Q :
What is the One Stop Service-Center (OSS-C)?
A :

The OSS-C at BKPM was innaugurated on 26 January 2015 to provide a simpler, faster, more transparent and integrated service for investors in Indonesia.



Investors no longer need to go around Jakarta to consult and obtain permits. At the OSS-C, 22 ministries and government institutions are now integrated. Investment licenses for almost all sectors have been delegated and served at BKPM, such as manufacturing industry, power, oil and gas and tourism sectors.


Having investment licenses processed in one system and working together under one roof will facilitate better coordination among related parties at the national level. This allows authorities to reduce the process time, synchronize procedures, avoid authority overlap and eliminate red tape.

Q :
Is there any fiscal facility offered by government for foreign investors?
A :

Yes. Indonesian government provides Investment Incentives as follows:

  • Import Duties
  • Tax Facilities (Tax Allowance)
  • Incentives for Export Manufacturing
  • Incentives for Bonded Zones
  • Incentives for Free Trade Zone
Q :
What about Tax Holiday for foreign investors?
A :

According to the Regulation of the Ministry of Finance Number 159/PMK.010/2015 and the Regulation of the Chairman of BKPM Number 19 Year 2015 the applicant or company should meet the following criteria:

  1. The company was established as an Indonesian business entity after 15th August 2011.
  2. Having new investment plan which has institution of no less than IDR 1,000,000,000,000,- (one trillion Rupiah).
  3. Submitting statement of ability to place fund in Indonesia banking of not less than 10% of the total investment plan as refered to in letter point 2, and such fund shall not be withdrawn before the commencement of investment realization implementation.
  4. Be involved in “Pioneer Industry” such as:
  • Upstream metal industry;
  • Oil refining industry;
  • Industry of organic basic chemicals derived from oil and natural gas;
  • Industry of machinery that produces industrial machinery;
  • Processing industry of agricultural, forestry and fishery products;
  • Industry of telecommunications, information and communication;
  • Marine transportation industry;
  • Processing industry which is a major industry in the Special Economic Zone or SEZ (KEK); and/ or
  • Economic infrastructure in addition to the use of Government and Business Entity or Public Private Partnership (PPP/KPBU) Scheme.

It is, then, eligible for the following incentives:

  1. An exemption from corporate income tax for a period from 5 (five) and up to 15 years, beginning from the first date of commercial production.
  2. Corporate Income Tax Reduction shall be granted not exceeding 100% and not less than 10% of the total amount of payable Corporate Income Tax.
Q :
Besides fiscal facilities, is there any other facility provided?
A :

Yes. Starting 2016, the government accelerates custom clearance process for imported capital goods, aiming at speeding up 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, Indonesian government has been issuing several economic policy packages, among others, to improve investment climate.

We set a minimum wage formula so investors can predict annual increase of wage, considering inflation and economic growth. We support business to reduce production costs, by cutting the price of fuel, gas, and electricity for industry. We revised the Indonesia Investment Guidance (DNI) to be more open and easier for (foreign) investors, including industrial sector, creative economy, and tourism.

Q :
What is the Direct Construction Facility (KLIK)?
A :

Ease of Direct Investment Construction (Kemudahan Investasi Langsung Konstruksi or KLIK), officially launched on February 22nd 2016, is a license that will be given to the investor who have investment plan in certain industrial/ bonded zones. With this license, investor is allowed to do the Construction-Stage directly after obtaining Principle License (IP).

Once the KLIK license is obtained, the investor is allowed to obtain other licenses paralelly while do the Construction-Stage, such as Building Permit (IMB), Environmental Permit (AMDAL and UKL/UPL), etc.

(Note: these licences should be completed prior entering Commercial-Stage)

Q :
What is the criteria for Direct Construction Facility?
A :

This facility can be enjoyed by any investor because there are no minimum limits required for investment value or the amount of labor as long as the investment plan located in certain industrial/ bonded zones assigned by Government of Indonesia.

So far, there are 14 industrial parks that have been set up by the government to implement this facility:

  • Central Java Province:
  1. Kendal Industrial Park
  2. Bukit Semarang Baru Industrial Park
  3. Wijayakusuma Industrial Park
  • East Java Province:
  1. Java Integrated Industrial and Port Estate (JIIPE)
  • South Sulawesi Province:
  1. Bantaeng Industrial Park
  • Banten Province:
  1. Modern Cikande Industrial Estate
  2. Krakatau Industrial Estate
  3. Cilegon Industrial Park
  • West Java Province:
  1. Bekasi Fajar Industrial Estate Industrial Park
  2. Delta Silicon 8 Industrial Park
  3. Karawang International Industrial City Industrial Park
  4. Suryacipta City of Industry Industrial Park
  5. Medan Industrial Park
  6. GT Tech Park Industrial Park
Q :
What is the 3-Hours Service (I23J) for investment?
A :

As one of a support in drawing more investment, Indonesia Government, through BKPM, officially launched “The Investment Licensing Service in 3 Hours” (Layanan Izin Investasi 3 Jam or I23J) on January 11st 2016. The service, which is part of the government’s 2nd economic policy package, aims to cut the time to wrap up licensing procedure for only 3 hours from workdays normally. The total permits issued by this service are ‘8+1’ products.

