With the introduction of the Business Identification Number (NIB) registry and the Online Single Submission (OSS) platform, the Indonesian government aims to ease the process of doing business in Indonesia.

The issuance of the NIB is in most cases sufficient to start your business operations in Indonesia, without applying for additional licenses for a range of activities, goods and services.

Indonesian Standard Industrial Classification

Moreover, for 45 additional Indonesian business classifications, known as Klasifikasi Baku Lapangan usaha Indonesia (KBLI) it is no longer required to obtain additional production licenses.
The Indonesian Standard Industrial Classification or KBLI consists of a 5-digit code used by the government to classify business fields in Indonesia.
As a result, your business activity is categorized under a KBLI number.
This classification is used by the Central Statistics Agency and other government bodies to administer the licensing and investment process.
An overview of the KBLI codes can be found on the website of the Central Statistics Agency, called Badan Pusat Statistik (BPS).

Business Identification Number

Before the NIB, companies may had to obtain 3 separate licenses; the Tanda Daftar Perusahaan (TDP), the Angka Pengenal Impor (API) and the Nomor Induk Kepabeanan (NIK).

Now, the NIB basically functions as your primary:

• Company Registration Certificate (TDP)
• Import Identification Number (API)
• Customs Registration Number (NIK)

 

Principal License
A newly founded company will also get a principal license, called Izin Prinsip (IP). The IP allows you to start investing and develop your business activities.
Unlike the TDP, API and NIK, the IP is a temporary business license, which serves as your initial investment license.
An IP for a PT. PMA is valid for a period of 1, 3 or 5 years, depending on the business sector. After that, it is possible to extend it for up to a maximum of 5 years.
Extensions must be requested at least 30 days before the IP expires, but it is advisable to start preparing 3 months before expiration date of the principal license.
When the company has fulfilled all its legal requirements, it can apply for a permanent business license.

Permanent Business License

The permanent business license, known as Izin Usaha Tetap (IUT) is required for a PT. PMA if the company wants to continue operating in Indonesia as a fully grown business, before expiration of its principal license.

The basic requirements to apply for an IUT:

• Physical company address;

When you used a virtual office address during the start up phase, you should get a physical address in order to apply for the IUT.

• Proof of investment;

This includes submitting the investment plan, investment activity reporting (LKPM) and settling the paid up capital (if not done already). Depending on the type of business, additional financial statements may be requested by the Investment Coordination Board (BKPM).

Benefits of an IUT:

• Acquire additional licenses and permits.
• Foreign employee recruitment.
• Visa extension.
• Change of shareholders or sale of company.
• Ease of doing business with local partners, customers and suppliers.

Therefore it is advisable to apply for the IUT as soon as you are able, even if you have no immediate expansion plans. Although the Indonesian government is not proactively checking whether every foreign investment company has acquired its permanent business license on time, active monitoring and implementation of the official regulation may occur in due time.
Note that getting a permanent business license also applies to domestic investment companies (PMDN).
Besides de permanent business license, there are 2 other primary business licenses (izin usaha), being:

• The trading business license (SIUP)
• The industrial business license (SIUI)

 

Trading Business License
The trading business license, known as Surat Izin Usaha Perdagangan (SIUP) is an operating license required for all companies who are involved trading, including the sale of goods and services.

The SIUP is issued by the Ministry of Trade and can be applied for online or via the regional Trade Office.
Depending on company size, there are 3 types of SIUP:

• Small;

SIUP for small businesses with a net-worth between 50 million and 500 million Rupiah.

• Medium;

SIUP for medium-sized businesses with a net-worth between 500 million and 10 billion Rupiah.

• Large;

SIUP for large businesses with a net-worth of more then 10 billion Rupiah.

This amount does not include the value of the company’s land and building(s).

Companies exempt from acquiring a SIUP are:

• Companies who are not involved in any trading activities.
• Companies who are in fact a branch office or a representative office.
• Micro-sized trading companies (owned by individuals or families and with a net-worth below 50 million Rupiah excluding land and building).

Benefits of a SIUP:

• Legal proof that the company is allowed to do trade; some suppliers may not want to do business with you if you cannot present the correct SIUP.
• Allowed to participate in certain legal tenders and auctions regarding government projects.
• Eased export-import process.

When you have a principal license (IP), you can already apply for the suitable trading business license.

