Advantages of Doing Business in Indonesia

Indonesia is one of the largest economies in Southeast Asia, which has rightfully attracted the attention of foreign investors along with such large markets as China and India. The country has demonstrated stable economic growth and has seen a significant increase in the middle class, which opens up great opportunities for foreign business.For companies wishing to enter the market, there are prospects for promoting goods and services against the backdrop of growing consumer demand.

Since 2021, legislative changes have made it possible to establish Indonesian companies with 100% foreign ownership in many industries. This reform, known as the Omnibus Law, has made it much easier to start a business, although there are still certain industries where foreigners are still restricted. As of 2024, these industries include:

• Media and Press:Foreign investment in print and electronic media is limited or prohibited in order to maintain control over the information space of the country.
• Telecommunications:Some segments of the telecoms sector have restrictions on foreign ownership, particularly in areas related to infrastructure and the provision of essential services.
• Transportation services:Domestic air transport, sea transport and some types of land transport have restrictions for foreign investors.
• Agriculture and Fishing: Certain activities in these sectors, in particular the cultivation of certain crops and fishing in territorial waters , are restricted for foreign capital.
• Defense industry:The production of weapons, ammunition and military equipment is prohibited for foreign investors in order to ensure national security.
• Retail in traditional markets:Small and medium-sized enterprises in the retail sector in traditional markets are protected from foreign competition.

Having a reliable partner to navigate bureaucratic processes significantly increases the chances of successfully launching a business in Indonesia. Our specialists are ready to provide comprehensive support – from registration to obtaining licenses and opening a bank account.

Advantages of Indonesia as a Business Jurisdiction

Taxation in Indonesia

The corporate tax rate for PT PMA is 22%. There are incentives for young companies with an annual turnover of up to IDR 4.8 billion (approximately USD 320,000), providing for a rate of only 0.5% of turnover. Value Added Tax (VAT) is 11% for most goods and services, with exceptions for certain categories of products and zero-rated exports. Dividends, royalties and interest payments are taxed at a standard 20% for non-residents, although these rates may be reduced under double taxation treaties.

Businesses operating in special economic zones (SEZs) enjoy additional benefits, including simplified export procedures and tax incentives. Reporting in Indonesia is done quarterly and annually. Main Benefits of SEZ in Indonesia

1. Tax Incentives: SEZ residents have access to tax incentives, including:
2. Exemption from corporate tax for a specified period, which can range from 5 to 25 years depending on the investment volume and sector.
3. Reduced or complete waiver of Value Added Tax (VAT) rates for export-oriented goods and services, which helps reduce the costs of raw material supply and product export.
4. Customs Preferences: Companies operating in SEZs are exempt from customs duties on imported equipment, raw materials and components used in the production of export goods. This makes SEZs particularly attractive to manufacturing and technology companies that rely on imported equipment and materials.
5. Simplified Licensing Procedure: The procedures for obtaining licenses for activities in SEZs have been significantly simplified. The Indonesian government has developed a centralized system for submitting applications and obtaining the necessary permits through a single online platform, OSS (One Single Submission), which reduces the cost of administrative procedures and shortens the time for paperwork.
6. Infrastructure Support: SEZ is actively developing infrastructure – roads, warehouses, logistics and industrial facilities, creating favorable conditions for business. Investors have access to all necessary communications and amenities, including transport hubs, which simplifies logistics compaction and optimizes costs.

Major Industries Using SEZ

1. Batan SEZ: Specializes in the development of manufacturing and logistics. Its proximity to Singapore makes this zone attractive to foreign companies looking to access the logistics capabilities of both countries.
2. Morun SEZ: Offers favorable conditions for the mining and energy sectors.

• Compliance with environmental standards: All companies are required to comply with environmental standards in force in SEZ, including responsible attitude to the environment and the implementation of waste disposal measures.
• Investment Obligations: Some SEZs may require foreign companies to establish minimum investment amounts in order to receive certain tax and customs benefits.

Company Registration Procedure

To register a PT PMA, it is necessary to have at least two shareholders, and the minimum authorized capital for the company must be IDR 10 billion (approximately USD 670 thousand).

Opening and Doing business in Indonesia for non-resident companies requires compliance with certain requirements, in particular in terms of management, accounting and tax reporting.

Company Management:

• Directors: A company must have at least two directors. Indonesian law requires that at least one of them must be a resident of the country and have a tax card (NPWP). This ensures effective management and interaction with local authorities.
• Commissioners: In addition to directors, a company must have at least one commissioner who supervises the activities of the directors. The Commissioner may be either a resident or non-resident of Indonesia.

Accounting and Reporting:

• Financial Reporting:Companies are required to prepare and submit financial statements to the tax authorities annually. For large companies and public companies, external audit is mandatory.
• Tax reporting:Companies are required to file tax returns and pay taxes by the due dates. This includes income tax, VAT and other taxes depending on the type of activity.

Other requirements:

• Legal address:The company must have a registered legal address in Indonesia. This can be either own premises or rented.
• Substance:While the law does not require the presence of an office or staff, in practice banks and tax authorities may require proof of the company’s real economic presence in the country. This may include the presence of an office, local staff, or the implementation of real business activities.

Bank and cryptocurrency accounts

Opening a bank account in Indonesia for PT PMA usually requires the personal presence of the director. The country also has certain limits on the exchange of local currency for foreign currency, but usually the limits on transfers abroad are set only for the conversion of IDR. At the same time, it is possible to open a cryptocurrency account, allowing the purchase and sale of cryptocurrencies for IDR without tax reporting. This is a profitable tool for businesses focused on digital finance, although cryptocurrency is prohibited as a means of payment.

Banks Used by Non-Residents

Indonesia offers foreign investors a wide range of banking institutions for opening accounts and conducting monetary transactions. Among the most popular banks that actively cooperate with non-residents, the following can be distinguished:

• Bank Mandiri 
• Bank Central Asia 
• Bank Negara Indonesia
• Bank Rakyat Indonesia
• CIMB Niaga.