Q :
What kind of license will I obtain within three hours?
A :

Those who are using the service will receive ‘8+1’ licensing products, such as:

  1. The investment license (Principle License or IP).
  2. The Deed of Establishment and legal entity approval from the Ministry of Justice and Human Rights of the Republic of Indonesia.
  3. Tax ID (NPWP).
  4. Company Registration Number (Tanda Daftar Perusahaan or TDP).
  5. Foreign Worker Employment Permit (IMTA).
  6. Foreign Worker Employment Plan (Rencana Penggunaan Tenaga Kerja Asing or RPTKA).
  7. Producer Importer Identification Number (API-P).
  8. Custom Registration Number (Nomor Induk Kepabeanan or NIK).
  9. Letter on Land Availability Information (optional).

Q :
What is the requirement for 3-Hours Service?
A :

The criterias to get this investment quick service are:

  1. Planned value of investment at least IDR 100 billion, and/or absorbing at least 1,000 local workers.
  2. The investor come in person into BKPM OSS-C, if a candidate of shareholder represents other shareholders, he/she has to bring the letter of authority.
Q :
What are the penalties given to the companies who do not report their deliver investment realization report (LKPM)?
A :

In accordance with Regulation of the Chairman of Investment Coordinating Board Number 17 Year 2015 on Guidelines and Procedures for Investment Monitoring, BKPM may impose administrative sanctions for company which is not deliver investment realization report (LKPM) during project completion periode and no extenstion of the project completion period.

Administrative sanctions can be done by:

  1. Written and/or online warnings;
  2. Restrictions on business activities;
  3. Suspension of business and/or investment facilities; or
  4. Cancellation/Revocation Investment and/or business Licenses and/or the Investment facility.
Q :
How to fill in the use of labor in LKPM for the construction phase?
A :

Indonesia’s labor is filled with a total absorption including erector, seasonal and contract during the reporting period while Foreign workers filled in the employment of foreign workers who have obtained foreign working permit.

Q :
What components that included in the fixed capital and working capital?
A :

Fixed Capital consists of the purchase value and development of land, buildings, machinery/equipment and spare parts and others. The details of these columns are as follows:

  1. Purchase of land as expenses incurred for procurement, including the cost of development of land.
  2. Buildings including factory buildings, warehouses and infrastructure that exist within the project location.
  3. Machinery/equipment including spare parts, whether imported or local purchases including environmental pollution prevention equipment.
  4. Others include transport equipment, office equipment, office inventory and the cost of feasibility studies. The Working Capital is filled with the value of expenditures for raw/auxiliary materials, salaries/wages of employees and overhead expenses.
Q :
How to fill realizable value of investments in LKPM for the construction phase?
A :

Realizable value of the investment to domestic investment companies is in the form of Rupiah (IDR) while the foreign companies is in the form of United States Dollars (USD) or Rupiah (Rp). Additional columns of investment realization filled with additional value during the reporting period while the total column is filled with the value realization of investment projects in the reporting period (accumulated value) with the previous quarterly period.

If at the time of the reporting period there were no additional investments realizable value, then the additional column filled with 0 (zero) so that the column value of total current quarter equal to the total column of the previous quarter.

For a company that just sent the first LKPM, Additional Columns of investment realization value equals with the value of total investment realization column.

Q :
Is LKPM mandatory for every company?
A :

Based on Regulation of the Chairman of Investment Coordinating Board Number 17 Year 2015 on Guidelines and Procedures for Investment Monitoring, after getting investment permission from BKPM, the company has the obligation to submit a report on Investment Realization Report (LKPM). For companies in the construction stage, the company must submit LKPM Development Stage delivered every 3 (three) months. As for companies which already operate or in the commercial stage, have to submit LKPM and to be submitted every 6 (six) months. LKPM can be delivered directly to the BKPM by email: lkpm@bkpm.go.id.

Q :
What sector is recommended to invest in Indonesia?
A :

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 Infrastructure, Agriculture, Industry (Labor-intensive industry, Import-substitution industry, Export-oriented industry, Downstream industry of natural resources), Maritime, Tourism, SEZ, and Industrial Park.

However, all industry or business fields in Indonesia is open to foreign investments unless mentioned otherwise in the Investment Guidance or previously called the “negative investment list”. This regulation attaches to the Investment Law under Presidential Regulation.

Q :
Why are certain investment sectors prioritized?
A :

Investment together with manufacturing industry and export are expected to be the pillars of Indonesian economy. There are three aspects where investments shall contribute the most to the economy.

First, supporting sustainable economic growth. We seek quality investments, that do not only see Indonesia as a market, but also as a production base. Investments that add value to our natural resources, contribute to our export and substitute our import.

Second, creating jobs, improving productivity and competitiveness. Investment in manufacturing sectors is prioritized, especially laborintensive industry, export-oriented and import-substitution industry, and also downstream industry of natural resources.