 

Industrial Business License
The industrial business license, known as Surat Izin Usaha Industri (SIUI) is an operating license, required for companies who are mainly engaged in processing raw materials, production of goods, use of machinery and storage of industrial equipment.
The SIUI is issued by the Ministry of Industry in cooperation with the regional Industry Office.

Depending on company size, there are 3 types of SIUI:

• Small
• Medium
• Large

The authorities involved determine to which category your company belongs, mainly based on the investment size and the number of employees.
Although there are no exemptions, the process for obtaining a SIUI is easier for small industrial companies.

The main criteria for a company who wants to obtain a SIUI are as follows:

• A letter of approval if the industrial company will be located outside a designated industrial area.
• A commitment that the industrial activities have no harmful environmental impact.
• A permit for the storage of industrial equipment and goods associated with the industrial activity.

Hence obtaining an industrial license as a manufacturer is not as straightforward as getting a trading license. Based on the above criteria the process involves 4 main steps:

1. Submit the requested industrial data, including an Environmental Impact Analysis (AMDAL).
2. Statement from the Directorate-General for Industrial Areas if the company is permitted to be located outside a designated industrial area.
3. Registry of the SIUI with the National Industrial Information System (SIINas).
4. Abide by a technical verification procedure.

Benefits of an SIUI:

• Legal proof that the company is allowed to produce; some customers may not want to do business with you if you cannot present the correct (S)IUI.
• In full compliance with (local) government regulations.
• Ease of doing business with local business partners.

When you have a principal license (IP), you can apply for the applicable industrial business license.
Note that industries that are active in the energy or the construction sector have to obtain a separate license.
AdvintA can apply on your behalf or guide you trough the process in getting a permanent business license, a trading license a/o an industrial license.

 If your company has a physical location, as apposed to a virtual office address, the business needs to obtain certain environmental and building permits, depending on its business activities.

Environmental Permit
Business operations that may have an impact on the natural environment need an environmental permit to operate in Indonesia.
This applies in most cases to companies that produce residual waste that may contaminate the environment.
Companies which are active in sectors such as agriculture, mining, construction or the processing of raw materials in general need to do an Environmental Impact Analysis, known as Analisis Dampak Lingkungan (AMDAL).

According to the environmental regulations in Indonesia, an AMDAL is necessary with regard to:

• Changes of the natural environment.
• Exploitation of natural resources.
• Production and processing of raw materials.
• Possible pollution of the immediate environment and contamination of natural resources.
• Impact on the sustainability of natural resources and cultural heritage.
• Implementation of new technologies that impact the environment.
• Introduction of new species of flora and fauna.

To apply for the AMDAL, companies need to submit an Environmental Impact Statement (ANDAL), and an Environmental Management & Monitoring Plan (RKL-RPL).
Thereafter, the AMDAL Evaluation Commission (Komisi Penilai) will evaluate the AMDAL application and present an AMDAL recommendation to the Ministry of Environment.
Some business activities which have a limited impact on the environment do not need an AMDAL permit.
Those companies can meet the requirements by submitting an Environmental Management Plan (UKL-UPL) or an Environmental Management and Monitor Statement (SPPL).
The Ministry of Environment regulates the business activities that require an environmental permit.

In short, the process involves 4 main steps:

1. Draft and submit the required documents.
2. Evaluation and recommendation of the documentation.
3. Application for the environmental permit.
4. Approval and issue of the environmental permit.

AdvintA can help you getting the right type of permit, by preparing the necessary documents, submit the application and guide you through the process.

Building Permit
Whenever your company needs to rent, buy or build a business space, then the premises needs to have a valid building permit, known as an Izin Mendirikan Bangunan (IMB).

This building permit registration allows the construction of new buildings in Indonesia in line with the criteria regarding:

• The allocation of the land.
• The business use of the building.
• The safety of the construction.
• The design of the building.

If your company plans to buy or lease and existing building, then the owner of that building must have the applicable IMB.
It is the responsibility of the owner or lessor to secure the IMB. That IMB should allow the business purpose or activities you want to employ in that building and on the land. If not, you need to request an adjustment of the IMB for that particular use at the local government.
Some buildings only allow residential use and no commercial activity. Also, some land zones are prohibited for commercial use or for certain business activities which have a substantial impact on the (living) environment.
Regarding the surrounding living environment, it is advisable to seek official approval of the local community for your business activities by obtaining a:

• Disturbance permit, known as Izin Gangguan or Hinder Ordonantie (HO).
• Business place permit, known as Surat Izin Tempat Usaha (SITU).

