Overview of Foreign Investment Law

The Indonesian Investment Act clearly distinguishes foreign investment from domestic investment.
Foreign investment refers to investments made by foreigners, foreign corporations, foreign countries, or companies invested in by foreign investment companies.
In the concept of equity ownership, it is divided into foreign investment and internal investment, and business permits are issued by the Investment Adjustment Authority (BKPM).
Only foreign investment is allowed for foreigners.
Occasionally, when acquiring a stake in a domestic company, the trade officer is asked whether the company's classification is a foreign investment company or a domestic investment company, and even 1% of the shares are considered foreign investment companies.

The ground rules and regulations applied to issuing business permits are also based on the Investment Act, and general investment is issued based on the relevant industry law or local government ordinances.
Foreign investment must establish a corporation in the form of a stock company in accordance with Indonesian law, invest and do business in the name of this corporation.
At least two foreign investors must first receive an investment registration form from the Indonesian government, establish a local corporation under the Indonesian Stock Company Act, obtain an investment approval form, and invest in it.
Foreigners become shareholders of this local corporation.

The Employment Creation Act No. 11 of 2020, collectively referred to as the Omnibus Law, took effect on November 2, 2020, to expand foreign direct investment and create new jobs through it.
Additionally, the Act was replaced by PERPU No.2/2022 issued on December 31, 2022.
Furthermore, the Positive List Regulation replaced the Presidential Decree of 2016 ("Negative List Regulation") as the 10th Presidential Decree of 2021 (replaced by the 49th Presidential Decree of 2021), a detailed enforcement ordinance of the Omnibus Act, which took effect on February 16, 2021.
As a result, the investment environment has greatly improved by changing most of the existing conditional investment-enabled industries to unlimited investment-open industries.
According to the revised investment law, foreign investment is possible in most business areas, except for primary industries such as agriculture and fishing, traditional culture-related industries, marine transportation, broadcasting and finance, mining, and small and simple technology-based retail and service industries.

Indonesia's Foreign Direct Investment (FDI) policy is weak in sustainability, and there is uncertainty that can change without prior notice.
Since the promulgation of the Foreign Investment Act in 1967, foreign investment has operated as a positive system for a considerable period of time.
In other words, foreign investment was allowed only in industries included in the regulations, and the legal status of foreign investors was not allowed to invest in foreign individuals; only foreign corporations were allowed to invest.
In the mid-1980s, foreign investment approval became a pre-decision by the Chairman of the Board of Investment Coordination (BKPM), and in the 1990s, the investment system changed from a positive system to a negative system.
It is a system in which foreigners can freely invest in industries that are not included in the regulation called the Negative System.
However, due to the Omnibus Law and its enforcement decree, which took effect in accordance with the Jokowi government's structural reform policy to create jobs at the end of 2020, it was reversed into a positive list again.
According to the classification of industries under the new presidential regulation No. 10 of 2021, foreign investment is prohibited or restricted, conditional investment is possible, small and medium-sized enterprises are designated and collaborated, and in principle, there are no restrictions on foreign investment.
What is different from the past is that a preferential industry classification with investment incentives was newly established, and the existing conditional investment-enabled industries were divided into conditional investment-enabled industries and small and medium-sized enterprises designated and collaborated industries.
In addition, the existing Negative List regulations have significantly reduced the number of foreign-owned or conditional investments to a total of six areas, including (a) narcotics cultivation and related industries; (b) gambling and/or casino activities; (c) Convention on International Trade in Endangered Species of Wild and Plants; and (IT) fish collection, Investment in business areas such as live or dead coral (recently dead stems) utilization or harvesting; (e) chemical weapons manufacturing; and (f) industrial chemicals and industrial ozone destructive substances; etc.
are completely restricted.

Previously, foreign investment approvals for general industries were issued by BKPM, the central bank, finance department, and Ministry of Power issued foreign investment approvals for general financial industries, and online integrated business licenses (Online Single Submission/SOS/S24) were issued to the central government in 2018.
According to the Omnibus Law, all investment-related procedures (corporation establishment, licensing, incentives, etc.) can be carried out through the OSS system.
To this end, OSS system operations were briefly suspended and then officially resumed on August 9, 2021.

Foreign Investment Methods

In Indonesia, foreign investment methods are only possible through direct investment methods.
Direct investment is a method of establishing a local stock company and investing in this company in accordance with Indonesian law.
There are two ways to invest directly.
There are ways to establish and invest in a new company and take over shares of an existing company.
It is a method of acquiring shares of a company in which foreign nationals own 100% of the shares, or acquiring shares of a company in which foreigners hold some or all of the shares.
Investment in how to establish a new company requires all new licenses, but the existing company's stock acquisition method can reduce the time required to proceed with the license at the workplace, but it may take more time than the new company's license.
Additionally, investment does not have any contingent debt risk as a method of establishing a new company, but investment in the stock acquisition method of an existing company has a high possibility of contingent debt, especially tax contingent debt.
When investing in the existing company acquisition method, the tax definition prescription is five years, so it is desirable to ask an expert to conduct a legal due diligence and accounting audit and decide whether to take over.

Ways Foreign Businesses Can Enter Indonesian Market

There are two types of offices that can be entered by foreigners: the establishment of a corporation and the establishment of a liaison office (representative office).
The establishment of a stock company is a method of entering the form of foreign direct investment through the establishment of a local corporation, and if profit-generating activities are accompanied, a stock company must be established even if it is a foreigner.
On the other hand, if only functions such as investigation, data collection, and headquarters business contact are performed, a liaison office can be established

Major Investment-Related Acts Signed and Effective 2021 (Omnibus Act Enforcement Decree)
Presidential Decree No. 10 of 2021 on the field of capital investment business (revised to No. 49 of 2021):

• Industries related to investment conditions are classified as detailed delegation orders of the omnibus law.

• Foreign investment is possible in most areas except for prohibited areas, but it is divided into conditional investment and essential collaboration industries, and completely open and preferential industries depending on the detailed areas.

  • Prohibited areas: Drugs, weapons, endangered animals and plants, gambling, etc.
    are prohibited from investing by all investors, including foreign investors.

  • Conditional investment: foreign investment is allowed under certain conditions (maximum equity ratio limit, specific permission additional acquisition, etc.).

  • Designation and collaboration of small and medium-sized enterprises: Industries that can only be carried out by small and medium-sized enterprises with a capital of less than 10 billion rupiah of the business entity require cooperation with the relevant small and medium-sized enterprises.
    However, in the case of foreign investment, it must be more than 10 billion rupiah, but it can be invested at an investment value of less than 10 billion rupiah, excluding technology-based startups established in the Kawasan Ekonomi Khus/KEK.