Third, promoting equal development distribution. We encourage more investments realized outside Java Island, the most populated island in Indonesia. We offer more incentives especially to investments located in eastern part of Indonesia, such as Nusa Tenggara, Maluku, and Papua.

Q :
I want to invest in Indonesia. What are the basic things I should know first?
A :

First you have to check whether your business is open for FDI in Indonesia in accordance to the Indonesia Investment Guidance (Daftar Negatif Investasi or DNI) under the Presidential Decree No. 39 of 2014 that stipulates the sectors which are closed and open with conditions to investment. If the business sector is not listed in the DNI, the business will be considered open and allowed for up to 100% foreign ownership.

The legal entity of the FDI Company should be a Limited Liability Company or Ltd. (Perseroan Terbatas or PT). The ‘PT’ company should be owned by minimum 2 parties, each party is either individual or corporate. According to Indonesian law, any company with any percentage of foreign shareholding is considered as a FDI Company or foreign-owned-PT-company, in short ‘PT. PMA’. 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 :
What is the policy for foreign direct investment?
A :

The FDI is required to have minimum investment ABOVE IDR 10.000.000.000,- (ten billion Indonesian Rupiah), or equivalent to 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 FDI Company (PT. PMA) is IDR 2.500.000.000 (two & a half billion Indonesian Rupiah). For each shareholder, at least IDR 10.000.000,- (ten millions Rupiah) or its equivalent in USD.

Q :
Can I setup a company in any location in Indonesia?
A :

Yes, you can setup company in any part of Indonesia. However, there are restrictions for some business sectors in certain regions. The Government has mandated (in PP No.24/2009 and UU No.3/2014) that manufacturing companies are located in industrial estates and that tenants’basic needs must be met, for example water and electricity.

Today, the Indonesian Industrial Estates Association (Himpunan Kawasan Industri Indonesia or HKI) has 69 company members, in 13 provinces, covering total gross area of about 45,600 hectares. There are more than 9,000 manufacturing companies operating and employing some 4 million people in the industrial estates. These figures do not include industrial estates non HKI members.

Main attractions of industrial estates are that the development is comprehensively planned to assure a strategic location, accessibility, building ratio, infrastructure and supporting services, secured land titles, and continuous maintenance and operation management.

15 new industrial estates will be developed until 2019. 13 industrial estates outside Java Island will be allocated for natural resources processing industry. While the other 2 in Java Island will be allocated for labor-intensive, high-technology and consumer goods industry.

Q :
How is the development of Special Economic Zones (SEZ) in Indonesia?
A :

There are eight existing Special Economic Zone or SEZs (Kawasan Ekonomi Khusus or KEK) in Indonesia and until 2019, 11 new SEZs will be developed troughout the archipelago. Each of SEZs is developed for specific sectors. The existing SEZs are:

  1. Sei Mangkei in North Sumatra Province, for Crude Palm Oil (CPO) and rubber industry, fertilizer industry, logistics, and tourism.
  2. Tanjung Api-api in South Sumatra Province, for CPO, rubber, and petrochemical industry.
  3. Tanjung Lesung in Banten Province, for tourism.
  4. Maloy Batuta in East Kalimantan Province, for CPO, coal, and mineral industry.
  5. Bitung in North Sulawesi Province, for fishery and agro industry and logistics.
  6. Palu in Central Sulawesi Province, for smelters, agro industry, and logistics.
  7. Mandalika in West Nusa Tenggara Province, for tourism.
  8. Morotai in Maluku Province, for tourism, manufacturing industry, and logistics.

The government offers additional fiscal and nonfiscal facilities for industries in SEZ. About 20-100% tax discount for period up to 25 years is offered under certain criteria. The government also provide free value added tax for importation of raw materials. In addition, foreign investors in SEZs are eligible to own properties and receive residential permits.

Q :
What are the licenses required to start a business?
A :

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 (Izin Usaha or IU). However, other business sectors, such as manufacturing, plantation, information and technology, education, medical and health, and hospitality, should obtain specific licenses pertaining to their business sector from relevant government agencies or ministries.

Q :
Other that setting-up a company (PT PMA), is there another method to evaluate Indonesian market?
A :

Yes, foreign investor could setup a Representative Office to study the market for a maximum period of 5 years. Foreign Representative Office is an office incorporated by an overseas company to represent itself in Indonesia with a view to manage the interest of the company or the affiliated companies in Indonesia and/or in other countries and/or to prepare the establishment and development of foreign investment companies 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 in any other profit generating activities.

