Investment Window into Indonesia (IWI) - Deloitte
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1 Investment Window into Indonesia (IWI)
Welcome to Indonesia
A. Introduction into Indonesia 2 1.General overview 3 2.Demography 4 3. Investment climate 6 4. Industry overview and opportunities 8 5.Regional snapshot 9 B. Identifying your investment Stage 12 C. Establishment of company:getting started 13 1.General investment policy 13 2.Forms of entity 14 3.Investment Procedures 16 4.Mergers and acquisitions 16 D. Taxation in Indonesia 18 1. Tax incentives 18 2. Tax administration 19 3. Business taxation 20 4. Taxes on individuals 32 5. Indirect taxes 34 6. Withholding taxes 37
E. Audit and compliance 38 1. Accounting period 38 2. Currency 38 3. Language, accounting basis and standards 38 4. Audit Requirements 38 5. Independence 39 F. Labour environment 40 1. Employee rights and remuneration 40 2. Wages and benefits 40 3. Termination of employment 41 4. Labour-management relations 41 5. Employment of foreigners 41 About Deloitte 42 Contacts 44
Investment Window into Indonesia (IWI) |
Foreword
Foreword
Selamat datang di Indonesia!
Since the silk road era, Indonesia have thrived to be one of the most
prominent trading countries. Indonesia also strategically lies within two
oceans (Pacific Ocean and Indian Ocean) and two continents (Asia and
Australia) to make this nation rich for its natural resources.
The current Indonesian government recognizes the fact that it is essen-
tial to efficiently utilize our natural resources by generating new invest-
Claudia Lauw Lie Hoeng
ments. Several measures have been taken to ensure investment con-
Deloitte Indonesia Country
tinues to come. Business licensing applications between ministries are
Leader
being expedited, synchronized, and integrated into an Electronic Single
Submission System (OSS). In addition, Indonesian government releases
Economic Reform Packages or known as Paket Kebijakan Ekonomi and
infrastructure development also being pushed to attract investors.
With increasing access and exposure to information, technologies
became another focus area for investors. In tandem with Financial
Services Authority (OJK), Government captures this importance and
encourages financial technology to emerge in the market.
Our effort to push for investments also evident during the recent 18th
Asian Games since it were held at 1962 Asian Games in Jakarta. As the
hosting country, we showed how conducive environment Indonesia was
for promoting attainable investment growth.
In support of the government’s efforts, and to have quick and clear
answers for everyone contemplating investing in Indonesia, I am very
pleased to present the newly redesigned collaborative work of Deloitte
Indonesia’s dedicated team of experts, “Investment Window into Indo-
nesia (IWI)”.
I trust that this publication will also give a broader and impactful insight
to every prospective investor, and that it will be a prime tool for them
to explore numerous opportunities that await them the moment they
start doing business in Indonesia.
1 1
Investment Window into Indonesia (IWI) |
A. Introduction into Indonesia
1.General overview The real GDP growth 5.1% in 2017 as With Indonesia average inflation
A diverse archipelago nation of more a whole, although in the last quarter reached 3.7% in 2017, down from
than 300 ethnic groups, Indonesia con- of 2017 it increase to 5.2%, but edged 3.5% in 2016 and is expected to be
tinues to be one of the largest econo- down to 5.1% in the first quarter of maintained at an annual average of
my in Southeast Asia. Indonesia ranks 2018. Within the 5 years (2018-2022), 4.0% in 2018-2022. Due to rising trade
the fourth most populous country country’s growth contribution from tensions between nations and elec-
in the world, the world’s 10th largest private investment (infrastructure and tions in 2019, the Rupiah will remain
economy in terms of purchasing power manufacturing) will take time to have a volatile against the US Dollar. It will
parity, and a member of the G-20. significant impact on the economy. The return to modest trend in 2020-2022
economy will be supported by private as global economic fundamentals
consumption, which is forecasted to gradually recover.
increase by 5.2% on average per year
over the next five years.
Economic growth
Indicator 2017a 2018f 2019f 2020f 2021f 2022f
GDP Growth (%, y-o-y) 5.1 5.2 4.9 4.9 5.0 5.1
Private Consumption(%, y-o-y) 5.0 5.1 5.4 4.8 5.6 5.3
Government Consumption(%, y-o-y) 1.9 4.0 3.7 4.0 4.2 4.0
Gross Fixed Investment(%, y-o-y) 6.1 6.2 5.5 5.0 5.7 5.8
Exports(%, y-o-y) 9.1 10.1 10.3 4.1 5.9 6.5
Imports(%, y-o-y) 8.0 13.6 12.1 3.8 7.6 7.1
Inflation(%, y-o-y) 3.7 4.2 4.5 2.5 5.7 3.2
USD exchange rate(end period) 13,548 14,894 14,305 14,300 13,750 13,550
aActual fForecast
Source: EIU
To strengthen the country’s invest- Indonesia’s nominal GDP have risen
ment climate and economic growth, by 8.8% from USD933 billion in 2016
the government continues to an- to USD1,015 billion in 2017, while
nounce policy reforms, more incen- GDP (PPP) per capita have risen by
tives, and deregulations intended to 5.1%. Based on the 20-year long-term
attract both domestic and foreign national development plan (RPJPN)
investments. The most notable eco- spanning from 2005 to 2025, Indone-
nomic reforms are 16 Economic Policy sia plans to achieve per capita income
Packages; 2 new packages released in equivalent to a middle income country
2017 with main focus on reducing lo- by 2025. The highest contributor to
gistics dwelling time from an average GDP is the manufacturing industries
of 2.9 days to 2 days’ time and accel- sector or around 22% from total GDP.
erating business license permit into a
single submission system.