  • Preferential industries: There is no restriction on foreign investment in the newly established sector, and financial incentives can be obtained if certain conditions are met.
    However, it is necessary to note that the financial industry, etc.
    are stipulated by individual laws and regulations, not by the Enforcement Decree of the omnibus Act.

Depending on the size of the investment, the Treasury Department provides a 50% or 100% corporate tax reduction for five to 20 years from the time commercial production starts.
Taxpayers can receive an additional 25% or 50% corporate tax reduction for the next two years after the corporate tax reduction is terminated, depending on the size of the investment.
This tax reduction benefit can be applied to companies belonging to Pioneer industries.
Leading industries refer to sectors with wide connectivity, high value creation, and external effects, corresponding to new technologies and having strategic value in the national economy.
Under the current regulations, this corporate tax reduction benefit can be applied if it falls under the specific Indonesian Standard Industrial Classification Code (Klasifikasi Baku Lapangan Usaha/KBLI) specified in the regulations.
Business sectors other than the prescribed KBLI can apply for tax reduction benefits to the Treasury through a separate channel.
In general, the application for tax reduction or exemption must be made through the OSS (Online Single Submission) system, and the completeness of the application is reviewed through the OSS system and transferred to the Treasury. Investment incentives provided by the Indonesian government are largely divided into Tax Allowance and Tax Holiday, providing the following investor benefits.
The tax incentive programs that offer various tax benefits to specific investors to continuously attract Indonesian investment are as follows:

Tax Holiday (corporate tax exemption for a limited time)

• Target: Leading industries, new investments, corporations planning to invest at least 500 billion rupiah

  • Leading industry standards: 18 leading industries are included, including basic metals, petroleum and gas refining/refining, inorganic and organic basic chemicals, pharmaceutical raw materials, semiconductor manufacturing, and electronic and computer communication equipment parts manufacturing.

• Benefits: The period varies depending on the amount of investment, and corporate income tax reduction benefits are granted from the tax year at the time of commercial production.

  • 500 billion to 1 trillion rupiah (5 years), 1 trillion to 5 trillion rupiah (7 years), 5 trillion to 15 trillion rupiah (10 years), 15 trillion to 30 trillion rupiah (15 years), 30 trillion rupiah or more (20 years)

  - 50% reduction in corporate tax for an additional two years after completion of the above exemption period

• Application Method: Before the commercial production time for new investments, you must apply for corporate income tax reduction to the Ministry of Investment (BKPM), and you need to apply within one year at the latest from the investment permit. Related Acts: Ordinance of the Minister of Finance No. 130 (Peraturan Menteri Keuangan No. 130/PMK).010/2020)

Mini Tax Holiday (corporate tax exemption for a limited time)

• Target: Leading industries, new investments, small investment plans of at least 100 billion rupiah and less than 500 billion rupiah, and companies that meet the debt-to-capital ratio (4:1) stipulated by the Ministry of Finance for the purpose of calculating income tax.

• Benefits: Benefits vary depending on the amount of investment, and corporate income tax reduction benefits are granted from the tax year at the time of commercial production.
  The corporate income tax reduction period is the same as five years.

  • More than 500 billion rupiah of new investment (100% of total corporate income tax to be paid), less than 100 billion rupiah of new investment (50% of total corporate income tax to be paid)

  • INVESTMENTS OVER 500 BILLION RUPEES ADDITIONAL REDUCTION OF CORPORATE INCOME TAX TO BE PAID FOR TWO YEARS

  • INVESTMENTS LESS THAN 100 BILLION RUPEES TO 500 BILLION RUPEES ADDITIONAL 25% OF CORPORATE INCOME TAX TO BE PAID FOR TW

• Application Method: Before the commercial production time for new investments, you must apply for corporate income tax reduction to the Ministry of Investment (BKPM), and you need to apply within one year at the latest from the investment permit.

• Related Acts: Ordinance of the Minister of Finance No. 130 (Peraturan Menteri Keuangan No. 130/PMK).010/2018)

Tax Allowance

• Target: large-scale investment, investment for export purposes, high-level job creation, and investment in the use of domestic parts, etc.

  • Reference Act: PP No.78/2019 / Lampiran I, II

• Benefits:

  • Investments in the form of tangible fixed assets, including land, can be reduced from net income up to 30% of the total amount and reduced by 5% annually for six years from the beginning of production.

    * Tangible assets are new assets and should be listed in basic permits, investment permits, investment registration or business permits, and should be owned directly by taxpayers and used for major business activities.

    * Depreciation is recognized as accelerated depreciation.

  • The dividend tax rate of foreign shareholders is 10% or lower than the tax agreement tax rate.

  • The extension of the deduction period for carryover losses has been extended from the previous 5 years to a maximum of 10 years.

• Application method: Applications are made on the OSS (Online Single Submission) system and must be made before commercial production.
  It must be applied within one year from the time when the taxpayer applies for a Nomor Induk Berusaha (NIB) or from the time when a new business license is issued from the OSS. h Related Acts: Government Decree No. 78 (Peraturan Pemerintah No.78/2019)

Act on the Calculation and Refund of Income Tax

• Target: Taxpayers who newly invested in leading industries

• Benefits: Up to 60% of the total investment amount can be reduced

  • Tax relief of up to 200% of the cost spent on employee development programs such as internships, vocational education, and other educational activities can be applied to employees

  • Tax reduction of up to 300% of the cost spent on the program can be applied when conducting R&D is carried out

• Related Acts: Government Regulations No. 45 of 2019 (Peraturan Pemerintah No. 45/2019)

Foreign loan-funded and foreign grant-funded government projects

• Subject: Income from overseas loans and government-ordered projects related to overseas aid funds

  • Eligible projects should be included in government project plans or similar documents.

  • The principal contractors (subcontractors), consultants, and suppliers of government-ordered overseas aid funds may impose tax obligations on the government.

  • In addition to the above provisions, the principal contractors (subcontractors), consultants and suppliers are given additional tax benefits listed below for the use of goods import taxes, overseas intangible assets and overseas taxable services related to government-ordered project overseas aid funds

• Benefits: Special tax treatment may be applied to the above matters.

  • exemption from import duties

  • Exemption from special consumption tax on VAT and luxury goods transactions

  • Exemption from Income Tax (PPh22)

• Note: If the provision of a qualified project is a taxable good or service, the principal contractor (subcontractor), consultant and supplier shall issue an appropriate tax invoice.
  However, no additional tax is collected on this.
  If a qualified project is only partially financed by overseas loans or overseas aid funds, tax benefits are determined in proportion to the amount of overseas loans or overseas aid funds.

Investment Incentive Application Case

2020 Indonesian Employment Creation Act No. 11 of 2020 (replaced by PERPU No. 2/2022 on December 31, 2022)

• The requirements for receiving tax benefits from investment have been expanded.