The requirements and procedure to form a representative office in Indonesia is governed by the Regulation of The Chairman of BKPM Number 15 Year 2015 Regarding Guidelines and Procedures for Licensing and Non-Licensing Investment. According to this regulation there are 3 types of Representative Offices which can be incorporated in Indonesia, namely:

  1. Foreign Company Representative Office (Kantor Perwakilan Perusahaan Asing or KPPA);
  2. Foreign Company Trade Representative Office (Kantor Perwakilan Perusahaan Perdagangan Asing or KP3A);
  3. Foreign Company Construction Representative Office (Kantor Perwakilan Badan Usaha Jasa Konstruksi or BUJK).
Q :
Do I have to register for licenses at BKPM Jakarta Head Office?
A :

For the time being, application for Principle License (IP) and Business License (IU) has to go through BKPM-Online Service Platform or Electronic Investment Information and License Service System (Sistem Pelayanan Informasi dan Perizinan Investasi secara Elektronik or SPIPISE). Other licenses such as Import Identification Number (Angka Pengenal Importir or API) and several sectors Business License (IU) still go through BKPM OSS-C in Jakarta.

Q :
How much does it cost to have an Investment Principal License (IP)?
A :

There is NO COST to be spent at all to have the licenses, it is free of charges

formally.

Q :
How long will it take to finish an Investment Principal License (IP)?
A :

The entire process would take a maximum of 3 (three) working days since completing the application letter and its attachments.

Q :
What is meant by business license? And for how the business license valid?
A :

Based on Regulation of the Chairman of BKPM Number 15 Year 2015:

  • Business Permit is a license shall be owned by the company to begin the implementation of production operations that produce goods or services, unless it’s stipulated by legislation.
  • Business Permit issued separately for each sector or certain business sectors, according the provisions of the laws and regulations of the Ministry/Institutions that foster the sector or line of business.
  • Business Permit valid throughout the company is still conducting business, unless specified by sectoral legislation.

Q :
When will the Company may apply for Business Permit to BKPM?
A :

Request Business Permit submitted by the company when the company is ready for production/operations, either goods or services (where the main engines of production companies have installed 80% and/or the office is ready to receive customers) as the implementation of the above Registration/ Consent Principle/Approval investment owned company, unless it is specified by sectoral legislation.

Q :
How do I open a bank account?
A :

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 PT PMA 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 Principle License (IP), the Deed of Establishment, Company Domicile Certificate (SKDP), Tax ID (NPWP);
  2. The power of attorney to the person who is given the authority to open bank account;
  3. Resident Identity Card (KTP) or passport of the authorized person to open bank account;
  4. Photo of the authorized person to open bank account;
  5. Minimum deposit of IDR 10 million or USD 1.000.
Q :
How do we know if a business field is opened or closed for investment?
A :

Fundamentally, all of business fields are opened for investment in the framework of Foreign Direct Investment as well as Domestic Direct Investment, except some of business fields on the provision list of business fields that are closed and openned with certain requirements in the field of investment (Investment Negative List/Daftar Negatif Investasi (DNI)).

These provisions are stipulated in Presidential Regulation Number 44 Year 2016 concerning Lists of Business Fields Closed to Investment and Business Fields Open with Conditions to Investment, that was signed by President Joko Widodo on May 12, 2016. This new regulation are meant to substitute the previous regulation, Presidential Regulation Number 39 Year 2014.

Q :
How to set up a new Representative Office in Indonesia?
A :

The requirements and procedure to form a representative office in Indonesia is governed by the Regulation of the Chairman of BKPM Number 15 Year 2015 concerning Guidelines and Procedures for Licensing and Non-Licensing Investment. According to this regulation, there are 3 types of representative offices which can be incorporated in Indonesia, namely:

  1. Foreign Company Representative Office (Kantor Perwakilan Perusahaan Asing/KPPA);
  2. Foreign Company Trade Representative Office (Kantor Perwakilan Perusahaan Perdagangan Asing/KP3A);
  3. Foreign Company Cosntruction Representative Office (Kantor Perwakilan Badan Usaha Jasa Konstruksi/BUJK).
Q :
What makes Indonesia a promising destination for investment?
A :

Indonesia is the fourth most populous country in the world with the young workforce and a large and growing domestic market due to the demographic bonus, making Indonesia one of the world’s leading economies.

As the only G-20 member in Southeast Asia and an active voice to develop world concerns, Indonesia plays a more significant role in the global stage. Standard Chartered foresees Indonesia’s entry into the G-7 by 2030 and projects that the Indonesian economy could become the 10th largest by 2020 and the 5th largest by 2030.

Being the world’s 3rd largest flourishing democracy with the largest Muslim populations, Indonesia has a stable policy situation with high commitment to implement structural reforms. Worldwide Governance Indicators Survey conducted by the World Bank indicated that Indonesia has improvements in several indicators such as Government Effectiveness, Regulatory Quality, and Control of Corruption.

Indonesia’s economic growth which continues to rise along with the improvement in investment climate has upgraded Indonesia’s ease of doing business rank from 91 to 72 by 2018. In addition to that, Indonesia has leaped to the fourth place, from previously on the eighth place, as a prospective investment destination 2017-2019 based on the survey by the United Nations Conference on Trade and Development (UNCTAD).

Indonesia has abundant of natural resources. It also has the second highest biodiversity level in the world after Brazil. Aside from the flora and fauna, Indonesia is home to many ecosystems. From beaches, small islands, coral reefs, seaweed beds, sand dunes, tidal flats, coastal mud, mangroves, and others make Indonesia the most attractive place for investment, especially in the tourism sector.

