Frequently Asked Questions

The Republic of Indonesia is a nation blessed with almost all of the prerequisites for transformation into a great economic power. With its abundant natural resources, large, productive and young population, and strategic access to the global mobility network, these assets and access empower Indonesia to be among the leading economies of the world.

Indonesia is an emerging global powerhouse and member of the prestigious G20. In 2015, with a Gross Domestic Product or GDP (Product Domestic Bruto or PDB) growth rate of 4.79%, Indonesia was the group’s third fastest-growing economy, only behind India and China. Today, Indonesia is the largest economy in Southeast Asia and the world’s 16th largest economy with almost a trillion dollar of GDP.

Underlying Indonesia’s vibrant economy is political stability. Indonesia has succeeded maintaining political stability as the world’s third-largest democracy. The maturing democratic country has held three peaceful direct presidential elections since 2004. For the first time, in 2015, Indonesia managed to organize simultanous direct elections for 263 Governors and Mayors throughout the country.

Indonesia ranks the fourth most populous country in the world. Its 250 million population and the rapidly increasing buying power of its population is creating a significant market. Moreover, the young population is also increasing in the quality of its human resources, thus providing a desirable competitive edge.

Indonesia has an abundance of renewable (agricultural products) and un-renewable (mining and minerals) natural resources. It is the world’s largest producer of palm oil, and the world’s second largest cocoa and rubber producer. The country also produces tin, nickel, coal, natural gas, bauxite, copper and gold in large quantities. It must be able to optimize the handling of its natural resources by increasing a processing industry that will provide high added value. 

Following the abundance opportunities Indonesia has to offer, the government continues reforming investment climate to make a safer and more attractive investment destination. President Joko Widodo has mandated the implementation of far-reaching fundamental reforms to create a solid foundation for businesses to grow and prosper for the long-term. Indonesia is at the beginning of a promising new era.

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 more than doubled in the last five years and 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 or KPBU) project’s construction cost. In addition, thegovernment 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 provide 35,000 megawatts of power.

  • The growth of Foreign Direct Investment or FDI (Penanaman Modal Asing or PMA) in Indonesia was the highest among the Southeast Asian countries (UNCTAD’s 2015 annual report).
  • Three out of four US companies in Indonesia plan to expand their business (AmCham’s and US Chamber of Commerce’s survey, 2015).
  • Indonesia remains main investment destinations in APEC region, together with China and the US (PwC’s APEC CEOs survey, 2015).
  • Indonesia is #1 as the top investment destinations, followed by the US, the UK, and India (Ernst and Young Capital Confidence Barometer, 2015).
  • Indonesia is the most promising country for overseas business, after India (Japan Bank for International Cooperation’s survey, 2015).
  • Indonesia is the priority investment country in Asia, following China, and the highest confidence of positive reforms, after India (The Economist’s Asia Business Outlook Survey 2015).

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:

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.

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.

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.

The FDI is required to have minimum investment ABOVE IDR,- (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.

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.

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.

First, you have to issue Principle License (Izin Prinsip or IP) at BKPM One Stop Service - Center or OSS-C (Pusat Pelayanan Terpadu Satu Pintu or PTSP Pusat). After that you are 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 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 (Dewan 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.


  • Before establishing the PT. PMA, you should check the availability of the company name that you 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, all 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 settingup the PT. PMA include, but are not limited to, the following:

    1. Taxpayer Identification Number or Tax ID (Nomor Pokok Wajib Pajak or NPWP), can be applied through online service of Indonesia Directorate General of Taxes at (currently the service is only available in Bahasa Indonesia).
    2. Company Domicile Certificate (Surat Keterangan Domisili Perusahaan or SKDP), can be obtained from the local or regional authority where the PT. PMA is located and applicable through the office of building management or industrial estate management.
    3. General Importer Identification Number (Angka Pengenal Importir Umum or API-U) or Producer Importer Identification Number (Angka Pengenal Importir Produsen or API-P) is applicable through BKPM OSS-C.

Yes, 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.

For example: The company operations that could potentially impact the environment is required to undertake environmental impact analysis and gain approval from the Ministry of Forestry and Environment of the Republic of Indonesia.

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 No. 15 of 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).

The functionality of KPPA is limited to:

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

The documents required to incorporate KPPA are as follows:

  • Copy of Articles of Association of the foreign company represented and any amendment(s) in English or its translations in Bahasa Indonesia from sworn translator.
  • Letter of appointment from the foreign company represented to whom which will be proposed as a Representative Executive.
  • Copy of passport of director of company to be represented.
  • Copy of valid passport (for foreigner) or copy of identification card number (for Indonesian citizen) who will be proposed as a Representative Executive.
  • Letter of statement concerning the willingness of Representative Executive to stay, and only work in the position as the Representative Executive without doing other business in Indonesia.
  • Power of attorney if the application is not obtained directly by Representative Executive.

