Investing in

Indonesia
2020
Table of Contents

1. Demographics 04

2. Economics and FDI in 2019 05

3. Main Industries 07

4. Key Economic Regions 08

5. Free Trade Agreements 09

6. How to Set up a Business 10

7. Tax Regimes 11

8. HR and Payroll Compliance 16

Graphic© Asia Briefing Ltd. Investing in Indonesia 2020 I 2

 This infographic of Investing in Indonesia 2020 is produced by a team of professionals at
Dezan Shira & Associates, with Trang Nguyen (Jasmine) as Editor and Thu Ha and Thien Bui
as Creative designers.

© 2020 Dezan Shira & Associates

Disclaimer
The contents of this guide are for general information only. For advice on your specific business, please contact a qualified professional advisor.
Copyright 2020, Asia Briefing Ltd. No reproduction, copying or translation of materials without prior permission of the publisher.
 1. Demographics
China

Political System Democratic Republic Capital Jakarta

Economic Centre Jakarta Population 273.5 million

Currency Indonesian Rupiah (IDR) Provinces 34

Time Zone UTC+7, UTC+8, UTC+9 Area 1,905,569 km²

2019 GDP Growth 5.02% Labour Force 69.2%

Middle Class 64 milion Average Annual US$2,945

Population Income

Neighbours Malaysia, Papua New Language Indonesian, English

Guinea, Timor Leste (business, professional)
and local dialects
Ease of Doing 73
Business

Brunei
Malaysia

Singapore

JAKARTA

East Timor

Australia

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 2. Economics and FDI in 2019

Top 5 Provinces Receiving Investments (US$ Billion)

5.9
6

5.02%
GDP Growth Rate 5

4.1
4
1.8%
Export Growth Rate
3 2.7

US$ 23.43 billion 2

1.9 1.8

FDI Disbursement 1.8

13,142 0
New Projects West Special Central Banten Central
granted investment Java Territory of Java Sulawesi
Jakarta
certificate in 2019
Source: BKPM

Top 5 Sectors Receiving Investment Top 5 Countries Investing in Indonesia

Electricity, Gas and Water Supply Singapore

Transportation, Warehouse and Telecommunication China
Metals, except Machinery and Equipment Industry Japan
Housing, Industrial Estate and Office Building Hong Kong
Mining Netherlands
Others Others

US$5.9 B US$6.5 B

21% 23.1%
US$8.8 US$7.2 B 25.4%
31.4%

16.8%
9.2% 16.8%
US$2.3 B 8% US$4.7 B US$2.6 B US$4.7 B
10.2%
10.2% 12.6%
15.3%
US$2.9 B US$3.6 B US$2.9 B US$4.3 B

Source: BKPM Source: BKPM

5 I Investing in Indonesia 2020 Graphic© Asia Briefing Ltd.

Top 5 Import and Export Partners (US$ Billion)

China Singapore Japan Thailand USA

44.9 17.1 15.6 9.4 9.3

27.8 17.6 15.9 12.9 11.1

China USA Japan Singapore India

Source: Tradingeconomics.com

Top 5 Imports and Exports

TOP 5 IMPORTS TOP 5 EXPORTS

Machinery including Computers Mineral Fuels including Oil

Electrical Machinery and Equipment Animal and Vegetable Fats, Oils and Waxes
Mineral Fuels including Oil Electrical Machinery and Equipment
Plastics and Plastic Articles Footwear
Iron and Steel Iron and Steel
Others Others
US$26 B US$39 B
16.6%
21.3%
US$156.7 B US$183 B
50.7% US$19.9 B 55.8%
12.7%
7.5%
US$13.8 B

US$15.9 B 7.3% US$13.3 B

10.2%
4.1% US$7.4 B
5.1%
4.7 3.9
US$7.9 B US$7.1 B

US$4.7 B
Source: World's Top Export

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 3. Main Industries

Chemical Fertilizers Natural Gas

Electricity Palm Oil

Footwear Petroleum

Handicrafts Plywood

Jewelry Processed Food

Medical Instruments Rubber

Mining Textile and Garments

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 4. Key Economic Regions

G Under Construction Special Economic Zones

A
J
F K
O Operating Special Economic Zones

C L
H

B N
M
E

Industrial Zone Area

A KEK Sei Mangkei F KEK Galang Batang K KEK Maloy Batuta Trans
Simalungun, North Sumatera Province Kalimantan
2,002.7 ha Bintan, Riau Island Province Kutai Timur, East Kalimantan Province
2,333.6 ha 557,34 ha
B KEK Tanjung Lesung
Pandeglang, Banten Province G KEK Arun Lhokseumawe L KEK Sorong
1,500 ha Mayamuk District, West