Q :
How is the global perspective on investing in Indonesia?
A :
  • Three out of four US companies in Indonesia plan to expand their business (AmCham’s and US Chamber of Commerce’s survey, 2017).
  • Indonesia still becomes the main investment destination in the APEC region, together with Vietnam and China (PwC’s APEC CEOs survey, 2017).
  • Indonesia is the fifth most promising country for overseas business (Japan Bank for International Cooperation’s survey, 2017).
  • Indonesia becomes a priority for investment country in Asia, following China. And also has the highest confidence of positive reforms (The Economist’s Asia Business Outlook Survey 2017).
  • Indonesia ranked fourth as the most prospective country for investment by MNEs in 2017-2019, after the US, China, and India (UNCTAD Business Survey 2017).
  • Indonesia was named Top Reformer in Asia for reforming its Ease of Doing Business (World Bank’s 2018 survey).
  • Indonesia is one of the most attractive investment destinations in Asia due to strong consumer demand and its improvements on investment and business climate (Economist Corporate Network survey, 2017).
  • Indonesia’s growth (GDP) is estimated to remain strong among other countries. Its GDP is also predicted to rise to 5.4 percent in 2018 and 5.5 percent in 2019 from 5.1 percent in 2017. In addition, Indonesia’s Long Term Foreign and Local Currency Issuer Default Rating has increased to BBB from the previous BBB with a stable outlook (Fitch Ratings, 2018).
  • Indonesia has a big economy and business opportunities as it named as Top-20 largest GDP current price, worth over USD 1.015 in 2017 (IMF, 2018) and include in trillion dollar club, countries with GDP more than USD 1 trillion per year (SEASIA, 2017).
Q :
How has the infrastructure been developed in Indonesia?
A :

The challenges with Indonesian infrastructure have a lot to do with the geographical realities in the country, as a vast archipelago. The fiscal budget allocated for infrastructure increased more than doubled in the last five years and the private sector’s contribution is strongly encouraged and facilitated.

The Government has issued several policies, including the provision of government guarantees, land acquisition for development projects, and viability gap fund for part of Public-Private Partnerships or PPP (Kemitraan Pemerintah dan Badan Usaha KPBU) project’s construction cost. In addition, the government established some financial institutions to help finance PPP projects and increase their bankability.

President Joko Widodo has set an infrastructure target in the five-year development plan, to be achieved by 2019. Indonesia, among others, will build 15 new airports, increase the capacity of 24 seaports, add 60% to current railway tracks, construct 1,000 km of toll roads, as well as 35,000 megawatts of power.

Q :
What sector is recommended to invest in Indonesia?
A :

As of 2015, the 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 Priority sectors were selected based on economic advantages, growth factors, and productivity aspects. The sectors are as follows:

1. Infrastructure: 35 GW power generation, 24 seaports, multimoda transportation

2. Agriculture: Food estate, corn plantation, cattle, salt

3. Industry:

  • Labor-intensive industry (textile, food & beverages, furniture, toys)
  • Import substitution industry (chemical & pharmaceutical, iron & steel, component)
  • Export-oriented industry (electronics, crude palm oil or CPO & derivative products, wood products, pulp & paper, automotive, machinery, rubber products, fish & derivative products, shrimp)
  • Downstream industry of natural resources (cacao, sugar, smelter)

4. Maritime: shipbuilding, fishery industry, cold storage, marine technology

5. Tourism, Special Economic Zone or SEZ (Kawasan Ekonomi Khusus or KEK) & Industrial Park: strategic tourism areas, MICE, 8+11 SEZs, 15 new industrial parks

6. Digital economy: e-commerce, financial technology, IT-based creative economy

In addition to the above, most industries and other business fields in Indonesia are open for foreign investments unless mentioned otherwise in the Investment Guidance or previously called the negative investment list. This regulation attaches to the Investment Law under Presidential Regulation.

Q :
Why are certain investment sectors prioritized?
A :

Investment together with manufacturing industry and export are expected to be the pillars of the Indonesian economy. There are three aspects where investments shall contribute the most to the economy.

First, supporting sustainable economic growth. We seek quality investments, that do not only see Indonesia as a market but also as a production base. Investments that add value to our natural resources, contribute to our export and substitute our import. We also seek responsible investments that considering environmental and social factors to embrace long term benefit.

Second, creating jobs, improving productivity and competitiveness. Investment in manufacturing sectors is prioritized, especially labor-intensive industry, export-oriented and import-substitution industry, and also downstream industry of natural resources.

Third, promoting equal development distribution. We encourage more investments realized outside Java Island, the most populated island in Indonesia. We offer more incentives especially to investments located in the eastern part of Indonesia, such as Nusa Tenggara, Maluku, and Papua.