Important Notes for KPPA:

  • KPPA can only be incorporated in capital of Indonesian provinces (e.g. Jakarta, Bandung, Yogyakarta, Kalimantan, etc.).
  • The location of KPPA must be in office building.
  • KPPA permit is valid for 3 years and can be extended 2 times for 1 year each.
  • After 5 years KPPA may be granted extension for different activities than before.
  • KPPA must be incorporated in an office building or tower.
  • In case Representative Executive is foreigner, he/ she must obtain Temporary Stay Permit Card (Kartu Izin Tinggal Terbatas or KITAS) and Work Permit to stay and work in Indonesia.

2. Foreign Company Trade Representative Office (Kantor Perwakilan Perusahaan Perdagangan Asing or KP3A).

The functionality of KP3A is limited to:

  • Introduce, promote and market the goods produced by a parent company, as well as providing information, or directions for use and importation of goods to companies or users in Indonesia.
  • Conduct market research and surveillance in Indonesia for domestic sales of goods produced by parent company.
  • Conduct market research on the items required by parent companies abroad (who appointed the company in Indonesia) as well as providing information about the terms of the export of goods to companies in Indonesia.
  • Closing contracts for and on behalf of the company that is appointed by the parent company in Indonesia for export of goods.

In order to perform the trading related activities in KP3A, a Foreign Company Trade Representative License (Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing or SIUP3A) must be obtained from BKPM OSS-C. The documents required to obtain SIUP3A are as follows:

  • Letter of appointment from the foreign company represented to whom which will be proposed as a Head of Representative Office.
  • Letter of intent concerning the activity of reprecentative office in Indonesia and the regulation to not engage in any trading activities as well as selling transaction.
  • Letter of statement concerning the willingness of Representative Executive to stay, and only work in
  • the position as the Representative Executive without doing other business in Indonesia.
  • Letter of reference from a Commercial Attaché/ Representative of the Embassy of the Republic of Indonesia in the country of origin.
  • Head of Representative Office must attach following documents:
    1. Curriculum Vitae or CV (Daftar Riwayat Hidup)
    2. Foreign citizen: copy of valid passport and Foreign Worker Employment Plan (Izin Mempekerjakan Tenaga Kerja Asing or IMTA).
    3. Indonesia citizen: copy of valid resident identity card (Kartu Tanda Penduduk or KTP) and Tax ID (NPWP).

  • Letter of domicile of KP3A from building management or local official.
  • Copy of temporary SIUP3A.
  • Power of attorney if the application is not obtained directly by Head of Representative Executive.

Important Notes for KP3A:

  • KP3A is prohibited to carry out any trading activities and sales transactions such as submitting tenders, signing contracts, settling claims, etc.
  • KP3A can be incorporated in capital of provinces, districts and cities in Indonesia.
  • KP3A must be incorporated in an office building or tower.
  • In case Representative Executive is foreigner, he/ she must obtain Temporary Stay Permit Card (KITAS) and Work Permit to stay and work in Indonesia.

3. Foreign Company Construction Representative Office (Kantor Perwakilan Badan Usaha Jasa Konstruksi or BJUK).

License can be obtained by a Foreign Construction company with large scale qualification as stipulated in the Ministerial Regulation. BJUK License can be used to undertake construction service business activities throughout the territory of Indonesia. BJUK License is valid for 3 years and can be extended.

Documents required for obtainment of BJUK are as follows:

  • Aplication Letter (original in Bahasa Indonesia).
  • Copy of Article of Association of Company from mother country which has been legalized by a public notary or competent authorities in the country of origin.
  • General data of foreign construction services business entity.
  • Original letter of recommendation from Indonesian Embassy in country of origin which states that construction company is legally registered in the country and has a good reputation.
  • Copy of valid construction service permit of parent company which has been certified by the issuing
  • authourity.
  • Copy of equalization certificate legalized by an Institute of national level.
  • Original letter of appointment for the Chief Representative of BJUK by the parent company.
  • Record of latest financial statements of parent company which has been audited by a public accountant.
  • Copy of passport or identity card of Chief Representative.
  • CV of Chief Representative.
  • Domicile Certificate of the Representative Office in Indonesia issued by the local municipality office.
  • Letter of statement of truth and authenticity of documents (original).
  • Statement letter that the directors or commissioners of parent company are not serving as commissioners or board of directors in other construction companies (original).
  • Original power of stamped and signed by company directors if the application is not directly carried out by Chief Representative Executive along with documents of receiver of Power of Attorney (POA).

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.

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.

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.

The OSS-C offers the service to facilitate various consultations, inquiries, and document admission pertaining to investment subject matter which is performed by FO, 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.



  • Investor is expected to plan-out their investment activity thoroughly and submit an investment proposal complete with business description to BKPM OSS-C.


  • The proposal will be screened by BKPM OSS-C where it’s classified into appropriate business field as stipulated in Indonesian Classification of Business Field (Klasifikasi Baku Lapangan Usaha Indonesia or KBLI)
  • If the business sector is open or open with condition, the foreign investor will be able to apply for Principle License (IP), to begin the investment process, subject to the condition stated in Indonesia Investment Guidance (DNI).



  • Once the investment proposal is evaluated and allowed under the Indonesia Investment Guidance (DNI), investor will be able to apply for Principle License (IP) from BKPM OSS-C, and start to setup legal business entity in Indonesia.
  • The BKPM OSS-C IP 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.