• According to Article 18 (3) of the former Investment Act, if one of the following conditions is met, tax benefits, land rights acquisition convenience, immigration service convenience, and import permit convenience can be obtained.

  * Employment of many workers, including priority industries, including social overhead capital construction, investment in technical areas, pioneering business areas, remote areas, borders or other necessary areas, conservation of living conditions, investment in innovation projects, small businesses or unions, etc

• In Article 18, Paragraph 3 of the revised Investment Act, in addition to the existing benefit requirements, the requirements for operators who can receive various investment incentives were expanded by adding 'tourism industry development'.

2020 Indonesian Employment Creation Act No. 11 of 2020 (replaced by PERPU No. 2/2022 on December 31, 2022)

• Preferential industries under the Positive List basically have no restrictions on foreign investment, and if certain conditions are met, they can receive various financial and non-financial benefits under the law.

• Non-financial benefits refer to the benefits of providing various conveniences in accordance with laws and regulations, such as simplifying the licensing process.

• According to presidential regulations, there are a total of 245 preferential industries (183 tax allowances, 18 tax holidays, and 44 investment allowances). Restrictions and Prohibitions (Industry)

Investment Restriction List Overview

The Employment Creation Act amended the provisions of the Indonesian Investment Act (Law No. 25 of 2007) to include more details in the presidential regulation, and on February 2, 2021, the Presidential Regulation No. 10 of 2021, was enacted and changed from the existing list to the Positive.

Existing investment laws and related presidential regulations divided all industries into investment banks, conditional investments, and full permission, but new regulations classify them into investment banks, conditional investments, small and medium-sized enterprises designation and collaboration, priority, and full permission.
In other words, a classification of preferential industries with investment incentives was newly established, and the existing "conditional investable industries" were divided into "conditional investable industries" and "small and medium-sized enterprises designated and collaborated industries."

According to the new presidential regulations, foreign investment is prohibited or restricted, conditional investment is possible, small and medium-sized enterprises designated and collaborated industries, and in principle, there are no restrictions on foreign investment.

Foreign Investment Restrictions and Prohibited Industries

Investment prohibited industries

• Investment activities by all investors, including foreign investors, are prohibited, including first-class drug cultivation and related industries, chemical weapons manufacturing industries, fishing activities related to endangered wild animals and plants, gambling, and casino-related industries.

Indonesian Employment Creation Act No. 11 of 2020 (Omnibus Act) on restrictions and prohibitions on investment (replaced by PERPU No. 2/2022 on December 31, 2022) Openness and restriction of investment

• In principle, investment is open in all business areas except areas where investment is prohibited or only the central government of Indonesia can invest (Article 12, Paragraph 1 of the revised Investment Act).

• Areas that directly restrict investment in the law have been changed to drug cultivation and distribution, gambling and casino industries in all forms, international trade in endangered wildlife, coral utilization and harvesting, chemical weapons manufacturing, and ozone-destroying chemicals (Article 12(2) of the revised Investment Act).

• Accordingly, Presidential Regulation No. 10 of 2021 was enacted on February 2, 2021, and the regulation includes significant improvements in the investment environment of foreign capital in Indonesia, such as significantly expanding the scope of industries allowed to invest to foreigners.

Special Economic Zone SEZ (Special Economic Zone, Local Language KEK, Kawasan Ekonomi Khus) Overview

In order to revitalize local governments and promote balanced regional development through active investment attraction, Indonesia designated a special economic zone in the Sei Mangke area in 2012.
In 2014, it became eight special economic zones, with only Sei Mangke, Tanjung Lesung, Palu, Bitung, Morotai, Tanjung Api-Api, Mandlika, and Transatall in the same economic zone.
Since then, with the inauguration of the Jokowi regime, it has planned to enact a total of 17 free economic zones from 2015 to 2019.
From 2023, there are the following 19 zones:
①SEZ Arun Lhoksumawe, ②SEZ Sei Mangke, ③SEZ Batam Aero Technic*, ④SEZ Nongsa, ⑤SEZ Galang Batang, ⑥SEZ Tanjung Kelayang, ⑦SEZ Lido, ⑧SEZ Kendal, ⑨SEZ Gresik, ⑩SEZ Singhasari, ⑪SEZ Mandalika, ⑫SEZ MBTK, ⑬SEZ Palu, ⑭SEZ Tanjung Lesung, ⑮SEZ Likupang, ⑯SEZ Bitung, ⑰SEZ Morotai, ⑱SEZ Sorong, ⑲SEZ Sanur.

SEZ General Requirements: Taxpayers who want to receive tax benefits within the special economic zone must meet the following

• In the case of a taxpayer constituting KEK's business activities (Badan Usaha)

  • Registered with relevant government agencies as a business that develops or manages KEK

  • Have agreement with relevant government agencies on KEK

  • Set the activity area of the KEK

• In the case of a taxpayer who runs a business within KEK (Pelaku Usaha)

  • Must be a domestic taxpayer

  • HOLD NEW CAPITAL INVESTMENT PLANS APPROVED BY KEK'S MANAGER

  • Has an information system linked to the Directorate General of Customs and Excise

SEZ Income Tax Benefit (PMK No 130/PMK).010/2020)
Income Tax Reduction: Corporate tax reduction benefits are granted to new taxpayers who make new investments that meet KEK's main business purposes

• Investment plan of more than 100 billion rupiah → 5 to 20 years of reduction period → 100% corporate tax reduction rate

• Investment plan 20 billion to 100 billion rupiah → 5 years of reduction period → 50% corporate tax reduction rate

Income Tax Allowance: Taxpayers who have been dismissed from corporate tax breaks or those who run other businesses in KEK can apply for income tax benefits below.

• Deduction from taxable income up to 30% of investment in property, plant and equipment (including land) (applicable for a six-year commercial production period of 5% per year, and the invested assets shall not be used for other purposes or transferred for a certain period of time)

• Allowing accelerated depreciation (reduction) for tax purposes

• Reduction to 10% of dividend withholding tax rate for non-residents (tax treaty applies if low withholding tax rate is applied under tax treaty)

• Extension of carry-over tax credit for up to 10 years (taxpayers within KEK can only receive corporate tax reduction and income deduction under GR-96, and other benefits under the Income Tax Act other than corporate tax reduction and income deduction can be applied separately)

Applications for income tax benefits must be submitted to the Treasury through the manager of the relevant KEK, and taxpayers who are approved for the application must regularly submit capital investment performance reports and production status reports.
If the taxpayer fails to fulfill this, the benefits under the Income Tax Act may be withdrawn and the reduced corporate tax (including penalties) must be paid.

Other tax benefits: Taxpayers within KEK can receive the following tax benefits in addition to the above-mentioned income tax law benefits.