3
Investment Window into Indonesia (IWI) |
A. Introduction into Indonesia
Top 10 Real GDP Growth Among G-20 Countries Projected by IMF
India
China
Indonesia
Turkey The IMF projects Indonesia will be at the top
3 fastest economic growths among
Argentina
G-20 countries
South Korea
Mexico 2022
Australia 2018
South Africa 2017
Saudi Arabia
0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
Source: International Monetary Fund; World Economic Outlook, October 2017
FDI Realization 2017 by location FDI Realization 2017 by Country
of Origin
16%
West Java 26% Singapore
51% 41% Japan
4% East Kalimantan
Banten South Korea
9%
Hong Kong
DKI Jakarta
Netherlands
East Java 15%
14% Others
Others
5% 5% 7% 6%
Source: BPS Source: BPS
2.Demography •• Over 60% of the population is be-
1% Agriculture, hunting, forestry,
Indonesia consists of 34 provinces; tween 20and
andfishery
65, with a low depen-
Mining and quarrying
16,056 islands,
13% with
7%more than 261
7%
6%
dency ratio and a dynamic workforce
Manufacturing
million people, making Indonesia the gas andwith
Electricity, waterhigh
supplyliteracy
9%
fourth largest country in the world in
Construction
4% •• Around 52% of the population lives
terms of population. The5%
41% demographic
Wholesale and retail trade, restaurants and hotels
in urban areas
advantages of the 260 million Transportation, warehousing, and communications
14% Real estate and •business services population comprises
• Indonesia’s
people are:
Community, social, and personal services
more than 39% of the total popula-
tion of 10 Southeast Asian countries
4
4% East Kalimantan 41% Japan
Banten South Korea
9%
Hong Kong
DKI Jakarta
Netherlands
East Java 15%
Investment Window into Indonesia (IWI) |
A. Introduction into Indonesia Others
14% Others
5% 5% 7% 6%
FDI Realization 2017 by Sector According to the Trading Economics,
1%
Indonesia’s labour force participation
Agriculture, hunting, forestry, and fishery
Mining and quarrying
rate grew from 68.1% in 2016 to 69.0%
7%
7%
13% 6% Manufacturing in 2017. It is estimated to increase to
9% Electricity, gas and water supply 69.2% in 2018. Indonesia also has a
Construction large consumer base with fast-growing
4%
41% Wholesale and retail trade, restaurants and hotels
5% spending power. The middle class is
Transportation, warehousing, and communications
Real estate and business services
rising in Indonesia. Around 7 million
14%
Community, social, and personal services people are expected to join the middle
class per year. Consumer expendi-
Source: BPS
ture has grown at a 13.8% CAGR from
2000-2012 and is expected to contin-
ue at an 11.5% rate in 2012-2017.
Indonesia Population by Age and Gender Groups
2.73 1.94
75+
70-74 2.21 1.87
3.08 2.95
65-69
60-64 4.4 4.47
5.97 5.93
55-59
7.33 7.27
50-54
45-49 8.49 8.54
40-44 9.41 9.48
35-39 10.09 9.98
10.27 10.24
30-34
25-29 10.45 10.57
20-24 10.7 11.01
15-19 10.85 11.37
11.07 11.64
10-14
5-9 11.59 12.14
0-4 11.68 12.17
10 5 0 5 10 15
million people
Male Female
Source: 2018 © Datebooks, Katadata Indonesia
5Investment Window into Indonesia (IWI) |
A. Introduction into Indonesia
3. Investment climate Indonesia’s debt to GDP ratio has after Standard & Poor (S&P) has lifted
A large part of Indonesia’s economic steadily declined from 83% in 2001 to its rating on the country’s debt on May
success is a result of the growing mid- be less than 26% by the end of 2013 2017 and keep the rating as stable
dle class and stable economic growth. – the lowest among ASEAN countries, outlook by 2018. The ratings reflect
Indonesia is one of the MINT econo- aside from Singapore, which has no Indonesia’s resilience to the global
mies (Mexico, Indonesia, Nigeria and government debt. As a result, the financial crisis, improving government
Turkey), namely those that are the most country continues to receive good re- and external credit-metrics, and an
attractive to long- term investors due to views and for the first time since global ability to manage domestic political
their favourable demographic profiles. financial crisis, Indonesia’s sovereign challenges to the reform agenda.
bonds were rated investment grade by
all three major credit ratings agencies
Rating Agency Rate Outlook
Fitch Rating BBB- Stable
Mood’s Baa3 Stable
Standard and Poor’s BBB- Stable
Source: Indonesia Investment Coordinating Boarding (BKPM), 2017
Ease of Doing Business index assessed by World Bank for 190 countries positioned Indonesia at 72; an increase of 19 levels
from rank 91 in 2017.
6Investment Window into Indonesia (IWI) |
A. Introduction into Indonesia
Southeast Asia Ease of Doing Business Rankings 2008-2017
In 2016, the confidence in national government was the highest in Indonesia compared with the 42% on average in OECD
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0 Singapore
20 Malaysia
Thailand
40
Brunei
60 Vietnam
Indonesia
80
100
Philippines
120
Cambodia
140 Laos
160
Myanmar
180 East Timor
200
Source: World Bank Doing Business 2018
Confidence in National Government in 2016 and Its Change Since 2007
100%
80%
60%
40%
20%
0%
Israel
Slovak Republic
Germany
Poland
Switzerland
Czech Republic
Iceland
Japan
United Kingdom
Hungary
Latvia
Turkey
Korea
Norway
Canada
New Zealand
OECD
Italy
Ireland
Austria
Sweden
France
Australia
Estonia
United States
Netherlands
China
Denmark
Luxembourg
Mexico
Belgium
Spain
Chile
Slovenia
Greece
Finland
Brazil
Colombia
Costa Rica
Indonesia
India
Lithuania
Russia
South Africa
-20%
-40%
% in 2016 % points change since 2007
Source: OECD Goverment at a Glance 2017
7Investment Window into Indonesia (IWI) |
A. Introduction into Indonesia
4. Industry overview and coal (and other mining products), Government sees large potential in
opportunities palm oil, agricultural products, elec- e-commerce industry to connect multi
Indonesia has a well-balanced econo- trical machinery and equipment, and industries with local and international
my, in which all major sectors play an fish. Indonesia’s government plans to market. Jokowi also appointed Alibaba
important role. Agriculture historically increase production of core commod- Group as an adviser to develop the
has been the dominant sector in terms ities as seen below. However, due to digital economy market which create
of both employment and output. The the recent drop in commodities prices, an open access to micro, small and
country has a vast range of mineral Indonesia has to realign its trade strat- medium-sized enterprises (SME) to
resources, which have been exploited egy, focusing more on value added enter global value chain.
over the past four decades, enabling industries (manufacturing and smelt-
the mining sector to make an import- ing) and infrastructure development. According to The Investment Strategic
ant contribution to Indonesia’s balance In addition, Indonesia’s government Planning for the period of 2015-2019,
of payments. plans to increase the production of Indonesian Government has laid new
core commodities for domestic con- focus on several business sectors
Indonesia has a well-diversified trading sumption and to reduce heavy reliance as follows:
economy. Oil and gas is the country’s on imports.