  • All application for Principle License (IP) will be done through BKPM - Online Service Platform or Electronic Investment Information & License Service (SPIPISE) []. All investor will always be able to approach BKPM office for advice and assistance in the aplication process.


  • Once the Principle License (IP) is approved by BKPM OSS-C, investor will be able to setup its business entity by engaging any public notary office to draft the establishment of FDI Company (PT.PMA), which is called “Company Deed of Establishment”. This draft will need to be ratified by Ministry of Justice and Human Rights of the Republic of Indonesia to be legalized and officially posted in the state gazette.


  • In parallel to establishing FDI 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.
  • Depending on the business sector, the licenses are Company Domicile Certificate (SKDP), Environmental License, Building Permit (Izin Mendirikan Bangunan or IMB), Nuisance Ordinance Permit, Location Permit, and Company Registration Certificate.


  • These set of ministries and government agencies will issue the main licenses and its related certifications needed by FDI Company to start its construction or setting-up stage. These main licenses are ratification on the Deed of Establishment, Taxpayer Identification Number or Tax ID (NPWP), and issuance of Foreign Worker Employment Permit (IMTA).

Information on the establishment of FDI Company in more details is explained in the Chapter of ‘Investment Policy ’, Question 6-8.



  • In the Setup 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 Principle License (IP), investor will be able to consult directly with these technical ministries to understand in-depth pertaining to legal procedures and technicalities on their Business License (IU).
  • During their Setting-up Stage or Construction Stage, investor will be able to apply for the technical licenses with BKPM OSS-C to simplify and expedite the settingup process, and start the business operation as soon as possible.



  • Once the company is ready for Commercial Stage, FDI Company will be able to apply for its Business License (IU) from BKPM OSS-C to start its business operation.

* Additional Notes:

All foreign investors who setup business entities are mandatory to submit Investment Activity Report (Laporan Kegiatan Penanaman Modal or LKPM) periodically to BKPM.

The FDI Company will be need to update the LKPM every quarterly during its setting-up period (after owning Principle License or IP) and biannually after receiving its operational (after owning Business License or IU).

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 ispart 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.

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 Identitas Kepabeanan or NIK).
  9. Letter on Land Availability Information (optional).

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.

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)

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:

1. Central Java Province:

  • Kendal Industrial Park
  • Bukit Semarang Baru Industrial Park
  • Wijayakusuma Industrial Park

2. East Java Province:

  • Java Integrated Industrial and Port Estate (JIIPE)

3. South Sulawesi Province:

  • Bantaeng Industrial Park

4. Banten Province:

  • Modern Cikande Industrial Estate
  • Krakatau Industrial Estate Cilegon Industrial Park

5. West Java Province:

  • Bekasi Fajar Industrial Estate Industrial Park
  • Delta Silicon 8 Industrial Park
  • Karawang International Industrial City Industrial Park
  • Suryacipta City of Industry Industrial Park
  • GT Tech Park Industrial Park
  • Medan Industrial Park

Yes. Indonesian government provides Investment Incentives as follows:

Import Duties

All investment projects of PMA as well as Domestic Direct Investment or DDI (Penanaman Modal Dalam Negeri or PMDN) projects which are approved by BKPM or by the office of investment in the respective districts, including existing FDI and DDI companies expanding their projects to produce similar product(s) in excess of 30% of installed capacities or diversifying their products, 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 of 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.

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 transmision, distribution, supporting services, and repairing equipment.

For 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 recommendation letter from Directorate General of Mineral and Coal, Ministry of Energy and Mineral Resources of the Republic of Indonesia.

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:

  1. Reduction of net income by 30% of the total investment in the form of tangible fixed assets, including any land used for the business main activities, shall be charged for 6 years, respectively at 5% per year calculated from the commencement of commercial production.
  2. Accelerated depreciation on tangible assets and amortization on intangible assets acquired in the framework of new investment and/or business expansion, with the usefull lives and depreciation rates as well as amortization rates.
  3. The imposition of income tax on dividens paid to any non-resident taxpayer other than a permanent established in Indonesia of 10% or lower tariffs in accordance with any applicable double taxation treaty.
  4. Compensation for losses that are later than 5 years but not more than 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 500-1,000 of domestic workforces
  • Company that is conducting research and development (R&D)
  • Company that is doing a reinvestment
  • 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. 18 of 2015. There are 66 business sectors listed in Attachment I and 77 business sectors listed in Attachment II.

Some of the differencies in Government Regulation No. 18 of 2015 compared to Government Regulation No. 52 of 2011:

1. Criteria for companies that can get the facilities tax allowance in Government Regulation No. 52 of 2011 is now part of the requirements in the main body of the regulation.

The main criteria to receive tax allowance facilities include:

  • High investment value or export oriented
  • High labor employment absorption
  • High domestic component usage

2. Additional facility for company who re-invest 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:


For new applicant or application of new project for tax allowance, below is the framework on the application


1. Corporate Taxpayer (company) will need to submit application of tax allowance Incentives directly by attaching its supporting documents.

2. FO of BKPM OSS-C, which consist of representatives from the 3 main government bodies: BKPM, Directorate General of Tax and technical ministry (according to the applicant business sector) will receive and process the application.

