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FAQ

 

FAQ Investment Opportunities

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.

FAQ Investment Procedure

Q :
How do I establish a company in Indonesia?
 
A :
First, you have to obtain Principle License (Izin Prinsip or IP) at BKPM One Stop Service-Center or OSS-C (Pelayanan Terpadu Satu Pintu Pusat or PTSP Pusat). After that you are able to establish the legal entity of your comany in Indonesia by engaging a public notary to issue Deed of Establishment. The Deed of Establishment of FDI Company (PT PMA) could be issued by public notary in Indonesia and it is prepared in Bahasa Indonesia. 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. The composition of the Board of Directors or BoD (Direksi) and the Board of Commissioners or BoC (Dewan Komisaris) of the company
  5. 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 Justice and Human Rights 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 Justice and Human Rights of the 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.

 
 
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) 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 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.

FAQ Investment Realization Report (LKPM)

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.

FAQ One Stop Service-Center (OSS-C)

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.

FAQ 3 Hours Investment Licensing Service

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.

FAQ Fiscal and Non Fiscal Facilities

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.

Others

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).

FAQ Direct Construction Facility (KLIK)

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