Pro-business Policies

Open policies for Foreign Direct Investments (FDI)

All business activities are open for 100% foreign ownership, except 37 business activities with certain requirements listed in the Presidential Regulation 49/2021. The revised regulation evoked restrictions in 350 business activities for FDI, including in ICT, health, transportation, energy and mineral resources, plantation, and agriculture, also construction. An FDI company is required to establish a limited liability (PT) with a minimum capital of IDR10 billion (~US$700,000). 

Simplified investment regulation and licensing 

In 2020, Indonesia issued Job Creation Law, a breakthrough in the country’s legal system, which revised 77 laws through a single law (“omnibus law”). It aims at creating vast job opportunities by improving investment climate and legal certainty, harmonizing central- regional policies, and simplifying regulation. To implement the law, several regulations have been issued, including Presidential Regulation 49/2021 that revoked the so called “negative investment list”.

Tax Holiday

Tax holiday is exemption of corporate income tax (CIT) offered to eligible pioneer sectors for 5-20 years (up to 25 years in SEZs) depends on the investment size started at IDR500 billion (~US$36 million). For smaller scale investment, government offers mini tax holiday, a 50% reduction of CIT for 5 years. Both tax holiday and mini tax holiday can be extended with 2- year of CIT reduction.

Tax Allowance

Tax allowance is 30% reduction of CIT from capital investment for 6 years (5% per year) offered to 183 business fields. It also includes accelerated depreciation, reduced dividend withholding tax rate, and extended tax loss carry forward up to 10 years.

Super Tax Deduction

The major tax deductions aimed at boosting investment, R&D, and the participation of businesses in improving human resources. They include reduction of gross income subject to CIT up to 300% of the cost of R&D activities or up to 200% of the cost of educational activities, also 60% reduction of CIT from capital investment for labor-intensive industries.

Import Duty Facility

On the trade side, Indonesia provides an exemption of import duty on imported machines, goods, and material for production applied for 3 years. VAT exemption is applicable in FTZs and bonded zones. Indonesia is also included in the US General System Preferences (GSP) that benefits companies to have a lower import tariff to enter US market covering 3,500 products.

End-to-end services and tailored facilities

As the front liner in improving ease of doing business, Ministry of Investment/BKPM is given the authorization to issue business licenses and investment facilities from other ministries/government institutions. It empowers the ministry to provide end-to-end services, including tailored facilities for each investor especially during this challenging time. Backed by SOEs, the country is also developing a new integrated industrial estate in Batang, Central Java, which offers highly competitive land lease and even free lease with certain requirements.