• Excluding the collection of VAT and luxury tax on the purchase and import of specific goods

• Income prepaid corporate tax (PPh22) not collected on the income of certain goods

• moratorium on import duties on capital goods and equipment and materials for goods and processing

• Exemption from consumption tax on goods used in the production of goods that are not subject to consumption tax

• VAT and luxury tax not collected for domestic purchase of certain goods

Tax benefits for special activities within KEK: The following tax benefits are granted within KEK, where tourism is the main industry.

• VAT refund for foreigners (if goods are purchased at a franchise store)

• Exemption from income tax and luxury tax under Article 22 of the Income Tax Act on Home Purchase in the KEK Region

• Exemption or mitigation of local taxes and levies

Other support schemes

Taxpayers within KEK are also given benefits in relation to import and export, manpower employment, and land acquisition other than tax benefits

Related to import and export

• No restrictions apply in relation to export and import activities (but this is only applicable in normal circumstances and may vary in accordance with Trade Department regulations).

• Simplified process for issuing Certificates of Origin for export purposes (each KEK's manager has the authority to issue COOs on behalf of the Ministry of Trade)

• Taxpayers within the KEK may use COOs to directly export goods imported into the KEK to other customs areas (therefore taxpayers within other customs areas may use the relevant COOs to receive import tariff benefits).

Employment of human resources

• Taxpayers who want to hire foreigners within KEK have unified the reception counter as KEK managers to simplify the process of acquiring foreign employment and utilization plans, related work permits, and temporary residence permits.(Foreign employees may obtain permanent residence permits if they meet certain criteria)

Acquisition of land

• KEK's managers must follow the National Single Window policy to simplify the approval process for land procurement and permits, and investment approval can be issued within three hours of submission.
  (However, three-hour services are applicable only to taxpayers who meet investment size and domestic employment requirements.).

Free Trade Zone KPB (Kawasan Perdagangan Bebas Indonesia) Overview

The Indonesian Free Trade Zone is a trading zone and port within the territory of Indonesia.
It is a designated area to promote foreign investment, trade promotion, international logistics facilitation, and regional development by guaranteeing free manufacturing, logistics, distribution, and trade activities through various support such as tariff reservation and infrastructure provision.
Indonesia's free trade zone is located in Batam, Sabang, Bindan, and Karimun, and the government is holding various investment attraction summits to attract investment to the region.

(1) Goods brought into the Free Trade Zone ("FTZ" or Kawasan Perdagangan Bebas/KPB) and goods supplied between companies in the Free Trade Zone can also enjoy tax benefits. Taxpayers in the free trade zone can enjoy the following tax benefits.

• VAT and luxury tax not collected on the income of certain goods

• Income prepaid corporate tax (PPh22) not collected on the income of certain goods

• exemption from import duties on certain goods

• excise tax exemption on imports of certain goods

• VAT and luxury tax not collected for domestic purchase of certain goods

• Transactions of intangible assets and taxable services are exempt from VAT, Taxable if supplied into Indonesia's taxable area or supplied to a company within a Bonded Stockpiling Area or special economic area

(2) Investment Location Conditions in Major Free Trade Area

Karimun Free Trade Area

• Chandra, head of the Karimun Free Trade Zone Authority, noted that investment conditions in Karimun are not superior to those of Singapore, which is located in nearby areas, but are highly potential areas.

• Companies that invested in Karimun from 1980 to 2008 (before Karimun was eligible for FTZ) were only PT Karimun Sembawang Shipyard, PT Karimun Granita, PT Multi Granitindo Utama, PT Wira Penta Kencana, PT Pacific Granitto Utama, and PT Minarining 7 companies.

• Meanwhile, companies that invested in Karimun from 2008 to 2017 were Italian company PT Salpem Indonesia Karimun Yard in the oil and gas manufacturing industry, German company PT Oiltanking Karimun in the oil storage sector, Singapore company PT Air Liquid Riau Island in the chemical sector, and Indonesian company PT Karimun Power Plant in the power sector.

• PT Oiltanking Karimun said the main reason for the investment is that the Karimun Free Trade Zone is adjacent to Singapore, an oil and trade hub in the Asia-Pacific region, and can receive tax benefits on cargo imports and exports.

• However, the shipbuilding industry is still preferred compared to the above industry.
  A total of three companies, PT Multi Ocean Shipyard (Indonesia), PT Karimun Marine Shipyard (Indonesia), and PT Grace Rich Marine (China), have made direct investments in the shipbuilding industry.

• Since the Karimun region qualified for FTZ, total investment in the Karimun Free Trade Zone has been gradually increasing since 2008.

Announcement of the Director of the Free Trade Zone of Ddanjungpinang

• Den Yelta, head of the Free Trade Zone Authority in Ddanjungpinang, noted that, like Chandra, head of the Free Trade Zone, the region seems to generate less investment due to a lack of publicity for potential investors.

• The main issue related to poor investment performance as well as promotion is local infrastructure, and BP Tanjungpinang has already promoted it to domestic and foreign investors, but investors are more interested in nearby free trade areas such as Batam, Tantan, and Karimun instead of Ddanjung Pinang.

• The Ddanjungpinang Free Trade Zone Authority said it has secured 1,088 hectares on Dompak Island and 1,590 hectares in the Senggarong area to attract investment.

• Of these, a total of 2.5 hectares (20,000 square meters) of land will be allocated to the construction of the Halal Cosmetics Industrial Complex, which is expected to produce 700,000 tons of halal cosmetics annually.
  In addition, plans to foster electronics, fisheries, tourism areas, and mangrove forest development are included.

• The local infrastructure includes Tanjung Mocco Port, Raja Haji Fisabililla Airport, roads, electricity, telecommunications, and water and sewage facilities, but the development of Tanjung Mocco Port has not yet been completed.

Announcement of Bintan, Director of the Free Trade Zone

FTZ Bintan, FTZ Bintan Bagian Utara, FTZ Maritime Bintan Timur, Bintan Penaga Bay, and Lagoi were selected as zones.

• FTZ Bintan focuses on tourism sectors and industrial complexes, including the maintenance, repair and maintenance (MRO) industry, alumina industry, food processing, marine defense and sports industries.

• The Northern Bindan Free Trade Zone covers 58,750 hectares and develops the Lobam Industrial Zone located at Sri Koala Lobam.
  Industrial sectors that will mainly attract to the region include shipyards, electronics, textiles, services, aviation, and packaging industries.

• The Lobam industrial zone covers 678 hectares, and there are support facilities such as roads, as well as the Sri Udana Lobam Free Port with a capacity of 6,200 TEUs.

• In addition, the Lobam Industrial Zone has electricity, water supply, communication network, household waste, and industrial waste treatment facilities.

• The Eastern Bintan Free Trade Zone focuses on shipyards, heavy and light industries, with an area of 812.6 hectares.

• In the master plan, the tourist area of Bintan Penaga Bay covers 1,571 hectares (including 500 hectares of beach areas).

