of income arising from risk
i u ed du i g e plo ee s dut f o hospitalizatio to disa ilit a d e e
death.
Employer will need to cover the full insurance fee ranging from 0.24% -1.74% of
employee monthly wage, depending on the work category.
The employer can check the rate for each category and the list of work under
each category in the Indonesian Government Regulation no. 14 of year 1993,
pertaining to implementation of Social Security programme for employment.
For more information on the details to social security pay-out structure, submission
of application, working details, and latest updates please contact BPJS directly at the
following link: www.bpjsketenagakerjaan.go.id

Q-28: Can I employ foreigners in my company and how many foreigners are allowed?
Answer:
Yes, in the framework of investment, expatriates are allowed to hold positions
where Indonesian nationals are not available or do not meet the requirements to do
the job and subject to the conditions that such positions are open for expatriates.
Expatriates can be employed in Indonesia only for certain positions and period.
Employers of foreign workers in this shall include:
a) Foreign trade representative, representative offices, representative offices of
foreign enterprises, representative offices of foreign news agencies
b) Private foreign enterprises
c) Legal entity that established based on Indonesian law
d) social institutions, religious, educational and cultural
e) impresario service tourism business

Investing in Indonesia - FAQ | 22

Employers of foreign labour can only employ foreign workers in an employment
relationship for a certain position and a certain time
Employers of foreign labour in the form of federal civil firm (Fa), the Federal
partnership (CV) and the Trade (UD) prohibited from employing foreign labour except
as provided in the State law
The ratio of expatriate to local worker is 1:1. It means the employment of 1
expatriate should be followed by the employment of minimum 1 local works.
Q-29: What about employing foreigner as a member of board of director?
Answer:
Foreigner could hold position as a member of director except the position of human
resources director who should be an Indonesian citizen.
Q-30: How much the charges working permit for foreigner?
Answer:
Companies employing foreigners are charged USD100/month (USD 1,200 per year per
expatriate employee to offset the costs of training Indonesian nationals (Article 47
Manpower Act number 13 Year 2003). This charge is administered through the
Ministry of Manpower and Transmigration.
Q-31: What is the flow of procedures to a recruit foreign worker?
First of all, the company (either local or PT. PMA) should submit RPTKA to the
Ministry of Manpower and Transmigration of Indonesia to get approval. Through
http://tka-online.depnakertrans.go.id/
Once approved, Indonesia Ministry of Manpower will issue RPTKA Endorsement to
the PT. PMA Company. The RPTKA Endorsement will then be used for application of
Visa Recommendation (TA-01).
Once approved The Visa Recommendation (TA-01) is approved by Ministry of
Manpower, it will be forwarded to Directorate of Immigration and to the PT. PMA
Company, to be used for final