largest export category, followed by
35 GW power
Infrastructure 24 Seaports
generation
Agriculture Food estate Corn plantation Cattle
Textile Textile Food and beverages Furniture Toys
Chemical and
Import-substitution Iron and steel Component
pharmaceutical
CPO and derivative Wood products,
Electronics Automotive
Industry products pulp and paper
Export-oriented
Fish and derivative
Machinery Rubber products Shrimp
products
Downstream industry
Cacao Sugar Smelter
of natural resources
Maritime Ship building Fishery industry Cold storage Maritime technology
Meetings, incentives,
Strategic tourism 15 new industrial
Tourism, SEZ and Industrial Park conferences, and 8+11 SEZs
areas parks
exhibitions (MICE)
Infrastructure Sector ment plans to build more roads, toll of regional infrastructure projects, the
The President Joko Widodo govern- roads, airports, and railways, not only scope has continued to expand and
ment plans to improve archipelago focusing on Java but also in Sumatra, will now include enhanced policy co-
connectivity and promotes balanced Kalimantan, Sulawesi, and Papua. Ad- ordination across the Asian continent,
growth between the western and ditional infrastructure development is which path crosses Indonesia. High-
eastern parts of Indonesia. The also influenced by China’s new round speed railway from Jakarta-Bandung
government has introduced a “sea of reform and overseas expansion. marks China’s first milestone project
toll road” concept to connect Indone- The centrepiece is the Belt and Road and is expected to expand more lanes
sia’s archipelago through seaports in initiatives (BRI) which include both as it gains permits from the Transpor-
the main corridor between western foreign policy and domestic economic tation Ministry.
and eastern islands to reduce high strategy. Originally billed as a network
logistics costs. In addition, the govern-
8Investment Window into Indonesia (IWI) |
A. Introduction into Indonesia
Sea toll concept - the world
maritime axis:
• Develop 24 new strategic
ports
• Add vessels (pioneer cargo,
transport vessel, pioneer
crossing vessel)
• Develop 60 crossing port
• Develop 15 new airports
• Develop air cargo facilities
2015-2019 in 10 airport through PPP
• Increase number of pio-
neer airplanes by 20 units
Power Road
National state
40.1% • Develop 42 GW Electric- • 2,650 km new roads
US$192.7 billion
ity Power Plant (7GW + • 1,000 km of new Toll Road
Regional state
35,000MW program)
Infrastructure • Rehabilitate 46,770 km
9.9%
Funding US$47.4 billion existing road
needed
New railway tracks in Java, Urban transport:
US$480 billion SOE
19.3% Sumatera, Kalimantan and • Develop Bus Rapid Transit
US$92.7 billion
Sulawesi: (BRT) in 29 cities
• 2,159 km inter-urban • Develop Mass Rapid Transit
Private sector
30.7% railways
US$147.2 billion (MRT) in 6 metropolis and
• 1,099 km urban railways 17 large cities
Source: Ministry of Transportation RI, May 2016; Buku RPJMN 2015-2019
5.Regional snapshot
For those who are targeting appropriate location to invest in or expand current business scope, we selected top 10 provinces
and presented as regional snapshot, with regional GDP on a yearly basis and several indicators in foreign investment field.
Top 10 Regional Demographics
Population (in
Province Provincial Capital Area (sq km) No. of Islands No. of Regencies No. of Cities
thousands) (2017)
DKI Jakarta Jakarta 664.0 287 1 5 10,277.9
West Java Bandung 47,799.8 287 29 9 38,075.3
Central Java Semarang 35,377.7 131 18 9 47,379.4
East Java Surabaya 32,800.7 296 29 6 34,019.1
Banten Serang 87,023.7 139 10 2 6,501.0
Riau Pekanbaru 72,981.2 419 25 8 14,102.9
North Sumatera Medan 129,066.6 370 7 3 3,501.2
South Sumatera Palembang 9,662.9 131 4 4 12,203.1
East Kalimantan Samarinda 46,717.5 295 21 3 8,606.4
South Sulawesi Makassar 91,592.4 53 13 4 8,160.9
Source: BPS
9Investment Window into Indonesia (IWI) |
A. Introduction into Indonesia
Top 10 Gross Regional Domestic Product USD mn
Province 2015 2016 2017 % Total 2016
DKI Jakarta 143,778 162,036 177,806 17.2%
East Java 122,500 138,065 148,950 14.7%
West Java 110,558 122,997 131,755 13.1%
Central Java 73,510 81,276 87,565 8.6%
Riau 47,292 50,785 52,056 5.4%
North Sumatera 41,444 46,769 50,462 5.0%
East Kalimantan 36,380 37,740 43,707 4.0%
Banten 34,646 38,429 41,636 4.1%
South Sulawesi 24,773 28,223 30,903 3.0%
South Sumatera 24,119 26,453 28,309 2.8%
Total 659,000 732,774 793,148 77.8%
Source: BPS
Top 10 Regional FDI by Value
Province 2015 2016 2017
DKI Jakarta 3,619 3,398 4,595
East Java 2,593 1,941 1,567
West Java 5,739 5,471 5,143
Central Java 850 1,031 2,373
Riau 653 869 1,061
North Sumatera 1,246 1,015 1,515
East Kalimantan 2,381 1,140 1,285
Banten 2,542 2,912 3,048
South Sulawesi 233 373 712.8
South Sumatera 646 2,794 1,183
Total Top 10 20,504 20,942 22,482
Total FDI by value 29,276 28,964 32,240
Source: BPS
10Investment Window into Indonesia (IWI) |
A. Introduction into Indonesia
Top 10 Regional FDI by No. of Projects
Province 2015 2016 2017
DKI Jakarta 4,463 6,751 8,803
East Java 742 1,473 1,750
West Java 4,497 5,369 5,309
Central Java 608 1,054 955
Riau 243 394 285
North Sumatera 438 688 564
East Kalimantan 406 466 340
Banten 1,737 2,161 2,479
South Sulawesi 165 309 196
South Sumatera 135 251 261
Total Top 10 13,434 18,916 20,942
Total FDI projects 17,738 25,321 26,257
Source: BPS
Top 10 Provincial Minimum Wage (UMP) per Month USD
Province 2015 2016 2017
DKI Jakarta 195.7 230.7 247.5
East Java 72.5 N/A 102.4
West Java 72.5 167.5 104.8
Central Java 66.0 81.9 100.8
Riau 136.1 155.9 167.2
North Sumatera 117.8 134.9 144.7
East Kalimantan 146.9 160.9 172.6
Banten 116.0 132.8 142.5
South Sulawesi 145.0 167.5 179.7
South Sumatera 143.1 164.2 176.2
Source: BPS
11Investment Window into Indonesia (IWI) |
B. Identifying Your Investment Stage
B. Identifying your investment
Stage
Five stages of organization evolution
d
/ Brownfiel
Greenfield
阶段
Stage
Development Startup Growth Expansionv Maturity
• Get started • Company • Performance • Managing growth • Going public-IPO
Concerns
• Plan & strategy incorporation • Expand manage- • Going concern • Reduce debt
• Investment • Form team members ment team • Business diversifi- • Sale of business/
• Product/service • Revenue cation divestiture
development
• Market study • Licensing • Early audit • Audit & • Pre-IPO preparation
• Business plan/ busi- • Labour environment procedure compliance • Business & debt
ness model • Tax compliance • Tax efficiency restructuring
Key elements
• Financial forecast/
• Buyside/ sellside projection • Merger & • Cost efficiency • Business
advisory Acquisition • Financial modelling transformation
• Risk management • Business and asset
valuation
• Employee training
12Investment Window into Indonesia (IWI) |
C. Establishment of Company: Getting Started
C. Establishment of
company:getting started
1.General investment policy Banking and financing Foreign entity could have business
Business environment The Banking Law permits two catego- activity in Indonesia by setting up a
Indonesia is a member of the ASEAN’s ries of traditional banks: general com- Foreign Representative Office (RO)
free trade agreements with China, mercial banks and rural banks (BPRs). or become a Foreign Investment
South Korea, India, Australia and New BPRs, which undertake simple kinds Company (PT PMA) as a Limited
Zealand. Indonesia and Japan signed of banking activities, operate on a Liability company. Both must be
the Indonesia and Japan Economic small scale and target their services to applied and obtained approval from
Partnership in 2007. lower-income individuals. Commercial BKPM through the OSS (Online Single
banks are free to offer various banking Submission) system.
