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- Foreign Investment in Indonesia
Foreign Investment in Indonesia
General Information
Indonesia locates in Southeast Asia, between the Indian and Pacific oceans. It is the world’s largest island country, with more than seventeen thousand islands. Indonesia is the world’s fourth most populous nation.
Major Types of Entity
There are two forms for foreign investors to set up a business presence in Indonesia:
| 1. |
Limited Company (Perusahaan Terbatas (PT)) - A PT Company formed with a foreign shareholder is referred to as a PMA (Penanaman Modal Asing) Company.A PMA company should have at least two shareholders, one director. The minimum total investment is 10 billion Rupiah (US$700,000). 25% of total investment, i.e. 2.5 billion (US$175,000), shall be injected. |
| 2. |
Representative Office (RO) –The license of a RO lasts for 3 years and extendable. |
In some sectors there are restrictions imposed on FDI by “negative list”, which includes production of alcoholic beverages, ownership of public museums, historical sites and casinos. Some sectors require for special licenses and/or caps on foreign ownership. The more restricted industries include forestry, tourism, telecommunications, energy, mining and finance.
Foreign companies are not permitted to establish branches in Indonesia with exceptions only in banking and certain energy resource exploration projects.
Major Taxes in Indonesia
Major types of taxes levied in Indonesia are as below:
| CIT-Corporate Income Tax |
VAT-Value Added Tax |
| PIT-Personal Income Tax |
WHT-Withholding Tax |
Foreign investment in certain designated business areas or regions may be granted the following tax incentives:
| 1. |
CIT reduction up to 5% |
| 2. |
Acceleration of depreciation |
| 3. |
Extension of tax loss carry-forwards up to 10 years |
| 4. |
A reduction to 10% in withholding tax on dividends |
Employment
It is compulsory for all employers to contribute to social benefit schemes, which include:
* depend on the work’s risk level
Land Ownership
Foreign invested companies in Indonesia are not permitted to own land. FDI companies can obtain formal rights of use the land with period up to 30 years depending on the business activities. The land-use right can be extended for additional 20 years.