Q :
How is the development of Special Economic Zones (SEZ) in Indonesia?
A :

Currently, there are 12 Special Economic Zones (SEZ) in Indonesia. Each of SEZs is developed for specific sectors. The existing SEZs are:

  1. Sei Mangkei in North Sumatera Province, for CPO and rubber industry, fertilizer industry, logistics, and tourism (already operated since January 2015).
  2. Tanjung Api-Api in South Sumatera Province, for CPO, rubber, and petrochemical industry (under development).
  3. Tanjung Lesung in Banten Province, for tourism (already operated since February 2015).
  4. Maloy Batuta in East Kalimantan Province, for CPO, wood, coal, and mineral industry (under development).
  5. Bitung in North Sulawesi Province, for fishery and agro-industry, and logistics (will be operated in 2019).
  6. Palu in Central Sulawesi Province, for smelters, agro-industry, and logistics (already operated since Agustus 2017).
  7. Mandalika in West Nusa Tenggara Province, for tourism (already operated since September 2017).
  8. Morotai in Maluku Province, for tourism, manufacturing industry, and logistics (under development).
  9. Arun Lhokseumawe in Aceh Province, for oil and gas industry, petrochemical, agro-industry, logistics, and paper industry (under development).
  10. Tanjung Kelayang in Bangka Belitung Islands Province, for tourism (will be operated in 2019).
  11. Sorong in West Papua Province, for tourism, industrial shipyards, fisheries processing industry, mining industry, and logistics (under development).
  12. Galang Batang in Riau Islands Province, for mineral processing industry, energy, and logistics (under development).
Q :
I want to invest in Indonesia. What are the basic things I should know first?
A :

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.

Q :
How much is the minimum investment for an FDI company?
A :

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.

Q :
Can I set up a company in any location in Indonesia?
A :

Yes, you can set up a company in any part of Indonesia. However, there are restrictions for some business sectors in certain regions, Industrial Law No. 3 Year 2014 and Government Regulation No. 142 Year 2015 has mandated that any industrial activities shall be located in industrial estates.

Today, the Indonesian Industrial Estates Association (Himpunan Kawasan Industri Indonesia or HKI) has 87 company members, in 18 provinces, covering a total gross area of about 86,059 hectares. There are more than 9,950 manufacturing companies operating and these figures do not include industrial estates non-HKI members.

Main attractions of industrial estates are that the development is comprehensively planned to assure a strategic location, accessibility, building ratio, infrastructure and supporting services, secured land titles, and continuous maintenance and operation management, as well as integrated environmental management.

Several industrial estates will be developed until 2019, 14 of those located outside Java Island will be allocated for the natural resources-based processing industry. While the other 2 in Java Island will be allocated for labor-intensive, high-technology, and consumer goods industry.

Q :
How do I establish a company in Indonesia?
A :

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.

Q :
Other than setting up a company (PT. PMA), is there any other method to evaluate the Indonesian market?
A :

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:

  • Manage the parent company’s corporate interests.
  • Prepare the establishment and development of its business in Indonesia.

Important Notes for KPPA:

  • KPPA can only be incorporated in the capital of Indonesian provinces (e.g. Jakarta, Bandung, Surabaya, Medan, Denpasar, etc).
  • The location of KPPA must be in the office building.

Q :
How do I open a bank account?
A :

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:

  1. Single Business Number (Nomor Induk Berusaha or NIB), the Deed of Establishment, Company Domicile Certificate (Surat Keterangan Domisili Perusahaan or SKDP), Tax ID (NPWP).
  2. The power of attorney, specifically required for another person who needs authority to open a bank account.
  3. Resident Identity Card (Kartu Tanda Penduduk or KTP) or passport of the authorized person to open a bank account.
  4. Photo of the authorized person to open a bank account.
  5. Minimum deposit of IDR 10 million or USD 1.000.

Q :
What licenses are required to start a business?
A :

Basically, to start a business company should obtain the following licenses:

  1. Single Business Number (NIB)
  2. Business License (Izin Usaha)
  3. Commercial/Operational License (Izin Komersial/Operasional) through Online Single Submission “OSS” website (www.oss.go.id)
Q :
Are there any guidelines and procedures to get a business license in Indonesia?
A :

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

  1. Input ID number or passport of director and other data.
  2. Activating the account.
  3. The investor will receive an email of User-ID and Password.

II. Single Business Number (NIB)

1. Log in to https://oss.go.id

2. Fill the data as follows:

  • Data of the company
  • Capital
  • Data of company shareholders and Board of Directors
  • Business activity
  • and others

3. NIB also serves as:

  • Certificate of Company Registration (Tanda Daftar Perusahaan or TDP)
  • Importer Identification Number (Angka Pengenal Impor or API)
  • Customs Access (Akses Kepabeanan)

III. Business License is a license to start business operations

  1. A business license is automatically issued after fulfilling the commitment statement for “LOCATION PERMIT, ENVIRONMENTAL PERMIT, and BUILDING PERMIT”
  2. The company will receive notification from OSS as their business license had been “activated” when commitments completed, including payment of invoices (if required)

IV. Location Permit (Izin Lokasi)

  • Maximum 10 days, after receiving location permit, the investor should start to fulfill the commitment to get ‘technical recommendation’ from Regional Land Office
  • Maximum 10 days, Regional Land Office (Badan Pertanahan Nasional or BPN) should deliver the technical recommendation to Regency/Municipality Office
  • Maximum 2 days after receiving a technical recommendation from Regional Land Office, Mayor or Regent should approve or reject the technical recommendation