Price controls services, although foreign exchange
A few commodities and services transactions require special qualifi- As a PT PMA, subject to the following
remain classified as “administered cations and a permit. Both general rules:
prices”. These include petroleum, elec- commercial banks and rural banks can
01. Company’s Law No.40 year 2007 (in
tricity, liquefied petroleum gas, rice, carry out either conventional or sharia
relation to: e.g. minimum of share-
cigarettes, cement, hospital services, banking business.
holders, number of Board of Direc-
generic medicine, potable/piped water,
tors and Board of Commissioners,
city transport, air transport, telephone Bank Indonesia is the central bank.
Articles of Associations, etc).
charges, trains, salt, toll road tariffs, Indonesia’s main financial centres are
and postage. Jakarta, Semarang, Bandung and Sura- 02. Investment Law No.25 year 2007
baya (Java), Medan and Palembang (Su- (in relation to investment rules and
Intellectual property matera), Denpasar (Bali) and Makassar activity)
Indonesia’s intellectual property laws rec- (Sulawesi). Singapore functions as 03. Negative List of Investment (NIL)
ognize patents, trademarks, copyrights Indonesia’s offshore banking centre. No.44 year 2016 (in relation to
and industrial designs. Both the licensor the list of business fields that are
and licensee may sue for infringement. Foreign investment closed to investment and business
The laws assign civil cases to the com- The Investment Coordinating Board fields that are conditionally open
mercial court and establish a mechanism (BKPM) is responsible for promoting for investment). Many business
for alternative settlement by arbitration, foreign and domestic investment and sectors are open to PT PMA, every
as well as allowing for court-ordered approving most project proposals in sector has certain restrictions on
injunctions against infringement. Indonesia. Other government agencies Foreign Capital Ownership.
or ministries handle investments
Trademark protection is valid for 10 years in the oil and gas, banking and The Foreign Investment Law includes a
and can be extended for an additional financial industries. The BKPM or guarantee that foreign investors will be
10-year period. A standard patent is valid the corresponding provincial board treated equally to domestic investors
for 20 years, while a simple patent is valid approves foreign and domestic and the Indonesian government will
for 10 years. investment in all other sectors. not nationalize a foreign investment or
revoke the investor’s rights to control
a foreign investment, unless it is in the
national interest to do so and compen-
sation is paid.
13Investment Window into Indonesia (IWI) |
C. Establishment of Company: Getting Started
Exchange controls Domestic commercial banks must sub- 2.Forms of entity
The rupiah is freely convertible, mit monthly reports to Bank Indonesia Capital Requirements for a limited
although approval of Bank Indone- on their foreign exchange transactions. liability company
sia must be obtained before more Failure to report may result in mon- More than IDR10 billion, including
than IDR100 million is taken out of etary penalties or even revocation of working capital for one year, machin-
the country. Authorization of Bank license. Financial institutions are also ery and others, not including land and
Indonesia may be provided only for required to submit monthly reports on buildings; at least 25% must be issued
the purpose of testing of cash ma- their foreign currency transactions. and paid- up capital. Higher minimums
chines, overseas exhibitions and other for authorized capital apply in certain
purposes that, according to the bank, Non-financial institutions must report sectors. All issued capital must be paid
serve the public interest. the movement of financial assets up and evidence of payment must
(such as equity in overseas companies be submitted to the Ministry of Law
A person carrying IDR100 million or and savings at overseas banks) and and Human Rights (MOLHR) to obtain
more into Indonesia must verify the liabilities (such as overseas loans and approval for the deed of establishment
authenticity of the funds with Indo- trade payables) between residents containing the articles of association.
nesian customs upon arrival. A wire and non-residents, including overseas All shares issued subsequently must
transfer with a value of more than transactions by residents. The require- be fully paid up upon issue.
USD100,000 to a non-resident must ment, applicable to companies with
be supported by a statement and total assets of at least IDR100 billion or For foreign investment companies, the
supporting documentation obtained annual sales of at least IDR100 billion, rupiah value of capital is assigned at
from the customer for the underlying is for transactions that are not con- the foreign exchange rate prevailing
transaction. For transfer with a value of ducted through a domestic bank or at the time the investment license was
USD100,000 or below, only a state- financial service company. granted. However, the rupiah value of
ment letter is required. payments of capital in foreign curren-
Investment Law No.25 of 2007 guar- cy is calculated at the exchange rate
Transaction involving swap sell foreign antees foreign investors the right to prevailing at the time of payment. This
currency against Rupiah for transac- transfer (in the currency of the original calculation applies to payments in kind,
tion amount of USD25,000 or less, investment) all after-tax profits, certain which must be valued by an indepen-
a declaration letter is also required costs and (in the event of nationaliza- dent appraiser.