3. Once the application assessment is completed, the 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 technical ministry(s), if needed, to provide further clarification in regards to the presentation and/ or application.

4. Based on the clarification meeting, one (or more) of the following will occur:

  • Ministry will issue ‘Certificate on Compliance of Quantitative Requirements’.
  • BKPM will issue Change in Principal License (if needed).
  • Applicant will be required to furnish additional supporting documents.

5. In the case that clarification and document are completed, BKPM will issue ‘Receipt of Application’ and schedule for a ‘Trilateral Meeting’.

6. 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.

7. The Trilateral Meeting produce agreement that is recorded in meeting minutes and decision from the Chairman of BKPM pertaining to one of the following outcome:

  • Approval on the tax allowance application to be submitted to Ministry of Finance of the Republic of Indonesia.
  • Rejection on the tax allowance application.
  • Pending decision on the tax allowance application.

8. In the case of pending decision on the tax allowance, BKPM will arrange for the ‘Extension Trilateral Meeting’. At the end of this meeting, decision will need to be issued pertaining to:

  • Approval on the tax allowance application.
  • Rejection on the tax allowance application.

9. The outcome of Trilateral Meeting and the arrangement for Extension Trilateral Meeting will need to be issued 15 days from the Clarification Meeting.

10. 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.

11. In the case of rejection on the tax allowance application, Chairman of BKPM will need issue Rejection Letter, within 3 working days since Trilateral Meeting or Extension Trilateral Meeting.


The following procedures are the simplified framework on tax allowance application procedure. The full and complete details of it is available in the Regulations of Chairman of BKPM No. 18 of 2015.

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 or VAT (Pajak Pertambahan Nilai ) and Sales Tax on Luxury Goods and materials purchased domestically, to be used in the manufacturing of the exported products.
  3. Can import raw materials required regarding of the availability of comparable domestic products.

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), VAT 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 years in order to further process their own products.
  5. Exemption of VAT 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.

Free Trade Zone

The companies operating in Free Trade Zone or FTZ (Zona Bebas Perdagangan) areas enjoy several incentives such as exemption of import duty and excise, import-related taxes (VAT, Withholding Tax/ Income Tax) not collected. Additionally, FTZ also offer faster issuance on investment related licenses and immigration clearance in terms of foreign employee. The limitation for operating in FTZ is that exporting goods out of FTZ into Indonesian custom area, will apply the tax duty and excise back on the previously duty exempted goods.

According to the Regulation of the Ministry of Finanance No. 159/PMK.010/2015 and the Regulation of the Chairman of BKPM No. 19 of 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,- (ten trilion 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 refinering 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 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.

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.

In Indonesia, minimum wages is the monthly wage payable to labor. It is mainly consist of fixed basic wage that is stipulated by regional governor as safety net.

The latest Government Regulation No. 78 of 2015 regarding Wages (GR 78) introduces several important changes, notably those concerning the calculation of provincial minimum wages and the requirement that all employees in Indonesia be paid in Rupiah.

GR 78 implements the Article 97 of Law No. 13 of 2003 regarding Manpower, and repeals and replaces Government Regulation No. 8 of 1981 regarding the Protection of Wages.

The main points of GR 78 are:

  • Minimum wage calculation GR 78 introduces a new formula for provinces to calculate their minimum wage each year, beginning in 2016. The introduction of the formula should bring certainty to the annual calculation of minimum wage and help create a more reliable business climate. The new formula is as follows:
    New minimum wage = current minimum wage + (current minimum wage x (Inflation + % GDP annual increase during the year)

  • Wages must be paid in Rupiah. The Article 21 of GR 78 requires that wages for all employees be paid in Indonesian Rupiah and does not differentiate between foreign and local employees.
  • Wage scale and structure GR 78 requires employers to prepare a wage scale and structure for employees by taking into consideration the group, positions, years of service, education, and competence of employees. Employers must inform employees of this wage scale and structure, and GR 78 requires that a copy of the wage scale and structure be attached to company regulation registration or renewal applications.

Yes, based on State Law No. 24 of 2011, employer will have to contribute a certain share based on employee monthly wage into the social security funding programme. The programme will provide economic assurance for every employee’s wellbeing.

The new Social Security Agency for Workers and/ or Health (Badan Penyelenggara Jaminan Sosial untuk Ketenagakerjaan dan/ atau Kesehatan or BPJS-TK and BPJS-KS) will continue to ensure that employer takes part in the mandatory social security programmes such as Pension Guarantee, Life Insurance, and Work-accident Insurance.

For more information on the details to social security pay-out structure, submission of application, working details, and latest updates please directly contact BPJS for Workers at and BPJS for Health at

Yes, in the framework of investment, foreigners 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 foreigners. Foreigners can be employed in Indonesia only for certain positions and period.

Employers of foreign workers in this shall include:

  1. Government body(s)
  2. International body(s)
  3. Representatives of foreign country
  4. International organization
  5. Foreign Company Representative Office (KPPA), Foreign Company Trade Representative Office (KP3A), Foreign Press Office
  6. Foreign private company, foreign business entity
  7. Legal Entity established under the Indonesian Law in form of Ltd. (PT) or foreign private organisation
  8. Social institute and other institute for religious, education, or cultural purpose
  9. Impresario service entity

Employers of foreign labor can only employ foreign workers in an employment relationship for a certain position and a certain time.