• The development of tourism areas in the Bindan region is carried out in an integrated manner, including Lagoi tourism, Trikora tourism, and Tanjungpinang Heritage tourism, and is expected to be developed as a travel bubble program between Indonesia and Singapore in the future.

• This area has sufficient infrastructure for investment, such as Bandar Bentan Telani port, Lagoon port, and electricity and communication facilities.
  For accessibility, Vindan can use Raja Haji Fisabilillah Airport and Raja Hang Nadim Airport, which are located about 50 kilometers away.

• Currently, Bindan International Airport is being built in the areas of Busung and Sri Kuala Lobam, with a total investment of $150 million, and it is expected to be the first airport operated by a private company.
  It was intended to be completed in 2020, but it is scheduled to be completed in 2023 due to uncertainties such as COVID-19.

• PT Bintan Aviation Investments is building an airport under the land use fee setting of PT Angkasa Pura II, a state-owned company, and assets will be absorbed into PT Angkasa Pura II after a certain period of time.

• In addition, Galang Batang SEZ, which produces alumina with a daily production of 1,500 tons, is located, and it is reported that it is preparing a feasibility study as of January 2022 with the aim of building the Sei Busung Dam in 2024.

The announcement of Batam, the director of the Free Trade Zone

• Batam is the most advanced region compared to other free trade zones in Indonesia, with a total of 26 industrial parks and 871 enterprises, according to data from the Batum Free Trade Zone Authority website (https://bpbatam.go.id/publikasi/e-book/)

• There are domestic companies in the Batam Free Trade Zone, but foreign companies' entry is dominant

• Mr.
  Lukita Dinarsyah Tuwo, former director of the Batam Free Trade Zone Authority, said that many companies have strategic locations, modernized facilities, competitive investment costs, good security systems, cleanliness and hygieneIt said that investment is determined by the hostile environment, reliable infrastructure, government support and facility benefits as a free trade zone.

• Investment benefits for investment companies are exemption from import and export taxes, exemption from VAT, and agreements against double taxation with about 60 countries.

• Lucita already has many facilities in the Batum Free Trade Area, such as ports, airports, roads and bridges, gas distribution networks, electricity, clean water, telecommunications networks, local radio and TV stations, and other public facilities.

• Batam has a maximum capacity of 45,000 DWT, 35,000 DWT, and 12,500 DWT of the Batam Center, Harbour Bay, Telaga Pungur, and 280 DWT.

• Due to geographical conditions, Tengku Fisabilillah/Batam Island-Tonton Island, Nara Singa II/Tonton Island-Nipah Island, Raja Ali Haji/Nipah Island-Setoko Island, Sultan Jainal Abidin/Remain/Rekan-Rokan Island-Rokan/Satan-Rokan/Rokan/Rang Island).

• The Batam Free Trade Zone Authority (BP Batam) has the best master plan for the Batam Free Trade Zone, emphasizing that Batam will become a trading and logistics platform in 2045.

• Lukita said the main strategies to make this happen are to develop the Batum Light Rail (55.47 km), develop a sewer system on Batum Island, and improve dam maintenance to maintain water supply and develop hazardous waste disposal areas.

• According to data from February 22, the development of water solar power plants between Tembesi and Durangkang began, with Tembesi's investment value of $470 million and Druangkang's investment value of $1.9 billion.

(3) Overview of Industrial Park in Indonesia

As of April 2022, there were 126 industrial complexes in Indonesia.
Compared to general areas, industrial complexes are relatively well equipped with infrastructure such as roads, water supply, and electricity.
In addition, it has the advantage of reducing the time and cost that tenant companies spend on licensing as they often already have licenses necessary to operate basic factories.
Investors who want to establish a factory in the industrial complex need sufficient preliminary investigation, including the distance from major arterial roads around the site to the factory, smooth power supply and demand, and ease of industrial water procurement.
The location selection of the factory acts as a key factor in determining the success of the business operation.

Operation Status of Industrial Park in Indonesia

Basic infrastructure and facilities of the Indonesian industrial complex

• Infrastructure: Roads, Sewerages, Waterworks, Wastewater Systems, Electrical and Telecommunications Facilities

• Peripheral facilities: medical facilities, fire brigade, security, commercial services, leisure facilities

• ancillary facilities: staff accommodation, office space, conference room, optical communication cable, special transportation service

Most industrial complexes require tenants to meet certain environmental requirements before they are connected to the central system.
For example, heavy and pollution industries (leather, pulp, etc.) cannot discharge wastewater, and industries that emit toxic waste or industries adjacent to residential areas need their own waste treatment plants.
In 2015, there were not many industrial complexes with their own sanitary treatment plants, and the corporation was providing services to transport waste from the factory to public landfills.
However, as regulations and management supervision of wastewater treatment have been strengthened, industrial complexes with their own sanitary treatment plants have been increasing.

Benefits of establishing a factory in the industrial complex as a foreign company:

• Information and help can be provided from the management team of the corporation regarding the procedures and processes for establishing a corporation, licensing, and operational problems.

• Since the prepared land can be used immediately and the developer of the industrial complex can start building and operating the factory while guaranteeing the basic license of the industrial complex residents, obstacles to land acquisition and licensing can be minimized.
  For example, the developer of the industrial complex can reduce the licensing process by already receiving permits such as the Upaya Penelope Lingkungan (UKL) and the Upaya Pemantauan Lingkungan (UPL).

• Electricity, water, gas, and communication supply are relatively stable compared to non-industrial complex areas.

Halal Industrial Complex under construction from 2021

• The Indonesian government is developing a halal industrial complex in which all halal-related infrastructure is aggregated to foster the halal industry.

• The first halal industrial complex in operation is Kawasan Modern Cikande.

• It is expected that companies operating in the Halal Industrial Complex will be easier to certify Halal and receive various tax incentives.

• The Indonesian government plans to operate a total of eight halal industrial complexes by adding six in the future.

Jakarta

Jakarta is the capital of Indonesia and serves as a business center.
The Jakarta Stock Exchange and representative offices of most companies are located in Jakarta.
Jakarta has tourist attractions such as national museums, national parks, amusement parks, nearby islands, and many entertainment facilities and world cuisine restaurants.
In addition, there are movie theaters, theater facilities, karaoke, bars, cafes, bowling centers, and spas, and there are many places where you can purchase traditional Indonesian specialties.
The headquarters of global companies are concentrated.

Bandung

Bandung became the administrative capital of the West Java region from 1864.
There are 48.68 million people living in the western province of Java, of which 3 million live in Bandung.
PT Dirgantara Indonesia, Indonesia's only aircraft company and PT Telkom Indonesia and Indonesian telecommunications company are located in Bandung.
Many other pharmaceutical companies, textile companies, automobiles and semiconductors, electrical parts and cable manufacturers, and petrochemical companies are located here.
The average temperature is 15 to 31 degrees, and the annual rainfall is 1,431 to 4,538 mm.