to justify the purchase, while for an tion) compensation. In certain circum-
amount exceeding USD25,000, it must stances, convertibility is guaranteed for A company may repurchase its shares
also be supported with documentation capital repatriation. if (1) payment is made out of net prof-
obtained from the customer for the its and does not cause the company’s
underlying transaction. Indonesian Rupiah (IDR) must be used in net assets to fall below the total of
all transactions that have a purpose of subscribed capital plus the required
Indonesia does not restrict the trans- payment settlement of obligations that reserve; and (2) the aggregate nominal
fer of foreign currency funds to or must be satisfied with a cash payment total shares owned by—or pledged in
from foreign countries, but inbound and other financial transactions con- favour of—the company or its subsid-
investment capital requires approval. ducted in Indonesia. Exemptions are iary does not exceed 10% of the total
Offshore loans must be registered provided for certain transactions related subscribed capital.
with Bank Indonesia, with subsequent to the implementation of the state
movement reported monthly, to en- budget; the receipt or grant of offshore Increases and decreases of capital
able the bank to monitor the country’s grants; international commercial trans- must be approved at a general meet-
foreign exchange exposure. actions; bank deposits in foreign curren- ing of shareholders; a reduction of
cy; and offshore loan transactions. capital also requires that there will be
no objection from a creditor.
14Investment Window into Indonesia (IWI) |
C. Establishment of Company: Getting Started
Founders, shareholders: Based on on the grounds that the company was Branch of a foreign corporation
the Company Law, at least two share- harmed as a result of mismanagement The Investment Law requires that a
holders are required at all times, which or negligence. foreign-owned enterprise operate
may be two individuals, two companies wholly or mostly in Indonesia as a
or a combination thereof in certain General shareholder meetings must be separate business unit to be organized
sectors. Shareholder liability is limited held at least once a year to approve the under Indonesian law and resident in
to the amount they contribute. annual report and determine whether Indonesia. Branches are, therefore,
profits will be retained or distributed as normally not permitted, except for
Minority shareholder should have dividends. The meeting must be held foreign banks, oil and gas companies.
minimum ownership of 1% in the case within six months of the closing of the Certain businesses, such as trading
of a foreign shareholder, or 5% for a company’s financial year. Decisions are or construction, may establish their
local shareholder. The minimum paid- taken by majority vote or as provided representative offices.
in capital is IDR10 million. for in the articles of association. Func-
tions of the general meeting of share- Representative office
Board of directors/management: holders that cannot be delegated to A foreign company can set up a trad-
A company must have at least one di- the directors or commissioners include ing representative office, but it must
rector and one commissioner. Certain amendments to the articles of asso- obtain approval from the BKPM. There
companies, notably public companies, ciation, appointment and dismissal of are several types of representative
must have at least two directors and members of the board of directors and office available, including a trading rep-
two commissioners, while a bank must commissioners, and mergers, consoli- resentative office, regional represen-
have at least three directors and two dations and dissolutions. tative office or a foreign construction
commissioners. When there is more service representative office. A trading
than one director, each is entitled to Taxes and fees: Notary fees amount representative office(“TRO”) can only
represent the company (subject to to 0.1%-1% of a company’s authorized engage in business promotion or
exceptions stated in the articles of capital, but are negotiable. A nominal market research activities. A regional
association). In foreign/domestic joint stamp duty is charged on the deed of representative office (“RRO”), other
ventures, the composition of the board establishment. than an office in the financial sector,
of directors generally reflects the ratio must also obtain approval from the
of foreign to local shareholdings. Types of shares: The company’s BKPM to set up. Its activities are limit-
capital may be issued in several classi- ed to supervision and coordination; it
Directors must carry out their du- fications of equity shares, at least one may not own or maintain production
ties in good faith, and a disposal or of which must have the characteristics facilities or operational activities and,
encumbrance of substantial company of ordinary shares. Shares may be therefore, it cannot accept orders,
assets must be approved at a general registered or bearer, but bearer shares participate in tenders, sign contracts,
meeting of shareholders. At least 75% may not be issued until the full value or engage in the importation of goods.
of issued shares must be represent- has been paid up. In practice, all shares A foreign construction service repre-
ed at the general meeting at which held by foreign investors must be in sentative office (“BUJKA”/ Badan Usaha
such approval is sought. One or more registered form. Both common and Jasa Konstruksi Asing) may conduct a
shareholders representing, collective- preferred shares are permitted, but construction project through a joint
ly, at least one-tenth of a company’s subsequent issues of preferred shares operation by obtaining approval from
total issued shares may, in the name may be sold only to those already hold- the BKPM (on behalf of Ministry of
of the company, file a civil complaint ing preferred shares. Each share nor- Public Works). BUJK also need to ob-
against a director or commissioner mally has one vote, unless otherwise tain a Construction License (“IUJK”/ Izin
provided in the articles of association. Usaha Jasa Konstruksi), through the
Association member.
15Investment Window into Indonesia (IWI) |
C. Establishment of Company: Getting Started
3.Investment Procedures According to NIL No.44 year 2016, of companies. Mergers generally are
Company Law No.40 of 2007 regulates there are restrictions on foreign permitted with the consent of 75% of
limited liability (Perseroan Terbatas, or ownership in certain business sectors. the shareholders. Some protection for
PT) companies. PT is the most com- Investment in infrastructure requires minority shareholders is provided, par-
mon form of business organization a joint venture company, with the In- ticularly with respect to the share sale
and the one to which foreign investors donesian partner holding at least price, which must be “fair.” Unless the
are restricted under the Investment 67% equity. surviving company retains its name and
Law. Branches of foreign corporations management, a merged entity must
normally are not permitted outside of 4.Mergers and acquisitions adopt a new name and management.
the banking, oil and gas sectors. The Company Law regulates mergers,
consolidations, acquisitions and splits
a. Preparation
Task Institution
•• Optain Principle License (Izin Prinsip) •• BKPM
•• Obtain company deed of establishment and articles of association •• Public notary, ratified by Ministry of
Law and Human Rights (MOHLR)
b. Pre-operation
Task Institution
•• Obtain producer importer identification number (API-P) for manufacturers; •• BKPM
•• Submit investment activities report (LKPM) every 3 months; •• BKPM
•• Obtain facilities, e.g. machinery import duty exemption and tax facilities, if needed; •• BKPM, Ministry of Finance
•• Obtain licenses from local government, e.g. building permit, domicile certificate; •• Local government
•• Obtain permits from relevant sectoral ministries, e.g. broadcasting permit. •• BKPM, sectoral ministries
c.Operation
Task Institution
•• Obtain business licenses (izin usaha); •• BKPM
•• Obtain general importer identification number (API-U); •• BKPM
•• Submit investment activities report (LKPM) every 6 months; •• BKPM
•• Obtain raw material import duty facility, if needed; •• BKPM
•• Obtain periodic operational permits from sectoral ministries, e.g. hotel permits •• BKPM, sectoral minitries
16Investment Window into Indonesia (IWI) |
C. Establishment of Company: Getting Started
Mergers of limited liability compa- ject to maximum fines of IDR100 billion
nies are possible where one or more and six-month prison terms for their
companiesare merged into a single executives.