Employers of foreign labor in the form of Federal Civil Firm (Firma/ Fa), the Limited/Federal Partnership (CV), Associated Business (Usaha Bersama or UB), Trading Company (Usaha Dagang or UD) prohibited from employing foreign labor except as provided in the State Law.

For all FDI, a foreigner could hold position as a member of:

  1. Board of Director (BOD)
  2. Board of Commissioner (BOC)
  3. Builder Members
  4. Board Members
  5. Supervisory

Except for DDI, a foreigner cannot hold a position as a member of Board of Commissioner.

According to the Attachment of Manpower Decree No. 40 of 2012, foreigner cannot hold a position as:

  1. Personnel Director
  2. Industrial Relation Manager
  3. Human Resource Manager
  4. Personnel Development Supervisor
  5. Personnel Recruitment Supervisor
  6. Personnel Placement Supervisor
  7. Employee Career Development Supervisor
  8. Personnel Declare Administrator
  9. Chief Executive Officer
  10. Personnel and Careers Specialist
  11. Personnel Specialist
  12. Career Advisor
  13. Job Advisor
  14. Job Advisor and Counseling
  15. Employee Mediator
  16. Job Training Administrator
  17. Job Interviewer
  18. Job Analyst
  19. Occupational Safety Specialist

Companies employing foreigners are charged USD 100/ month (USD 1 ,200 per year per foreign employee as compensation fund for foreign workers (Article 40 Manpower Act No. 35 of 2015). This charge is administered through government bank which is appointed by Minister of Manpower of the Republic of Indonesia.

First of all, employer (either local or PT. PMA) should submit Foreign Worker Employment Plan (RPTKA) application via online to the Ministry of Manpower of the Republic of Indonesia to get approval through link

Once approved, Indonesia Ministry of Manpower of the Republic of Indonesia will issue RPTKA Endorsement to the employer. The RPTKA Endorsement will then be used for Foreign W orker Employment Permit (IMTA)’s application.

This application should be submitted via online to the Directorate General of Guidance Employment and Broaden Employment Opportunities through the Director of Foreign Manpower Management or go to BKPM OSS-C.

General requirement for IMTA as follows:

  1. RPTKA Endorsement.
  2. Transfer receipt of Compensation Fund for Foreign Worker (Dana Kompensasi Penggunaan or DKP) with the value of USD 1,200 per yearfrom Government Bank, which is appointed by Minister of Manpower of the Republic of Indonesia.
  3. Proof of insurance policy from the insurance company incorporated in Indonesia.
  4. Foreign worker’s passport.
  5. Photo size of foreign work er 4×6 cm (2 copies).
  6. Sufficient educational background proof from the foreign worker for the job position.
  7. Competency certificate or working experience minimum 5 years correspondent with the job position.
  8. Contract agreement between the foreign worker and the employer.
  9. Reccomendation for the foreign worker from the authorized agency based on the job field (if required).

After receiving IMTA, employee will then be able to apply for Temporary Stay Visa (Visa Tinggal Terbatas or VITAS). General requirement for VITAS application as follows:

  1. Application letter
  2. Copy of savings book
  3. Valid passport with minimum 18 months validity for 1 year stay period or 30 months validity for 2 years staying period
  4. Recommendation letter: RPTKA & IMTA

There are 2 options for VITAS application:

1. VITAS which is submitted by the employer:

  • The employer submits VITAS application to Directorate of Immigration.
  • The employer has to pay for the telex visa approval cost.
  • When the VITAS application is approved, the employer will get visa approval letter, and the approval was also sent to Indonesian Embassy representative.
  • The foreign worker has to come to the Indonesian representative to apply for a visa while carrying the approval letter and pay for visa fee.
  • After obtaining a visa, the foreign worker will head to Indonesia, and will be granted with admission stamp upon arrival.
  • Foreign worker should report to the local immigration office where he/ she domicile in Indonesia to take biometric and interview and also pay the cost of limited stay permit.
  • VITAS issued.

2. VITAS which is submitted by the foreign worker:

  • The foreign worker submits VITAS application to Indonesian Embassy Representative.
  • The foreign worker should pay for the telex visa approval cost .
  • The Indonesian Embassy Representative will forward the application to Directorate of Immigration.
  • When the VITAS application is accepted, The Indonesian Embassy Representative will issue the visa. The foreign worker also has to pay for the visa fee.
  • After obtaining a visa, the foreign worker will head to Indonesia, and will be granted with admission stamp upon arrival.
  • Foreign worker should report to the local immigration office where he/ she domicile in Indonesia to take biometric and interview and also pay the cost of limited stay permit.
  • VITAS issued.

The foreign worker should apply for KITAS from the local immigration office where he/ she domicile in Indonesia within 7 days after entering Indonesia. The following procedures also applies to the temporary hired foreigner/ expertise, such as specialized technician for temporary repair work, expert personnel for short-term job position and any affiliated foreigner for specific work function.