Semarang Smarang is the administrative capital of central Java.
There are 34.26 million people living in central Java and 1.6 million in Smarang.
Smarang has Tanjung Emas, Indonesia's third largest port.
The average temperature is 18 to 28 degrees, and the annual rainfall is 1,414 to 4,277 mm.

Yogyakarta

It is the second most tourist area after Bali.
The city of Yogyakarta is the capital of Yogyakarta's special district, with an area of 35 square kilometers and a population of 400,000 people.
Yogyakarta is crowded with tourists who come to see traditional culture and traditional structures.
The temperature ranges from 25.7 to 28.8 degrees Celsius, and the rainfall is 1,855 mm every year.
The area has long been the center of several dynasties, especially the ancient Kingdom of Mataram and the Kingdom of Sultanate.
Local people admire the Sultanate of Yogyakarta.

Surabaya

It is the capital of eastern Java.
Its economic base is mainly agriculture, fisheries, oil, coffee, mango, and apple cultivation, and it is Indonesia's second-largest economic region after Jakarta.
Surabaya is also known as a clean city in Indonesia, and has many modern buildings and accommodations, making it convenient to live in.
Surabaya is home to 3 million people, and the main ethnic groups are Javaese and Maduraese.
There is no Surabaya traditional culture, but many traditional cultures and festivals in the surrounding area have moved to Surabaya.
Juanda International Airport is located 20 km from Surabaya with an area of 396 ha.
In addition, there are Pegerungan Airport, Trunojoyo Airport, and Abdulrahman Saleh Airport (Navy Airport) in eastern Java.
The headquarters of PT PAL, a state-run shipbuilder involved in Daewoo Shipbuilding & Marine Engineering's massive warship project, is located in Surabaya.

Bali

Bali is a world-renowned tourist attraction located 2km from eastern Java, and Indonesians call it Pulau Dewata.
Bali is famous for its unique culture and beautiful nature and is geographically located connecting the Nusa Tenggara region with Java.
The local government has improved the investment environment so that Bali can be developed as a tourist destination.
The average annual temperature is 24.1 to 29.1 degrees, and the annual rainfall is 1,050 to 2,000 mm.
It is a city specialized in the tourism industry, and it is known that the main source of income for residents is from the tourism industry.

Medan

The capital of North Sumatra is Medan, Indonesia's third-largest city, with particularly developed tourism and trade.
North Sumatra is a huge area extending from the Indian Ocean to the west to the Strait of Malaka to the east.
The area also has Indonesia's largest lake, Tobal Lake, with 25 cities.
The average annual temperature is 23.4 to 33.6 degrees, and the annual rainfall is 3,140 mm.
There are various ethnic groups living in Medan, but the main ethnic group is the Badak people, and the original indigenous people are the Deli Malay people.
There are two Bardang ethnic groups living in Medan, the southern Bardang people are Islam, and the northern Bardang people (Toba, Karo) are Christian.
Medan people are generally outgoing, active, spoken out, and self-expression rich.

Samarinda

Saralanda is the capital of eastern Kalimantan.
Eastern Kalimantan is the second largest in Indonesia with 245,000 square kilometers, with 13 cities.
Samarinda is East Kalimantan's largest city, with an estimated 1 million inhabitants as of 2019, and is also a road leading to the Kutai Barat, Kutai Kartenegara and East Kutai regions.
East Kalimantan has abundant natural resources, marine resources, and agricultural and fishery products.
East Kalimantan has abundant coal, quartz, gypsum, pumice, dolomite, limestone, marble, and corn, but various measures are needed to develop and manage these natural resources.
The average annual temperature is 24.2 to 28.8 degrees Celsius, and the annual rainfall is 2,519 mm.

Makassar

Makasar is the capital of the city of South Slaeus, and is a representative city in eastern Indonesia.
There are 23 cities in the city of South Slaue, and Makasa is the center of the region, agriculture, farms, livestock, fisheries, and mineral trade.
The South Slavic city is focusing on industrializing an economy that is focused on agriculture, and the state government is working to improve the investment environment.
It has Sukarno Hata Port, East Indonesia's largest port, and many nearby tourist attractions have been developed.
The average annual temperature is 22 to 34 degrees Celsius, and the annual rainfall is 2,000 to 2,500 mm.

Jayapura

Jayapura is a major city in Papua.
The Papua region has many mountainous areas, and the peaks of three mountains - Jayawijaya, Trikora and Yamin - are covered with snow throughout the year.
Papua is rich in natural resources such as agriculture, fisheries, gas, and mining, and forest resources such as wood and plywood.
It is also home to various unique species such as kangaroos and beavers.
Tourism is still untapped.
The average annual temperature is 23.5 to 28.4 degrees Celsius, and the annual rainfall is 1,744 mm.

The Indonesian government manages all investments differently by dividing them into Penanaman Modal Dalam Negeri/PMDN and Penanaman Modal Asing/PMA. PMDN is a 100% domestic-only investment, and if a foreigner holds even 1% or one share, it is classified as PMA. PMDN allows investment in almost all industries, but PMA prohibits or restricts investment in many industries.
It is not difficult to switch from a PMDN company to a PMA company unless it is included in the Investment Negative List, which outlines prohibited or conditionally allowed investments.
Transformation from a PMA company to a PMDN company is allowed in all industries.

Basic requirements for foreign investment:

• It will not involve industries prohibited from foreign capital investment.

• Number of investors/shareholders: at least 2

• Minimum investment: more than 10 billion rupiah per industry, excluding land and buildings.

• Form of foreign corporation investment entry: Based on investment and management entities, foreigners and locals jointly invest and manage local corporations, or foreigners invest and manage alone.

Co-investment joint management type:

Under the Local Investment Act, foreign investment is not allowed without local partners' participation in certain industries (e.g., construction, agriculture, horticulture, mining, power generation, medical equipment distribution, etc.).
Foreigners unfamiliar with the local situation may find early market entry easier with local partners' involvement.
However, differences in standards and management methods between foreigners and locals might lead to challenges in smooth management.
Management decisions, such as capital increase, addition of industries, and work processes, may face obstacles due to these differences.

Joint Investment Exclusive Management Type:

Local investment is received by locals in industries limiting foreign shares under the Local Investment Act.
In this type, the foreign counterparts do not participate in management to enhance local subsidiaries' operational efficiency.
The percentage of total stock held by locals is crucial.
If locals hold at least 25% of the shares, they can prevent dissolution, merger, or integration at shareholders' meetings.
If they hold at least one-third of the shares, they can prevent the revision of articles of incorporation.
If locals hold at least 50 percent, foreign shareholders (minority shareholders) cannot pass any agenda presented at the shareholders' meeting without local shareholders' consent.