The HO is a permit letter stating that the company does not cause any nuisance or hindrance to the immediate living environment, i.e. the neighbors.

The SITU is slightly different and basically states that the company is permitted to operate on that location as long as it does not cause damage or obstruct the living environment, i.e. the neighborhood.

• Besides your company details and a valid IMB, you may need to present a production equipment list and a waste processing chart, depending on the type of business activity.
• After getting written approval from the building owner and the local residents / the neighbors via the village head (RT/RW), you can file for the application at the local government official, who will grant you the HO a/o SITU permit.

The process of obtaining a HO or SITU is fairly straightforward if you do not employ industrial activities outside an industrial zone or city.
To accommodate businesses and investors in Indonesia, the government is working on the integration and simplification of the environmental and building permit processes.
AdvintA can help you with the IMB and related local permits, by assessment of the validity and type of the existing permits and the local regulations or by applying for an adjustment a/o new permit on your behalf.

The import of goods into Indonesia is usually subject to import duties; for government revenue purposes but also to protect Indonesian businesses that produce similar goods domestically.

The export of (raw) commodities is a main contributor to Indonesia’s GDP; to support its economy, the Indonesian government aims to minimize taxes on exported goods.

If a business is involved in straight import or export of goods under its own company name, it needs to have an import or export license in Indonesia.

Freight forwarding

Besides the import/export license, the basic documentation you need to arrange in order to import or export goods are as follows:

• Bill of Lading (B/L)
• Packing List (PL)
• Certificate of Origin (CoO)
• Transport Insurance
• Pro forma invoice
• Method of payment

In addition to the storage and shipping of goods, a freight forwarder is the appropriate party to serve as your agent in arranging these documents for you.

A freight forwarder does not actually move the cargo itself, but acts as an intermediary between your company and the carrier (by sea, air, rail a/o road).

The use of a freight forwarder is not mandatory for your transportation needs, but as the importing and exporting of goods involves dealing with many regulations which can vary per country, it is advisable to hire a freight forwarding company as your logistics partner.

In consultation with you, AdvintA can select the suitable freight forwarder and negotiate the best possible prices, depending on your needs and priorities.

Import
Since the introduction of the Online Single Submission (OSS) platform, the need for importers to apply for a main import license and a customs registration number has been abandoned.

Now the Business Identity Number (NIB) serves as the company’s primary import license (API) and customs registration number (NIK).

• The NIB will not expire as long as the company is in operation, meaning that there is no need anymore to renew your API and NIK every 5 years as was required before the launch of the OSS platform.
• Moreover, when your company undergoes changes, now you can just enter the new data in the OSS system using your NIB, without your imports being halted until the whole revision was completed as was the case prior to the OSS.

Only company directors are permitted to sign import documents under the OSS system, unless you assign another authorized person to do so via a power of attorney.
Products which require additional permits in Indonesia may still need specific import approval.

Export
The Business Identity Number serves as the company’s primary customs registration number.

If a company will be exporting goods on a regular basis, it should also have:

• A trading business license (SIUP).
• A registered exporter enlistment (REX).

Exporter registration is called Eksportir Terdaftar (ET) in Indonesia.
Obtaining a SIUP and ET is not complicated, but besides the SIUP and ET, exporters need to verify whether their products need specific export approval, called Izin Expor (SPE), for their cargo.

Usually, for the export of (bulk) commodities and several other (quota) regulated goods a SPE is required.
For example, the production of wood/timber based goods is a diversified manufacturing specialty in Indonesia.

Timber processing companies, including furniture and handicraft producers in Indonesia who export goods in which timber is used, need to comply with the Timber Verification and Legality System, known as Sistem Verifikasi dan Legalitas Kayu (SVLK).

This system is introduced to prevent illegal logging and ensure the legality of the timber source within the supply chain.

The SVLK is recognized by the European Union (EU) and many other countries.

Via a voluntary partnership agreement (VPA) between the EU and Indonesia, the SVLK issues a so-called V-Legal customs document which complies with the EU's Forest Law Enforcement, Governance and Trade (FLEGT) scheme.

Together with a certificate of origin (CoO), the V-Legal certification covers Indonesian exports of timber and timber-based products, so customers abroad do not have to double-check the origin and legality of the wood.