Employers who will employ foreign worker shall have RPTKA. RPTKA is a basis to obtain Foreign Worker Employment Permit (IMTA). In order to receive RPTKA, the employer must apply via online to the Directorate General of Guidance Employment and Broaden Employment Opportunities through the Director of Foreign Manpower Management by enclosing:

  1. Explanation and reason to employ expatriate.
  2. Completed RPTKA form.
  3. Licence from authorize ministry.
  4. Article of association of legal entity that has been legalized by authorized ministry.
  5. Organization structure of the employer company.
  6. Letter of the employer domicile from regional government.
  7. Letter of Appointment for Indonesian manpower as assistant to the foreigner and mentoring program plan.
  8. Letter of Statement for the capacity to provide education and training for Indonesian manpower in accordance with the qualifying position occupied by the foreign worker
  9. Employer Tax ID (NPWP).
  10. Copy of valid obligatory report of employment in accordance to State Law No. 7 of 1981.
  11. Recommended position that will be occupied by the foreign worker from technical ministries (if required).

According to the Article 42 paragraph (4) and (5) of Law of the Republic of Indonesia No. 13 of 2003 pertaining to Employment, foreign labor can only be employed in Indonesia for a stipulated position and department.

As a follow up to the above regulation, Ministerial Decree of Manpower No.16 of 2015 article 41 concerning Procedures for Licensing Hiring Foreign Workers stipulate, that the employer (sponsor) of foreign labor is prohibited to hold more than 1 job position or department .

Additionally, employer or sponsor of foreign labor is prohibited from employing foreign labor that has already been employed by other employer, unless the foreign labor is appointed as Director or Commissioner in other company as stated in its General Meeting of Shareholders.

According to the Article 35 of Law of the Republic of Indonesia No. 13 of 2003 about Manpower, employer can recruit a local worker directly or through a worker placement service providers or agency. The employer shall provide protection covering welfare, safety, and physical and mental health of the worker. The worker placement service agency shall provide protection as from the recruitment to the manpower placement.

There are 2 kinds of working relations between employer and employee:

  1. Working relation for unspecified period applied to permanent employee. The working agreement for unspecified period can require a probation period for 3 months at the maximum and the wage received by the employee shall not below the minimum wages.
  2. Working relation for specified period. This working relation shall be based on the period of time (maximum 3 years) and the completion of a certain job. Working agreement for specified period cannot require a probation period. It can be applied for a period of 2 years at the maximum and only extendible once for 1 year at the maximum.


Please refer to Law of the Republic of Indonesia No.13 of 2003 for further information.

Yes, it is allowed. Outsourcing in this regard, is defined as a submission of partial execution of the work or business process to other business entity by entering into full work contract or provision of services contract. However in society perspective, majority of the outsourced workers are employed under temporary appointment work agreement or temporary contract worker.

Related with this, there will be 2 definitions of outsourcing:

1. If what is meant for outsourcing is the recruitment of workers directly conducted by the employer with the status of working relationships are specified period and unspecified period work agreement, thus this outsourcing definition is associated with the Article 56-59, Law of the Republic of Indonesia No.13 of 2003 and Ministerial Decree of Manpower No.100/MEN/VI/2004.

Specified period work agreement is for a particular job that will be completed within a specified time, which included in a category, as follows:

  • Job which is once done or temporary
  • Job which is estimated a maximum of 3 years for its completion
  • Job which is seasonal
  • Job which is deal with new product, new activity or additional product that are still in experiment or poll.

Meanwhile, uncertain time work agreement is for the job that does not meet the certain time work agreement’s categories.

2. If what is meant for outsourcing is submission of partial execution of the work or business process to a party or other company , then outsourcing in this definition must be in accordance with Ministerial Decree of Manpower No.19 of 2012. Submission of partial execution of the work or business process to a party or other company is divided into 2 types, which are:

• Whole package service provider, must meet the conditions, as follow:

  1. Conducted separately from the main activity, not only management but also the implementation of work activities.
  2. Performed with a direct order or indirect order from the employer.
  3. Supporting activities that support and facilitate the main activity.
  4. Do not hinder production process directly.

• Worker service provider (worker only), should be a supporting service or not deal directly with the production process:

  1. Cleaning service
  2. Catering for workers
  3. Security
  4. Supporting services in oil and gas industry
  5. Transportation provider for workers

Yes. according to the Article 102 of Act No. 13 of 2003 about Manpower , Labors and Labors Unions shall function to execute jobs in accordance with their obligations, maintain orderliness for continuous production, channel their aspirations democratically, and develop their skill and expertise as well as to take part in promoting companies and ensuing welfare of their members and families.

Every labor shall entitle to establish and become a member of labors unions. The labors union shall entitle to accumulate and manage funds as well as to hold accountability for the funds of organization.

According to the Article 102 of Act No. 13 of 2003 about Manpower, Labors and Labors Unions, the government shall function to stipulate policies provide service, supervise, and take action against any violation of provisions of law in force. The government refers to the Ministry of Manpower of the Republic of Indonesia at the national level, and Department of Manpower at provincial level.