Single-Investment Management Type:

Under the Investment Act, this is possible only for industries allowing 100% foreign ownership.
Local partners are formally invested due to investment law regulations, but foreign companies invest and operate alone without local partners' involvement in management.
It allows foreigners to manage the business independently without interference.
For companies possessing all the necessary funds, technologies, and market access, this form provides an advantageous situation for overseas expansion.
When managing a single investment alone in an industry that mandates joint ventures with locals under the investment law, having legal protection under local law with the help of local experts is essential. Requirements for licensing a local subsidiary of foreign investment

• Pre-approval for mutual use of local subsidiaries

• Establishment of a local subsidiary

• Certificate of location

• Taxpayer registration card

• Letter of approval from the Ministry of Justice for incorporation

• Certificate of investment

• Business Registration

• Business basic number card (company registration card, importer license, Customs Service registration number)

• Certificate of Social Security Insurance Subscription

• Conditional business permit (material permit, environmental permit, building permit, certificate of completion)

• Tax office electronic filing number

• Value-added tax penalty business designation

• Imported Capital Goods Tariff Reduction and Exemption Letter

• Imported Raw Materials Tariff Reduction and Exemption Letter

• Labor Department Registration Certificate

• Employment plan approval form for foreign employees

• Foreign employment permit

• Visa issuance instruction cable

• Fixed-term residence permit

• Police report on foreigners' accommodation

• Certificate of temporary residence for foreigners

• Foreign employment report

Process for licensing the establishment of a local subsidiary for foreign investment: **May vary slightly depending on the investment area

Foreign Investment Local Corporation Mutual Pre-approval → Establishment of Local Corporation → Taxpayer Registration Certificate → Ministry of Justice → Investment Certificate → Business Registration → Basic Number → Business License → Business License (conditional) → Taxpayer Electronic Fileing → Customs Authorization → Customs Authorization → Foreign Tax Authorization → Customs AuthorizationPolice report card → certificate of temporary residence for foreigners → employment report for foreigners

In Indonesia, the concept of a branch office is not separately distinguished from an investment corporation, and when entering the form of a branch office accompanied by business activities as a foreigner, a local corporation in the form of a corporation must be established.
If business activities are accompanied, please refer to the information on the above corporation, and if it is an office established with a non-profit concept, please refer to the following contact office (representative office).

Types of liaison offices and types of entry:
Permission to establish a representative office can be classified into three types according to the industry.
For general industries (except finance and airlines), you can obtain an Izin Kegiatan Kantor Perwakilan Perusahan Ashing, and for Indonesian import/export/distribution agents, you can obtain an Asiatican KP3: Asiatican Construction, In the case of the engineer industry, there is IPBUJJKA (Izin Perwakilan Badan Usaha Jasa Konstruki Ashing), a foreign construction company.

Restrictions on Liaison Office Activities:
Representative offices (KP/RO) or general liaison offices in Indonesia shall not engage in any commercial or commercial activities.
Only market research, information gathering, public relations, and liaison with the headquarters are available, and sales activities such as orders, bids, contracts, imports, and distribution are not allowed.
If this is violated or operating profit is suspected, caution is required as the National Tax Service may investigate the company or issue a tax invoice.

Liaison Office Types and Process for Preparation for Licensing

Representative Office of a Foreign General Company

In general, all companies, except for special industries (financial affiliates, construction companies, airlines, etc.), can obtain permission for a representative office.
The representative office (KP) is approved by BKPM's Investment Coordination Committee and can issue the first three-year activity permit.
It can also extend two additional activity permits for the next year each, totaling five years.
If the company's activities change after five years, it can request permission for new activities again.

Representative offices in general industries must be located in the Ibukota, the capital of the Provinsi, and can only be established in office buildings.
As mentioned earlier, the representative office cannot directly conduct sales (i.e., it cannot generate revenue, issue invoices, win orders, bid, contract, import and export, distribute products, or engage in product promotion and marketing).
It can only conduct market research, gather information, and communicate with the headquarters.
This restriction is because the representative office is considered a prerequisite for the establishment of a corporation.
It can be interpreted as an unspoken guideline to conduct legitimate public relations and marketing activities after the establishment of a corporation.

Preparation for licensing of representative offices of foreign general companies

• Permission to open a representative office

• Preparation of the articles of association of the representative office

• Certificate of location

• Taxpayer registration certificate

  • District Court Registration

  • Certificate of Social Security Insurance Subscription

  • Tax office electronic filing number

  • Local Business Administration Company Registration Certificate

  • Labor Department Registration Certificate

  • Employment plan approval form for foreign employees

  • Foreign employment permit

  • Visa issuance instruction cable

  • Fixed-term residence permit

  • Police report on foreigners' accommodation

  • Certificate of temporary residence for foreigners

  • Foreign employment report

Procedures for opening a representative office of a foreign general company:
Representative Office Opening Permit → Representative Office Articles of Incorporation → Location Certificate → Taxpayer Registration → Local Court Registration → Social Security Insurance Subscription Certificate → Taxpayer Electronic Filing Number → Ministry of Labor Registration → Foreign Employment Permit → Visa issuance instruction cable → Residence Permission (fingerprint collection and photography) → Foreign resident police report card → Foreign resident temporary residence certificate → Foreign employment report

Representative Office of Foreign Trade Company

If the foreign headquarters already exports goods to Indonesia or imports goods from Indonesia, it is established under the concept of an import and export agent.
The representative office of a commercial company cannot directly engage in import and export transactions or handle goods, but it can manage and monitor import and export operations locally as an agent of the headquarters.
However, all commercial activities, sales/distribution operations, and bidding are not allowed, so caution is required.
The difference from the general representative office is that it is possible to promote and market products.
Therefore, it is a method of entering the market that consumer goods manufacturers can use before establishing a local corporation.
It is a representative office approved by the Investment Coordination Committee (BKPM), and commercial branches can be established in Ibu Kota Provinsi or Kabupaten.
Branches, other than the headquarters, can be set up in several places, which seems to be related to the essential promotion of products to the entire region due to the nature of consumer goods.
After obtaining the first temporary approval (2 months) from the representative office of a commercial company, it must be changed to a one-year permit later.