surviving company (with the simultane-
ous dissolution of the other company Requirements
or companies). In a consolidation, two For tax purposes, foreign investment
or more companies merge into a new (PMA) companies, permanent estab-
entity and each of the original compa- lishments (PE), certain entities with
nies is dissolved; in an acquisition, an foreign affiliations and companies that
individual or legal entity takes over all prepare their financial statements
or most of the shares of a company, using US dollar as the functional
resulting in a transfer of control. currency in accordance with PSAK 10
may maintain English language and US
5.Business Regulation dollar bookkeeping, provided approval
Monopolies and restraint of trade from the Minister of Finance is ob-
The Anti-Monopoly and Unfair Com- tained (contractors of oil and gas
petition Law prohibits a company or PSCs and companies operating under
companies group from holding more Mining Contracts of Work need only
than a 50% or more share of the do- to provide notification). A change in
mestic market, or two or three compa- the method of bookkeeping is pos-
nies or companies group from holding sible, subject to approval from the
75% or more of the market between Director General of Tax (DGT). The
them. Market share is determined by DGT also sets the exchange rate used
sales value rather than volume. The for accounting and tax payments on
law prohibits vertical restrictions on a weekly basis. Books, records, an-
competition and any deals or con- nual balance sheets and copies of
tracts allowing for monopolies, oligop- correspondence must be retained in
olies, price fixing, cartels, trusts and Indonesia for 10 years.
geographical designations of markets
between suppliers. Small enterpris- A portion of profits must be retained
es and cooperatives are exempt, as each year until a minimum reserve of
are the production and marketing of 20% of issued capital has
goods and services deemed “vital” to been attained.
public welfare and state companies.
Companies violating the law are sub-
17Investment Window into Indonesia (IWI) |
D. Taxation in Indonesia
D. Taxation in Indonesia
1. Tax incentives release of goods, redelivery of taxable •• Withholding tax on dividend distrib-
Bonded Storage goods, lending of machinery, and entry uted to a non-resident shareholder
Bonded Storage is a building, a site of excisable goods to and/or from the at 10%, unless the relevant tax treaty
or a zone that meets certain require- bonded zone shall be granted facili- stipulates a lower rate.
ments which is used for storage ties in the form of postponement of
of goods for certain purposes and import duty, exemption from excise, In order to apply for the corporate
obtains customs facilities. Bonded and/or non-collection of import taxes tax facilities, certain detailed require-
Storage takes several forms, among (VAT, LGST, and Art.22). These facilities ments must be met including qualita-
others, as described below. shall be provided to goods/ materials tive criteria, such as high investment
entered into a bonded zone to be pro- value or export- oriented, high labour
Bonded Warehouse cessed or combined with the absorption, and high local content. The
A Bonded Warehouse is defined as products produced in a bonded zone, industry sectors that are eligible for
a place of bonded storage to store or capital goods, including office equip- these income tax facilities are, among
imported goods, which may be accompa- ment, to be used by an Entrepreneur in others, food; textile; chemicals and
nied with one or more activities such as Bonded Zone (PDKB). Consumables are their products; plantation, forestry and
packaging/ repackaging, sorting, kitting, not facilitated in a bonded zone. logging; coal and lignite mining; oil,
packing, adjustment, or cutting of certain natural gas, and geothermal mining.
goods within a certain period for later Application is required to obtain each
removal. license and there are requirements that
must be fulfilled in obtaining
The imported goods or materials that the license.
are introduced into a bonded ware-
house by an Entrepreneur in Bonded Corporate Tax Facilities
Warehouse may be granted facilities in Companies investing in certain indus-
the form of postponement of import tries and/or in certain less developed
duty, exemption from excise, and/or regions having high priority on a na-
non-collection of import taxes (VAT, tional scale can be granted tax facilities
LGST, and Art.22). These facilities shall in the form of:
be provided to goods or materials
•• Additional net income reduction, up
introduced solely with the purpose of
to a maximum of 30% of the amount
supporting industry (manufacturing) at
of investment in tangible fixed assets,
other Indonesian customs territory or
which shall be charged at 5% per
bonded zone, or for re- export.
annum for six years;
Bonded Zone •• Accelerated depreciation and amor-
Bonded Zone is a place of bonded tisation;
storage to store imported goods and/ •• The period of loss carry forward be-
or local supplies for production purpos- ing extended up to ten years (certain
es with its output primarily for export additional years can be given if the
purposes. Import of goods, entry of taxpayer meets the requirements);
taxable goods, delivery of products, and;
18Investment Window into Indonesia (IWI) |
D. Taxation in Indonesia
Tax Holiday Facility Certain requirements must be sat- is obtained (contractors of oil and gas
Taxpayers making a new investment in isfied. The taxpayer shall submit the PSCs and companies operating under
a pioneer industry but not entitled to application together with the applica- Mining Contracts of Work need only to
Corporate Tax Facilities (as mentioned tion for registration of investment or provide notification). A change in the
in the above paragraph) can obtain an no later than 1 year after the issuance method of bookkeeping is possible,
exemption or a reduction of income of registration of investment. subject to pre-approval from the DGT.
tax as mentioned in Article 18(5) of In- There is no statutory requirement for
vestment Law No. 25 of 2007. The said Upon approval, the tax holiday facility an audit of ataxpayer’s accounts by a
pioneer industries are defined as is only applicable to the income which public accountant for tax purposes.
industries possessing broad linkages, is granted the facility. Other income However, if taxpayers do have audited
giving added value and high externali- (such as capital gain, interest, dividend, accounts, the DGT requires them to be
ty, introducing new technology, as well royalty, rental, debt waiver, revalua- submitted upon annual tax filing.
as possessing strategic value for the tion, etc.) remains subject to tax in
national economy. accordance with the prevailing tax Payment and filing
regulations. Taxpayers that have both All taxpayers carrying out a business
Those pioneer industries are: up- types of income stream are required or an independent profession must
stream metals; crude oil and natural to maintain separate bookkeeping for maintain regular and proper account-
gas purifying and/or refining; crude each income stream. ing records, on which periodic tax pay-
oil, natural gas, or coal based petro- ments and reporting are based. Tax
chemicals; basic inorganic chemicals; A taxpayer is only eligible for one type returns need to be filed based on type
basic organic chemicals sourced from of tax facility (either Tax Allowance of taxpayer, business or transactions.