Representative of government is member of the tripartite cooperation institutions, together with employer organization and labors union. Tripartite cooperation institution provides recommendations, suggestions and opinions for the government and parties concerned in the formulation of policies and settlement of manpower issues.

In the case of industrial relations dispute, employer and labors union should undertake negotiation at the first place. If negotiation fails, the dispute should be brought to tripartite cooperation institution.


Further information about industrial relations dispute settlement can be referred to Act of the Republic of Indonesia No. 2 of 2004 concerning Industrial Relations Disputes Settlement.

Yes, Labors strikes is regulated by the Minister of Manpower Decree No. 232 of 2003. According to this regulation, strike is defined as labors’/workers’ action which is projected and carried out jointly and/ or by work er/ labors union to stop or slow down the works. Strike is part of human right of workers/labors that should be conducted legally, orderly and peacefully as the consequence of failed negotiation.

Failed negotiation shall be negotiation that all parties could not reach an agreement in the dispute settlement because the employer is not willing to conduct negotiation or the worker/labors union or the workers/labors have requested in writing the employer 2 (twice) within the period of 14 working days or the negotiation is deadlock ed stated by the parties in the minutes of negotiations.

The strike shall be deemed illegal if it is conducted:

  1. Not because of failed negotiations; and/ or;
  2. Without notification to the employer and competent agencies in the field of manpower;
  3. With a notification of less than 7 days before the implementation of the strike;
  4. At a public company and/ or a similar company in which the activity may harm safety of human being.

An Illegal strike as meant shall be classified as absent. The summon to resume work for the strikers shall be conducted by the employer twice consecutively within the grace period 7 days in the form of appropriate and writing summons. The workers/ labors who do not answer the summon shall be considered to have resigned.

In the case of workers staging labors strike legally in raising demand for normative rights rally violated by employer, they shall be entitled to obtain wage.

The discontinuation of working relations is regulated in Chapter XII Act No. 13 of 2003 on Manpower. Labors dismissal shall be termination of working relations because of a certain matter that discontinues rights and obligations between workers/ labors and employer.

Employer, labors, labors unions, and the government, by all means, shall strive to avoid discontinuation or working relations. In the case of all efforts being made, but discontinuation of working relations being unavoidable, employer shall negotiate the plan for discontinuation of working relations with labors union or labors individually in the case of the said labors is not members of labors union.

In the case of the negotiation as meant in the above paragraph totally fail to result in an agreement , employer only can discontinue working relations with labors after obtaining a stipulation from the authorized to settle industrial relations dispute.

Application for stipulation of discontinuation of working relations shall be submitted in writing to the institution authorized to settle industrial relations dispute, accompanied by reasons as the basis of the discontinuation.

The institution authorized to settle industrial relations dispute can accept the application for stipulation if it has been negotiated. The institution authorized to settle industrial relations dispute only can issue stipulation of the application for discontinuation of working relations if the plan for discontinuation of working relations has been negotiated by the negotiation failed to result in an agreement.

Employer shall be prohibited from discontinuing working relations with the following reasons:

  1. Workers/ labors fail to come because they are sick according to certificate of doctor as long as the period of absence does not exceed 12 months continuously.
  2. Workers/ labors are unable to undertake their jobs because they have to fulfill obligations to the state in accordance with the provisions of laws.
  3. Workers/ labors who practice their religions.
  4. Workers/ labors who perform marriage.
  5. Female workers/ labors who are pregnant, give birth, suffer abortion.
  6. Workers/ labors who have blood relations by the same and/ or married with the other workers/ labors in companies, unless otherwise stipulated in working agreement, corporate rule or collective working agreement.
  7. Workers/ labors establish, become members and/ or executive of workers/ labors unions, workers/ labors undertake activities or workers/ labors unions outside the working hour during the working hour on the basis of agreement of employer or on the basis of the provisions stipulated in working agreement, corporate rule or collective working agreement.
  8. Workers/ labors report employer to the authorized parties with regard to action of employer committing act of crime.
  9. Because of the different faith, religion, political ideology, ethnic, race, group, sex, physical condition or marital status.
  10. Workers/ labors disabled permanently, sick because of working accident or disease related to working relations whose recovery period, according to letter of doctor, cannot be ascertained yet.

Application for stipulation of discontinuation of work relations shall be unnecessary, in the case of:

  1. Workers/ labors being in the probation period, if it has been stated in writing previously.
  2. Workers/ labors tendering their resignation, in writing on the basis of their intention without indication of pressure or intimidation from employers.
  3. Expiration of working relations in accordance with working agreement for a specified period for the first time.
  4. Workers/ labors enter the mandatory retirement age in accordance with the stipulation in working agreement, corporate rule, collective working agreement or laws in force.
  5. Workers/ labors passed away.
  6. In the case of labors dismissal, employer shall be obliged to pay appropriate severance payment and/or gratitude payment.