To regulate international trade, the World Customs Organization (WCO) has introduced a commodity description system for which it uses Harmonized System codes (HS codes) by which all cargo is identified.

These HS codes are attached to the packing list which contains a description of the shipped goods.

Undername services
Although the OSS platform makes the import and export of goods less of a hassle, importing and exporting companies still need to comply with the practical procedures, and additional approval may be applicable, depending on the cargo.

AdvintA can take care of the necessary import a/o export documentation for your company if you wish to import or export under your own company name.

However, if you do not ship goods on a regular basis, or if you want to outsource the (paper) work involved, it is possible to use a third party service which already has the licenses you need.

This is called an undername import or export service.

Depending on the product, AdvintA can serve as your undername agent or we can find you the specialized broker who possesses the specific permit you need.

Whatever your needs and wishes, we can help you with your import or export necessities.

If your company needs to hire staff, there are several main issues to take into account in which AdvintA can be of assistance, as summarized below.Employee categories
The Indonesian law categorizes employees into 3 main groups:

• Permanent employees
• Temporary staff
• Foreign specialists

Different rights and obligations apply for each category.
Hiring qualified and suitable employees requires specific care and attention in recruitment and regulation.
We can help you in identifying the appropriate channels for your human resources (HR) needs for each of these categories.
fter you have found your ideal candidate, we can draw up the employment contract for you, in compliance with the Indonesian labor law & social security regulations.

Human resource policy
Depending on the size and activity, your company may need to develop a HR policy.

In particular, if you employ 10 employees or more a company employment regulation should be in place, approved by the local Ministry of Manpower office.

Such an employment regulation scheme, i.e. HR policy should cover the following:

• Rights & obligations of both employer and employee
• Employee working provisions
• Company work ethics
• Validity of terms & conditions

AdvintA can compose or refine your human resource policies and employment contracts, suited to your company characteristics and compliant with the current regulations.
However, if your company is in need of highly skilled specialists or a large workforce, you should consider outsourcing the recruitment & selection process to a specialized employment agency to which we can refer you.

Employee rights
Employees in Indonesia are entitled to the following basic rights:

• A 40-hour work week for full-time employees.
• Overtime rates.
• Minimum wage.
• Paid leave periods re annual leave, maternity leave, sickness leave or personal leave.
• Religious holiday allowance; called Tunjangan Hari Raya (THR).
• Social security & health insurance scheme; called Badan Penyelenggara Jaminan Sosial (BPJS).

The table below provides a summarized overview of these employee rights:

Employee rights

Employee administration and taxation
If you employ personnel, Indonesian regulation requires that the company sets up and implements a salary structure & salary scale policy according to the guidelines outlined by of the Ministry of Manpower.

The salary structure and scale is made up of wage ranges, including the nominal (minimal) wage range for each job class.

Besides the salary structure, companies in Indonesia should have a payroll policy in place with detailed information regarding:

• Job description
• Terms of employment
• Education level

The company should pay and report their employee taxes on a monthly basis as follows:

• The Employee Withholding Tax (PPh 21), which should be paid no later then on the 10th of the following month.
• The Employee Tax Report, which should be submitted no later then on the 20th of the following month.

Besides the employee tax, the monthly prepaid Corporate Income Tax (PPh 25) should be paid on the 15th of the following month at the latest and must be submitted to the tax office on the 20th of the following month at the latest.
To avoid a possible penalty or fine from the tax office, it is important to pay your taxes on time.

AdvintA can advise you about employee rights and obligations and assist you in setting up your basic payroll structure.

However, the larger your workforce, the more time it takes to process your payroll responsibilities. In that case, you should consider outsourcing the payroll processing to a specialist payroll agency, to which we can refer you.

 Badan Penyelenggara Jaminan Sosia (BPJS) is the Social Security Administrative Institute of the Indonesian government.The BPJS provides 2 types of mandatory national insurance schemes:

• Healthcare insurance (BPJS Kesehatan)
• Social Security insurance (BPJS Ketenagakerjaan)

All Indonesian residents, including foreigners / expats who have been living in the country for 6 months or more, are obliged to obtain the BPJS Kesehatan health insurance.

Anyone residing in Indonesia and being employed by a company, foreign or local, will also get the
BPJS Ketenagakerjaan social security insurance.

Healthcare
There are 3 types of health care coverage under the BPJS Kesehatan scheme:

• Basic Healthcare;

Under this service, you can choose a doctor, dentist or clinic in case you need basic       healthcare services.