Preparations for licensing representative offices of foreign trading companies:

• Permission to open a foreign trading company

• Preparation of the articles of association of the representative office

• Certificate of location

• Taxpayer registration certificate

• Registration of Local Bunkwan

• Business Registration

• Business basic number card (company registration card, importer license, Customs Service registration number)

• Business license

• Certificate of Social Security Insurance Subscription

• Tax office electronic filing number

• Value-added tax penalty business designation

• Labor Department Registration Certificate

• Employment plan approval form for foreign employees

• Foreign employment permit

• Visa issuance instruction cable

• Fixed-term residence permit

• Police report on foreigners' accommodation

• Certificate of temporary residence for foreigners

• Foreign employment report

Procedures for opening a representative office of a foreign trading company:
Representative office opening permit → Representative office articles → Location certificate → Local court registration → Business registration → Business license → Business license → Taxpayer electronic filing registration → Labor department registration → Foreign employment permit → Visa → Expiration date → Foreign employment permit → Temporary residence permit → Police report

Representative Office of Foreign Construction Company

Construction work and construction design in the form of a representative office are authorized by the Indonesia Investment Coordination Authority (BKPM).
It is a representative office authorized by foreign companies operating in the construction industry, such as construction engineering firms.
The permit must be renewed every three years, and a fee of US$10,000 for the construction industry and US$5,000 for construction design or supervision companies (Pengawas) must be paid every three years to a designated bank of the Indonesian Public Works Housing Department (PU).
Unlike general company representative office licenses, construction company representative office permits allow participation in construction bidding, order procurement, and construction under the condition of joint operation with a local construction company in Indonesia, as well as issuing invoices.
In other words, it is possible to generate profits.
The Indonesian Construction Act broadly categorizes construction service providers into engineering, construction, and supervision, and mandates that these services must be carried out by different operators in construction projects.
Therefore, forming a consortium is very common. According to the Indonesian Construction Act, it is not possible to win or construct a construction project alone; it is mandatory to form a Joint Operation (J/O) with a local construction corporation in Indonesia, which holds the highest construction industry grade.
Additionally, the representative office must report its annual activities of the previous year to the Ministry of Labor by mid-January every year.
After receiving a construction order, you must apply for a Tax Operator Registration Certificate (SPPKP) to issue a tax invoice.
Moreover, you must obtain the branch manager's Personal Taxation Registration Certificate (NPWP Pribadi) in advance.
While obtaining employment permits for more than three employees can be challenging, after receiving the project order, the contract can be submitted to the Ministry of Labor to obtain employment permits for experts (such as engineers) necessary to carry out the project.

Preparations for licensing representative offices of foreign construction companies:

• Recommendation Letter for representative Embassy in Indonesia

• Joining the Construction Association

• Construction license

• Permission to open a representative office

• Preparation of the articles of association of the representative office

• Certificate of location

• Taxpayer registration certificate

• District Court Registration

• Business Registration

• Basic business license (company registration card, importer license, Customs Service Registration Number)

• Certificate of Social Security Insurance Subscription

• Tax office electronic filing number

• Value-added tax penalty business designation

• Labor Department Registration Certificate

• Employment plan approval form for foreign employees

• Foreign employment permit

• Visa issuance instruction cable

• Fixed-term residence permit

• Police report on foreigners' accommodation

• Certificate of temporary residence for foreigners

• Foreign employment report

Procedures for opening a representative office of a foreign construction company:
Embassy Recommendation Letter → Construction Association → Construction License → Representative Office Opening Permission → Representative Office Articles of Incorporation → Taxpayer Registration Certificate → Local Court Registration → Business Registration → Social Security Insurance Subscription Certificate → Business Permit → Taxpayer Electronic Filing Registration → Value-added tax penalty business designation → Ministry of Labor registration → Foreign employment permit → Visa issuance instruction cable → Visa issuance → limited-time residence permit (fingerprinting and photographing) → Foreign residential police report → Foreigner temporary residence certificate → Foreign employment report

A corporation in Indonesia is identified with the label PT, and almost all companies are registered as PTs.
The Corporation Act is based on UU 40/2007, and in 2016, the law on the authorized capital of corporations was revised by Government Regulation No. 29 (GR No 29/2016).
According to UU 40/2007, Indonesian nationals needed at least 50 million rupiah at the time of establishment as minimum capital.
However, the revised regulations changed this limit to an amount that the founder of the corporation can adjust under consultation.
It is interpreted that the purpose of the government authorities' revision of the Stock Company Act is to facilitate the businesses of small enterprises and startup companies.
Other basic matters, such as the number of shareholders who are founders, remain in accordance with UU 40/2007. However, due to the introduction of the OSS (Online Single Submission) system in July 2018, the corporate establishment process was changed.
According to Government Act No. 7 of 2021, small and medium-sized companies in the form of stock companies were classified as follows based on the amount of authorized capital or sales: Micro Enterprises: Maximum authorized capital of 1 billion rupiah, excluding land, buildings, etc., or up to 2 billion rupiah in annual sales. Small Enterprises: Maximum authorized capital of 1 to 5 billion rupiah, excluding land, buildings, etc., or up to 2 to 15 billion rupiah in annual sales. Medium Enterprises (Medium Enterprises): Maximum authorized capital of 5 billion to 10 billion rupiah, excluding land, buildings, etc., or up to 15 billion to 50 billion rupiah in annual sales.

In Indonesia, the only limited liability company is PT/Perseroan Terbatas, Please refer to the contents of the above corporation.

In Indonesia, a private business (self-employed) is owned by one person, and it is the easiest type of business to start.
Any person of Indonesian nationality can freely establish a private business without any restrictions.
Usually, private businesses are created by small capital entrepreneurs who use available resources, limited output, and simple technology production tools.
These projects are formed without permission and without specific procedures.
Therefore, this type of business is the easiest type to establish, and dissolution is also very easy.
Private businesses in Indonesia include, for example, Warung (street restaurants), small restaurants, street vendors lined up in alleys, and rear car peddlers.

Persekutuan Perdata (Maatschap)

Legal basis: Civil Code 1618 (pascal 1618 KUH Perdata), established by two or more persons verbally or in writing.
The condition of the partnership is to share the results of the mutual benefits generated by the activities performed together.
Contracts must be made by agreement between the founders of the company, which includes the division of the amount of capital issued by the various parties, the distribution of business performance results (income), and then divided into several parties according to the initial contract or contract.

Im Firma

Legal basis: Civil Code 1618 (pascal 1618 KUH Perdata), established by two or more persons verbally or in writing.
The condition of the partnership is to share the results of the mutual benefits generated by the activities performed together.
Contracts must be made by agreement between the founders of the company, which includes the division of the amount of capital issued by the various parties, the distribution of business performance results (income), and then divided into several parties according to the initial contract or contract.

CV(Commanditaire Vennontschap)

Legal basis: Article 19-21 of the Commercial Act (Pascal 19-21 KUH Dagang), the difference is that there are people who are almost involved in Firma or those who are not involved in the business.
The operator of the business shall be responsible for personal responsibility by injecting all of the individual's assets.
The articles of association must be prepared and the articles of association must be registered in the court.
In Limited Partnership, the owner (shareholder) involved in management is unlimited liability, and the owner (shareholder) not involved in management is limited liability.