The investors can buy and own land in Indonesia for a specified period of time by means of the following rights:

  1. The Right of Exploitation (Hak Guna Usaha or HGU) is granted for a period of not longer than 25 years and could be renewed for 25 years. To an enterprise/a corporate bodies that needs a longer period, HGU for not longer than 35 years may be granted.
  2. The Right of Building (Hak Guna Bangunan or HGB) is the right to build and to own buildings on land which is not one’s property for a period of not longer than 30 years and can be extended by a period not longer than 20 years.
  3. The Right of Use (Hak Pakai) is the right to use and/ or to collect the product, from land directly controlled by the state, or land owned by the other persons which gives the rights and obligations stipulated in the decision upon granting his right by the authorized official, or in the agreement to work the land, as far as it is not conflict with the spirit and the provision of the law.

HGU, HGB, and The Right of Use can be held by Indonesian citizen, foreigner residing in Indonesia, corporate bodies that are established under Indonesian Law and are based in Indonesia, and foreign companies that have a representative office in Indonesia.

The ownership of HGU and HGB is allowed to change during the validity of contract period. Meanwhile, The Right of Use of land can be transferred to another party with approval of relevant government official.

The Right of Use of land belonging to individuals can also change hands.

Yes, it depends on the type of property :

  1. For a landed building (house, office, factory) it is only allowed for a foreigner or PT. PMA and the status of the land is The Right of Building (HGB) or the Right of Use.
    Regarding the ownership of landed house, recently the Government of Indonesia has revealed the new Government Regulation No. 103 of 2015 on House Ownership of Foreigners Residing in Indonesia. This regulation allows foreigners to buy a landed houses under the Right of Use category for a period up to 80 years (an initial period of 30 years and can be extended twice by 20 years and a further 30 years).
  2. For a condominium or apartment and office space, the foreigner or PT. PMA can own it as long as it isn’t a part of a government-subsidized housing development and the land status of the building is strata title status under the Right of Use.
    Still based on the same regulation, regarding apartments, foreigner allows to purchase an apartment under the Right of Use category and this is only involves luxurious apartments priced over IDR 10 billion.

  1. The title of the plantation land is The Right of Exploitation (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.
  2. The type of plantation crops should be suitable with the HGU.
  3. This right can be held by Indonesian individuals or entities as well as government approved PT. PMA (foreign joint venture) companies and may be mortgaged.

PT. PMA who is a property developer may buy a land in Indonesia to develop the property. The status of the land is The Right of Building (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 The Right of Ownership (Hak Milik) which is allowed only for Indonesian citizen.

The basic tax obligation is Income Tax (Pajak Penghasilan or PPh) 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:

Withholding Tax (Pajak Pemotongan) 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.


Detailed information on Income Tax should refer to The Income Tax Law No. 36 of 2008.

Land & Building Tax (Pajak Bumi dan Bangunan or PBB)

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 or VAT (Pajak Pertambahan Nilai or PPN)

In normal cases, 10% VAT is applied to imports, manufactured goods and most services. However, according to the Government Regulation No. 7 of 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.
  4. Agricultural products.

Sales Tax on Luxury Goods (Pajak Penjualan atas Barang Mewah or PPnBM)

These tax ranges from 10% to 75%. The list of the tax should be referred to The Government Regulation No. 12 of 2001 jo. No. 43 of 2002 jo. No. 46 of 2003 and other related tax implementation regulations.

Stamp Duty

The stamp duties nominal are either IDR 3,000 or IDR 6,000 on certain documents. The rate of IDR 6,000 is applicable for letters of agreement and other letters, such as Notary Deed and Land Deed including its copies. For all documents bearing a sum of money, the rate is IDR 6,000 when the value stated in the document is more than IDR 1 million, and IDR 3,000 when the value is between IDR 500,000 and IDR 1 million. Below IDR 500,000 is not subject to stamp duty. For cheques, the rate is IDR 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 tax payer that has no double-tax 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.

Yes, foreigners who will travel to Indonesia should apply visa from the Indonesian Embassy in their respective countries unless they come from one of the visa exempt countries or one of the countries eligible for Visa on Arrival or VOA (Visa Kunjungan Saat Kedatangan).

All visitors must hold a passport valid for 6 months from the date of arrival and have valid return ticket. The immigration officer at the port of entry may ask the passenger to produce any necessary documents (such as hotel reservation and proof of finance).

Regarding the purpose of visit , the visitors with ASEAN Countries nationalities are able to visit Indonesia without any visa for the purpose of official duties, education, tourism, business, government and social culture purpose. They may stay up to 30 days

Based on the Presidential Regulation No. 104 of 2015 on Amendment of Presidential Decree No. 69 of 201 5 on the Visa Free Visits, the Government of Indonesia provide more flexibility for foreign tourists to visit Indonesia and increased the number of countries granted exemptions from the obligation to have a visitor ’s visa for a limited time frame and for specific purposes.

Nationals holding passport from the following 90 countries and territories are eligible to enter and remain in Indonesia without a visa for 30 days and with no option of renewal of converted to other type of visa.

Passport holders from 15 countries and territories can visit Indonesia for the purpose of tourism, business, education, government related tasks, socio–culture, journalism or transit . These 15 countries can enter and exit Indonesia through any airport or harbour. Meanwhile, nationals from 75 countries and territories can visit Indonesia for the purpose of tourism only and can only enter and exit Indonesia through certain airports and harbours:


Five airports

  1. Bali; Ngurah Rai International Airports (DPS).
  2. Jakarta; Soekarno Hatta Interna