• Advanced Healthcare;

Under this service, you can get a signed referral letter from your doctor to receive advanced treatment at specialized clinics or hospitals in case your general practitioner cannot give you the further medical treatment required.

• Hospitalization care;

Under this service, you can get the treatment and care which requires (overnight) hospitalization.

Social Security
There are 4 types of social security protection under the BPJS Ketenagakerjaan scheme:

• Elderly Protection, known as Jaminan Hari Tua (JHT);

Receive a benefit once you have left the company or when you reach the age of 55 years.

• Pension Protection, known as Jaminan Pensiun (JP);

Receive a benefit when you have reached the retirement age.

• Work Accident Protection, known as Jaminan Kecelakaan Kerja (JKK);

Receive compensation for medical expenses incurred resulting from work-related accidents during working hours in the company.

• Accidental Death Protection, known as Jaminan Kematian (JK);

Receive compensation under a life term insurance, benefitting the next of kin in case of non-work related death while employed by the company.

If you are an independent professional i.e. working as a freelancer in Indonesia, you can register as an independent BPJS Social Security member.

Take into account that when you have a company in Indonesia, you must register all of your employees at the BPJS Ketenagakerjaan, including the director and commissioners who are residing in the country, after which they will receive a social security card.

Be aware that the pension and accidental death benefits are not that substantial. So if you wish to build up extra pension or receive higher accidental death settlements, then you should consider taking out an additional capital insurance or life insurance at a commercial insurance company at your own expense.

AdvintA can help you to comply with the health care & social security policies for yourself, your company a/o your employees.

A general meeting of shareholders (GMS) is called a Rapat Umum Pemegang Saham (RUPS) in Indonesia and should be held annually by a Ltd. Company (PT. or PT. PMA) to determine the company’s policy and to vote on strategic company decisions, after which a report is issued.

The GMS must meet certain conditions. Especially for large companies, it is important to comply with the format and content of the GMS.

We can advise your company about the required GMS format and subsequent report, in particular if strategic decisions and subsequent changes are involved.

In Indonesia, business entities are required to submit Investment Activity Reports to the Investment Coordination Board.

These reports are called Laporan Kegiatan Penanaman Modal (LKPM) and should be submitted on a regular basis to the Badan Koordinasi Penanaman Modal (BKPM) if you have a PT, PMA or KPPA.

The basic reporting scheme is as follows:

• Limited companies (PT. and PT. PMA) which are still in the startup phase are to report every 3 months (per quarter).
• Companies which are already fully operational and have their permanent business license (IUT) and additional permits if applicable are to report every 6 months (per semester).
• Representative offices (KPPA) are to report annually (per calendar year).

Depending on the investment value and the business activity, additional reporting info and dates may apply.

The government collects and analyzes these data to monitor investment realization and identify investment challenges in Indonesia.
Companies should submit the LKPM report in accordance with the format provided by the BKPM.

The LKPM report can be submitted online via the Online Single Submission (OSS) platform. Your company will receive access to the OSS platform after your NIB registration is completed.

Although the government does not too strictly enforce the investment reporting requirements, failure to comply may lead to administrative sanctions by the BKPM, such as having your business license revoked.

So if you have any concerns about what, how and when to report, AdvintA can assist you in submitting your company’s Investment Activity Reports.

Indonesian taxes are not that high compared to most western countries, but the tax system is quite extensive and regularly subject to adjustments.

Most recent, the Indonesian government has responded to the COVID-19 situation, introducing several adjusted financial regulations, such as tax relaxation, premium reduction and loan restructuring.
For a comprehensive and up-to-date overview of the Indonesian tax system we can recommend the (online) tax guides of PwC or Deloitte.

As soon as your company is registered as a tax payer, the business becomes taxable.

Consequently you are required to fulfill your tax reporting obligations, even if there is no significant business activity yet.
In line with general business accounting principles, your company must prepare an annual balance sheet and a profit & loss statement.

Tax reports are filed at the district’s tax office where your company is registered.

Monthly tax reporting applies to:

• Employee tax
• Withholding taxes
• Value added tax

Yearly tax reporting applies to:

• Corporate income tax
• Individual income tax
• Real estate taxes

Based on your company’s legal entity, activity, size and location, we can refer you to a certified tax consultant or accountant who can carry out your tax reporting and payment obligations.