agriculture, plantation, or forestry scheme or Tax Holiday scheme).
products; raw materials for pharmacy; The DGT has enforced the use of the
semi-conductor or other main comput- 2. Tax administration online e-Billing system for tax pay-
er components; main components of Tax year ments replacing the previous hard-co-
communication or health equipment; The tax year for a company is the py process. Taxpayers will have to gen-
main components of industrial or accounting/financial year and calendar erate an e-billing code through certain
certain automotive machinery; robotic year in the case of individual. system in order to facilitate their tax
components; main vessel, aircraft or payment. The billing code is valid for
train components; electricity gener- Administration, books and records certain period and will need to be given
ation machinery; and/or economic Generally, books and records, includ- to the bank to execute a tax payment.
infrastructure. Application for other ing those on computers, should be
maintained in Rupiah currency and in Starting 2018, corporate taxpayer has
the Indonesian language, and kept for the obligation to submit its periodic
10 years in Indonesia. Art. 21/26 income tax returns and
periodic VAT returns in the form of
For tax purposes, foreign investment electronic documents through DGT
(PMA) companies, permanent estab- portal system.
lishments, certain entities with for-
eign affiliations and companies that Consolidated returns
prepare their financial statements There is no provision for the filing of
using the US dollar as the functional consolidated returns or for group relief.
currency in accordance with Indo-
nesia’s generally accepted financial Tax authorities
accounting standards (PSAK Number Most taxes are administered central-
10) may maintain English language ly by the DGT, except regional taxes
and US dollar bookkeeping, provided which are administered and collected
approval from the Minister of Finance by regional governments, such as
provinces and districts.
19Investment Window into Indonesia (IWI) |
D. Taxation in Indonesia
The DGT is a department under the 3. Business taxation
Ministry of Finance that formulates Overview
technical guidelines and procedures for The principal taxes applicable to
fiscal policy. The DGT has various units companies doing business in Indone-
that administer taxpayer obligations (e.g. sia are corporate income tax, branch
monitoring tax compliance, collecting profits tax, withholding tax, value
tax, counselling, conducting tax audits); added tax (VAT) and luxury goods sales
these offices are classified as small, me- tax (LGST), and various other indirect
dium and large tax offices. An account levies, such as tax on land/building,
representative from the tax office is regional taxes and stamp duty. There
assigned to serve each taxpayer. is no excess profits tax or alternative
minimum tax.
Rulings
A taxpayer may request a confirma- Tax exemptions and various tax incen-
tion from the DGT if the application of tives are available to qualified entities.
the tax law and procedure is unclear. The main tax laws are the Income Tax
There is no timeframe for the DGT Law, VAT and LGST Law, the Law on
to respond to such a request. A tax General Tax Provisions and Proce-
ruling applies only to the taxpayer that dures, the Land and Building Tax Law,
filed the request and generally can be and the Law on Regional Tax and User
used only to support that taxpayer’s Fees Bill.
position in the event of a tax audit or
tax objection. Such a ruling may not be
used by other taxpayers.
20Investment Window into Indonesia (IWI) |
D. Taxation in Indonesia
Indonesia Quick Tax Facts for Companies
Corporate income tax rate 25%
Branch profit tax rate 20%
Capital gains tax rate 0.1% - 25%
Basis Worldwide
Participation exemption Yes
Loss relief
- Carryforward 5 years
- Carryback No
Double taxation relief Yes
Tax consolidation No
Transfer pricing rules Yes
Thin capitalization rules Yes
Controlled foreign company rules Yes
Tax year Calendar year or accounting/financial year
Advance payment of tax Yes
Return due date 4 months after end of calendar year/tax year (can be extended to six months by notification to
the DGT)
Withholding tax
- Dividens 20% (non-resident); 10%/15% (resident)
- Interest 20% (non-resident); 15%/20% (resident)
- Royalties 20% (non-resident); 15% (resident)
- Technical Service fee 20% (non-resident); 2% (resident)
- Branch profit tax 20%
Capital tax No
Social security contributions (employer 10.2%-11.7%
contribution)
Land and building tax 0.3%-0.5%
Land and building acquisition duty 5%
Transfer tax 0.1% (transfer of shares listed on Indonesian stock exchange); 5% (transfer of non-listed
resident company’s shares by a non-resident); 0%/1%/2.5% of
gross proceeds (transfer of land and/or buildings)
Tax on founder shares at initial public offering 0.5%
Stamp duty IDR 3,000/IDR 6,000
VAT 10%
21Investment Window into Indonesia (IWI) |
D. Taxation in Indonesia
Residence Certain types of income earned by Capital gains taxation
A company is considered resident resident taxpayers or Indonesian PEs Capital gains are taxable as ordinary
for tax purposes if it is established or of foreign companies are subject to a income, and capital losses are deduct-
domiciled in Indonesia or if its place of final income tax. The tax withheld by ible. However, the sale of shares listed
effective management is in Indonesia. third parties is deemed to be the final on the Indonesian stock exchange is
settlement of the income tax for the subject to a tax of 0.1% of the trans-
Taxable income and rates particular type of income. action value. Founder shares also are
Resident companies are taxed on subject to an additional final tax of
worldwide income. Nonresident Taxpayers engaged in certain business 0.5% on the share value at the time of
companies are taxed only on Indone- sectors, such as construction and an initial public offering, regardless of
sia-source income, including income shipping, pay income tax at a fixed whether the shares are held or sold
attributable to a permanent establish- percentage of gross income. following the offering.
ment (PE) in Indonesia.