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):

  • Applying for Environmental Permit through OSS
  • OSS system will issue Environmental Permit
  • Duration of UKL-UPL completion: 15 days
  • Duration of AMDAL completion: 115 days

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:

  • Applying for Building Construction Permit through OSS
  • OSS system will issue Building Construction Permit

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:

  1. OSS system will issue the operational/commercial license as required by companies
  2. The companies should complete its commitment to get license/ non-license, such as Good Manufacturing Practice or GMP, Circulation Permit (Izin Edar), Indonesian National Standard (Standar Nasional Indonesia or SNI), Product Registration (Pendaftaran Produk), or SNI related to their business
  3. OSS system activates Commercial/Operational License once completed

VIII. Payment

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:

  1. The company will receive email and notification from the OSS system on the list of obtained license
  2. The company make a payment to the institutions (if required)
  3. The Company then upload the receipt of payment to the OSS system

IX. Expansion of Business Licenses and Data Renewal

  1. The company has to fulfill all the requirements, such as Location Permit, Environmental Permit, Building Construction Permit and etc in each location
  2. The company has to update their expansion project information into OSS system
Q :
Do I have to register for licenses at BKPM?
A :

Business licenses can be applied online through OSS except for several business sectors. They are financial, mining (oil and gas, mineral and coal, and geothermal), and property sectors.

For these sectors, licenses can be applied through One Stop Service Center (Pelayanan Terpadu Satu Pintu or PTSP Pusat) BKPM.

Regarding the business licenses, PTSP Pusat has 3 types of service, that are:

  1. Self Service
  2. Assistance Service
  3. Priority Service

Other than that, PTSP Pusat BKPM also provides consultation and complaint services.

Q :
What is One Stop Service Center or "PTSP Pusat"?
A :

PTSP Pusat at BKPM is established to provide a simpler, faster, more transparent and integrated service for investors in Indonesia.

At the PTSP Pusat, there are Representative Officers from 19 ministries and government institutions providing consultation and accepting the application for licenses which are not included in OSS.

Q :
What services are provided at PTSP Pusat?
A :

PTSP Pusat in BKPM offers activities such as:

  1. Serving information and consultation on Investment policies in a particular sector.
  2. Serving business licensing applications which are not regulated in Government Regulation No. 24 Year 2018.
  3. Helping clarify the procedure of business licensing application through the OSS system (Layanan Berbantuan).
  4. Helping facilitate the problems faced by investors in realizing their investment in Indonesia.
  5. Synchronizing and coordinating with related Ministries/Institutions including with provincial, regency/city governments, administrators of Special Economic Zones (SEZs), and Free Zone Authority.
  6. Providing priority service for eligible investors in obtaining Business Licenses (Layanan Prioritas).
Q :
What is a priority service?
A :

Priority Service (Layanan Prioritas) is a service provided for eligible investors who meet requirements.

Q :
What kind of license that I will obtain through priority service?
A :

Through Priority Service, investors will obtain:

  1. The article of Association of the company
  2. Legalization from the Ministry of Law and Human Rights
  3. Taxpayer number (NPWP)
  4. Single Business Number (NIB), which also function as Company Registration Number (TDP), Importers Identification Number (API) and Custom Access (Akses Kepabeanan)
  5. Foreign Worker Employment Plan (Rencana Penggunaan Tenaga Kerja Asing or RPTKA) for workers beside shareholders

3-HOURS ESDM

8 Types of licenses:

  1. Temporary Business License for Oil/Fuel/LPG Storage
  2. Temporary Business License for Storage of Processed Products/CNG
  3. Temporary Business License for LNG Storage
  4. Temporary Business License for Oil Refinery
  5. Temporary Business License for Processing Oil Residue Industry
  6. Temporary Business License for Natural Gas Processing
  7. Temporary Business License for General Trade of Oil/Fuel
  8. Temporary Business License for General Trade of Processed Products

Q :
What are the requirements for priority services?
A :

The criteria to get this service are:

Priority Service

  1. Planned value of the investment at least IDR 100 billion, and/or absorbing at least 1,000 local workers.
  2. The investor come in person to PTSP Pusat at BKPM, and if a candidate of shareholder represents other shareholders, he/she has to bring the letter of authority.

The exemption from the above criteria is valid for:

  1. Certain manufacturing lines of business, or be domiciled in certain areas that fall under an inland free trade arrangement in accordance with the prevailing regulations.
  2. Certain manufacturing lines of business that are part of a supply chain, by showing Statement Letter or MoU as a supplier for a company who will use the products.
  3. Companies will be domiciled in a Special Economic Zone.
  4. Companies participate in tax amnesty programs, by showing evidence of the tax amnesty submission receipt issued by the Minister of Finance or the relevant appointed official.

