INDONESIA. FOREIGN INVESTMENT RULES
(Contributors: Lunaskaya Advocates – Jakarta)
Foreign Investment shall be any investing activity for running business within the territory of the Republic of Indonesia, made by any foreign investor using either foreign capital entirely or joint capital with domestic capital. Foreign Investor shall be any individual foreign citizen, foreign corporation, or foreign state making investment within the territory of the Republic of Indonesia.
Foreign Capital shall be any capital owned by any foreign country, individual foreign citizen, foreign corporation, foreign legal entity, and/or Indonesian legal entity, whose capital is owned partially or entirely by foreign party.
Unless otherwise stipulated by the law, any foreign investment shall be in form of limited liability companies based on the law of the Republic of Indonesia.
Any investors shall have the right to make transfer or repatriation in foreign currency to, among others:
- profit, bank interest, dividend, and any other revenue;
- funds required for:
- purchasing raw materials and support materials, intermediate products, or final product;
- reimbursement of capital goods in order to secure the investment;
- additional fund required for financing investment;
- fund for loan repayment;
- payable royalty or interest;
- income of any foreign individuals working in any investment company;
- the proceeds of any sale or liquidation of investment;
- compensation for any loss;
- compensation for any takeover;
- payment made for technical aid, payable costs for technical service and management, payment made under project contract, and payment for intellectual property right; and
- proceeds of asset sale.
Any investment companies shall be entitled to use experts of foreign citizen on certain position and expertise in accordance with the rules of law.
Facilities given to investors may be in form of:
- net income tax deduction up to certain level of investment made within certain period.
- import duty holiday or reduction for imported capital goods, machinery, or equipment domestically unavailable for production;
- import duty holiday or reduction for raw materials or support materials for production within certain period and with certain conditions;
- value added tax holiday or postponement for imported capital goods or machinery or equipment domestically unavailable for production within certain period;
- accelerated depreciation or amortisation; and
- property tax reduction, especially for certain business fields in certain region, area, or zone.
Government will provide service and/or licensing convenience to investment companies in obtaining:
- land rights;
- immigration service facility; and
- import licensing facility.
Ease of service and/or land right permit set forth in Article 21 point a may be given, extended and renewed in advance simultaneously and may be further renewed upon request of investors in form of:
- Hak Guna Usaha (Leasehold) may be given for 95 (ninety-five) years and simultaneously renewed in advance for 60 (sixty) years, and it may be further renewed for 35 (thirty-five) years.
- Hak Guna Bangunan (Building Rights) may be given for 80 (eighty) years and simultaneously renewed in advance for 50 (fifty) years, and it may be further renewed for 30 (thirty) years.
- Hak Pakai (Right of Use) may be given for 70 (seventy) years and simultaneously renewed in
advance for 45 (forty-five) years, and it may be further renewed for 25 (twenty-five) years.
Facilities granted for foreign investment are:
- limited residential permit for two (2) years for foreign investors.
- change of status from limited residential permit into permanent residential permit for foreign investors after living in Indonesia for two (2) consecutive years;
- one-year re-entry permit will be granted for several trips to any holders of limited residential permit that will apply for twelve (12) months starting from the day such limited residential permit is granted;
- two-year re-entry permit will be granted for several trips to any holders of limited residential permit that will apply for twenty-four (24) months starting from the date such limited residential permit is granted; and
- re-entry permit will be granted for several trips to any holders of permanent residential permit that will apply for twenty-four (24) months starting from the date such permanent residential permit is granted.
Service and/or licensing convenience for import licensing facility may be granted for importing:
- any goods so long as it does not violate the law governing merchandise trade;
- any goods that have no negative impact on the safety, security, health, environment, and moral of the nation;
- any goods for plant relocation from abroad to Indonesia; and
- any capital goods or materials for production demand of its own.
Indonesian Investment Coordinating Board (“BKPM”) is the institution in charge in handling the investment matters.
The foreign company must report to the BKPM about the activities of the company per 6 months.