Companies engaged in the upstream The sale or transfer of land and/or
The standard corporate income tax oil and gas industry generally are re- buildings is generally subject to a 2.5%
rate is 25%. quired to calculate corporate income final income tax on the sales pro-
tax in accordance with a relevant ceeds. Different rates apply for certain
Small-scale entrepreneurs whose production sharing contract (PSC), and transactions i.e. sale or transfer of low
gross income for the fiscal year does the income tax calculation for certain cost houses/apartments by real estate
not exceed IDR4.8 billion are subject companies engaged in mining is gov- company (1%) and transfer to the gov-
to a 0.5% tax on gross revenue for erned by the contract of work. The tax ernment for the public interest (0%).
certain period of time. provisions for oil and gas, geothermal,
and sharia-based industries are stipu- Income derived from the sale of
Resident corporate taxpayers with lated separately through government non-listed Indonesian shares held by
gross revenue between IDR4.8 billion or Ministry of Finance regulations. foreigners is taxable at a rate of 5% of
and IDR50 billion receive a 50% reduc- the gross proceeds, unless the rate is
tion in the corporate tax rate imposed Debt-to-Equity Ratio reduced under a tax treaty.
on the taxable income that is attrib- Starting from fiscal year 2016, the
utable to gross revenue up to IDR4.8 Minister of Finance has introduced Branch Profit Tax
billion. A public company with at least an implementing regulation on A branch of a foreign company in
40% of its total paid-up shares traded debt-to-equity ratio. A certain portion Indonesia is taxed at the standard
on a stock exchange in Indonesia and of interest arising from debt is non tax corporate income tax rate, and a 20%
that complies with other requirements deductible if the debt-to-equity ratio branch profit tax is levied on taxable
can obtain a 5% reduction in the in- exceeds 4:1. This regulation does not income after income tax. A relief on
come tax rate. apply to certain industries (e.g. those the branch profit tax rate is available
subject to the final tax regime, infra- if so provided under a tax treaty. An
PEs are subject to a branch profits tax structure, banking, insurance, financ- exemption from branch profit tax may
of 20% (or a lower rate under a tax ing). This rule applies to both related be available if all the net profits of a
treaty) on net after-tax profits, in addi- and non-related debt, whether the PE are reinvested in Indonesia in the
tion to the 25% corporate income tax debt is obtained domestically or from form of:
rate. An exemption from branch prof- abroad. In addition, taxpayers with for-
its tax applies if all of the PE’s net profit eign private debt must submit a report
after tax is reinvested in Indonesia. to the tax authority.
22Investment Window into Indonesia (IWI) |
D. Taxation in Indonesia
•• A capital contribution in a newly Double taxation relief
established company domiciled in Unilateral relief
Indonesia as a founder or a member Resident companies deriving income
of the founders; from foreign sources are entitled
to a unilateral tax credit for foreign
•• A capital contribution in an existing
tax paid on the income. The credit is
company established and domiciled
limited to the amount of Indonesian
in Indonesia;
tax otherwise payable on the relevant
•• Fixed assets to be used by the PE to foreign income. A country-by-country
do business or conduct activities of limitation applies, i.e. the credit for
the PE in Indonesia; or foreign tax paid on income from one
•• Investment in intangible goods to be country is limited to the amount of
used by the PE to do business or con- Indonesian tax otherwise payable on
duct activities of the PE in Indonesia. the income from the same country.
Indonesia does not grant credit for
Compliance underlying tax.
A foreign company carrying out busi-
ness activities through a PE in Indone- Tax treaties
sia generally has the same compliance Indonesia has a reasonably broad
obligations as a resident taxpayer. A tax treaty network, with the treaties
foreign company that does not have generally following the OECD model
a PE settles its Indonesian tax obliga- treaty and containing OECD-compliant
tions on Indonesian-source income exchange of information provisions.
when an Indonesian taxpayer with- Treaties generally provide for relief
holds income tax. from double taxation on all types of
income, limit the taxation by one coun-
Tax collection operates under a try of companies resident in the other,
self-assessment system. For taxpayers and protect companies resident in one
that subject to the ordinary tax regime, country from discriminatory taxation in
monthly tax instalments is due on the the other.
15th day of the following month and
must be filed by the 20th of the To claim relief under a tax treaty,
following month. the foreign taxpayer must fulfil the
substance and administrative require-
The annual corporate tax return must ments. The substance requirements
be filed within four months of the end entail general conditions to be met,
of the book year but could be extend- and if the foreign taxpayer receives
ed for two months with notification to income for which the article in the
the DGT. Annual corporate tax liability relevant tax treaty stipulates a bene-
(income tax liability less monthly in- ficial owner requirement (i.e. interest,
stalments and/or other prepaid taxes) dividend, royalty), additional conditions
must also be satisfied (please refer to
“General anti-avoidance rule” section).
For the administrative requirement,
the foreign taxpayer must complete
and submit to the DGT in a timely
manner,
23Investment Window into Indonesia (IWI) |
D. Taxation in Indonesia
a specific document issued by the an attachment to the completed Form •• It has fixed and non-fixed assets,
Indonesian Tax Office in lieu of a Cer- DGT-1 or Form DGT-2. Treaty relief will sufficient and adequate to carry on
tificate of Domicile, and Form DGT-1 or be denied if the foreign taxpayer fails business activities in the DTA partner
Form DGT-2. Form DGT-2 is specifically to fulfil any of the requirement. state or partner jurisdiction other
for a company that is a banking insti- than the assets that generate income
tution, pension fund, or earns income Anti-avoidance rules from Indonesia;
from bonds or stocks listed on the In- General anti-avoidance rule
•• It has employees with certain exper-
donesian stock exchange. These forms While Indonesia does not have a gen-
tise in accordance with the business
must be endorsed by the tax authori- eral anti-avoidance rule, the foreign
field that is carried out, in sufficient
ties of the treaty partner country. If the income recipients must satisfy certain
and adequate numbers; and
foreign taxpayer is unable to obtain substance requirements to obtain
the endorsement, the foreign taxpayer benefits under a tax treaty, as follows: •• It has activities or other active busi-
can use any form of Certificate ness other than only receiving income
•• There is a relevant economic motive
of Domicile commonly verified or in the form of dividend, interest and/
for establishment of the entity;
issued by the tax treaty partner’s tax or royalty originating from Indonesia.
authorities, provided certain require- •• Its business activities are managed
ments are met. This form will serve as by its own management and the
management has sufficient authority
to carry out transactions;
Indonesia Tax Treaty Network
Algeria Hong Kong New Zealand Suriname
Armenia Hungary Norway Sweden
Australia India Pakistan Switzerland
Austria Iran Papua New Guinea Syria
Bangladesh Italy Philippines Taiwan
Belgium Japan Poland Thailand
Brunei Darussalam Jordan Portugal Tunisia
Bulgaria Korea (DPRK) Qatar Turkey
Canada Korea (ROK) Romania Ukraine
China Kuwait Russia United Arab Emirates
Croatia Laos Seychelles United Kingdom
Czech Republic Luxembourg Singapore United States
Denmark Malaysia Slovakia Uzbekistan
Egypt Mexico South Africa Venezuela
Finland Mongolia Spain Vietnam
France Morocco Sri Lanka Zimbabwe
Germany Netherlands Sudan
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