Priority Service for ESDM Sector

No Requirements

Q :
Is there any fiscal facility offered by the government for foreign investors?
A :

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:

  1. The importation of capital goods namely machinery, equipment, and auxiliary equipment for an import period of 2 years started from the date of stipulation decisions on import duty relief.
  2. 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 2 years full production (accumulated production time).
  3. The importation to the extant of machines, goods, and materials which:
  • Are not produced in Indonesia
  • Are produced in Indonesia but they don’t meet the required specifications
  • Are produced in Indonesia but the quantity is not sufficient for the need of the industry

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:

  1. Reduction of net income by 30% of the total investment in the form of tangible fixed assets.
  2. Accelerated depreciation on tangible assets and amortization on intangible assets.
  3. The imposition of income tax on dividends paid to any non-resident taxpayer.
  4. Compensation for losses that are later than 5 years but not more than 10 years, for:
  • A company located in the industrial area and/or bonded zone
  • A company operating in construction development for infrastructure sector
  • A company that use domestic raw materials at least 70%
  • A company that is absorbing 500-1,000 of domestic workforces
  • A company that is conducting research and development (R&D)
  • A company that is doing a reinvestment
  • A company that exports at least 30% of sales or 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. 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:

  1. Corporate Taxpayer (company) will need to submit application of tax allowance incentives directly by attaching its supporting documents.
  2. Once the application assessment is completed, BKPM will arrange for a ‘Clarification Meeting’ between the company and representative from Directorate General of Tax. The meeting is held for the purpose of:
    - Company presentation on the project and business plan intended to receive the tax allowance facility
    - Inquiries by the technical ministry(s), if needed, to provide further clarification in regards to the presentation and/or application.
  3. In the case that clarification and document are completed, BKPM will issue ‘Receipt of Application’ and schedule for a ‘Trilateral Meeting’.
  4. Trilateral Meeting is held for final discussion in regards to the tax allowance application, to be proposed by BKPM to Ministry of Finance of the Republic of Indonesia (with Directorate General of Tax). The Trilateral Meeting will be headed by BKPM officials and attended by representatives from BKPM, Ministry of Finance of the Republic of Indonesia, and Directorate General of Tax.
  5. The Trilateral Meeting produce an agreement that is recorded in meeting minutes and decision from the Chairman of BKPM pertaining to one of the following outcomes:
    - 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
  6. In the case of a pending decision on the tax allowance, BKPM will arrange for the ‘Extension Trilateral Meeting’. At the end of this meeting, the decision will need to be issued pertaining to:
    - Approval on the tax allowance application
    - Rejection of the tax allowance application
  7. The outcome of Trilateral Meeting and the arrangement for Extension Trilateral Meeting will need to be issued 15 days from the Clarification Meeting.
  8. In the case of approval on the tax allowance application, Chairman of BKPM will issue ‘Recommendation Letter’ on the grant of tax allowance to Ministry of Finance of the Republic of Indonesia, latest 3 working days since the Trilateral Meeting or Extension Trilateral Meeting.

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.

Q :
What about a tax holiday for foreign investors?
A :

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:

  1. The Pioneer Industry:
    - 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.
    - Economic infrastructure.
  2. New investment
  3. Having a value of the new investment plan of at least IDR 500.000.000.000,00 (five hundred billion rupiahs).
  4. Fulfill the provisions of the amount of the ratio between debt and capital as referred to in the Regulation of the Minister of Finance concerning determining the amount of the ratio between debt and company capital for the purposes of calculating Income Tax.
  5. Having not yet been issued a decision regarding the granting of notification or concerning the refusal to reduce the Corporate Income Tax by the Minister of Finance.
  6. Status as an Indonesian legal entity.

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:

  • 5 (five) tax years for new investments with a value of investment plan of at least IDR 500,000,000,000.00 (five hundred billion rupiahs) and a maximum of less than IDR 1,000,000,000,000.00 (one trillion rupiahs).
  • 7 (seven) tax years for new investments with an investment plan value of at least IDR 1,000,000,000,000.00 (one trillion rupiahs) and a maximum of less than IDR 5,000,000,000,000.00 (five trillion rupiahs).
  • 10 (ten) tax years for new investments with an investment plan value of at least IDR 5,000,000,000,000.00 (five trillion rupiahs) and maximum of less than IDR 15,000,000,000,000.00 (fifteen trillion rupiahs).
  • 15 (fifteen) tax years for new investments with an investment plan value of at least IDR 15,000,000,000,000.00 (fifteen trillion rupiahs) and no more than IDR 30,000,000,000,000.00 (thirty trillion rupiahs).
  • 20 (twenty) tax years for new investments with the value of the investment plan at least IDR 30,000,000,000,000.00 (thirty trillion rupiahs).

Note:

  1. BKPM will publish In Advance Confirmation which is a notification letter to investors regarding the fulfillment of the requirements of the pioneer industry to obtain a corporate income tax deduction facility for the investors who applied for it
  2. List of business fields (Indonesia Standard Industrial Classification-KBLI) of the pioneer

Q :
Besides fiscal facilities, is there any other facility provided?
A :

GREEN LANE

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.

WAGE FORMULA

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.

OTHERS

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.