Lhokseumawe and North Aceh Papua Province

C KEK Palu
Aceh Province 523,7 ha
Palu, Center of Sulawesi Province
2,622.48 ha
1,500 ha M KEK Singhasari

D KEK Tanjung Api-Api H KEK Tanjung Kelayang Malang, East Java

Bangka Belitung Island Province 120,3 ha
534 ha
Banyuasin, South Sumatera Province N KEK Kendal
2,030.7 ha I KEK Bitung Kendal, Central Java
Bitung, North Sulawesi Province 1,000 ha
E KEK Mandalika
324,4 ha
Lombok Tengah, West Nusa O KEK Likupang
Tenggara Province J KEK Morotai Minahasa Utara, North Sulawesi
1,035.67 ha Morotai Island, Maluku Province 197,4 ha
1,101.76 ha

Oil and Gas Industry

Agro Industry Fishery Logistics

Creative Industry Food And Beverage Manufacturing Industry Petrochemical Industry

Energy Herbal Pharmacy Industry Mineral Industry Smelters

Fisheries Processing Industry Industrial Shipyards Mineral Processing Industry Tourims

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 5. Free Trade Agreements

12 FTAs in Effect

AANZFTA ASEAN
ASEAN - Australia and New Zealand Free Trade Agreement Association of Southeast Asian Nations

AIFTA IJEPA
ASEAN - India Free Trade Agreement Indonesia - Japan Economic Partnership Agreement

AHKFTA IC-CEPA
ASEAN - Hong Kong Free Trade Agreement Indonesia - Chile Comprehensive Economic Partnership Agreement

ACFTA IA-CEPA
ASEAN - People’s Republic of China Free Trade Agreement Indonesia - Australia Comprehensive Economic Partnership Agreement

AKFTA PTA
ASEAN - Korea Comprehensive Economic Cooperation Agreement Indonesia - Pakistan Preferential Trade Agreement

AJCEP D8
ASEAN - Japan Comprehensive Economic Partnership Preferential Tariff Arrangement – Group of Eight Developing Countries

New Zealand

Hong Kong China Australia Japan Chile

Laos Cambodia Singapore Phillipin Indonesia Pakistan

Myanmar Thailand Vietnam Brunei Malaysia Turkey

South Korea India Bangladesh Nigeria

Iran Egypt

Source: WTO Center, VCCI

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6. How to Set up a Business

Key Market Entry Options

Entry Market Estimated

Common Purpose Pros Cons
Structure Types Set up time

• Numerous financial and

• A minimum 10 billion IDR
non-financial incentives;
(US$700,000) of total
• Flexible at foreign
investment value, with 2.5
ownership ratio (1-100%)
billion IDR (US$175,000)
subject to the Negative
Foreign shall be injected as
Investment List;
Investment 1.5 - 2 Company’s paid-up capital.
• Lower tax and import
Companies months Nonetheless, this paid-up
duties;
(PT PMA) capital can be used during
• Able to participate in
Company’s operational;
government sponsored
• A minimum equity of
business tenders;
10 million IDR (US$700)
• Simple organization
per share required.
structure.

• Cannot engage in any

commercial activities;
• Market research; cannot issue invoice or
• Fast and simple
• Developing trade contacts; apply for specific license
registration procedure;
General • Gathering information on (except for BUJKA
1.5 – 2 • No paid-up capital
Representative regulations and laws; and KPPA Migas);
months required and can be
Office (RO/KPPA) • Manage the parent • Can only be incorporated
owned 100% by the
company’s corporate in capital of Indonesia
parent company.
interests. provinces;
• Must be located in
office building.

Four Types of Representative Office

RO for Foreign RO for Foreign Oil

RO for Foreign Trading
General RO (KPPA) Construction and Gas Company
Company (KP3A)
Company (BUJKA) (KPPA MIGAS)

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6.

Set up a PT PMA Set up a General Representative office

Registration for RO
from 4 Establishment from 14
Company Name Reservation
working days 1. Preparation of required documents working days
2. Application to the OSS System

Legal Entity Establishment Certificate of Domicile

from 14 to 21 from 7 to 21
1. Preparation of article of association by notary
working days
from Local District Office working days
2. Company’s deed of establishment and its (outside Jakarta)
decree from Ministry of Law and Human Rights

Certificate of Domicile from 3 working

from 7 to 21 Single Business Number days upon
from Local District Office working days (NIB) Registration completion of
(outside Jakarta) documents

from 3 working
Single Business Number days upon Taxpayer Identification from 7 to 21
(NIB) Registration completion of Number Registration working days
documents

Taxpayer Identification from 7 to 14 from 7

KPPA License working days
Number Registration working days

Vary, depending
on the license
Usual trade
KPPA License license (SIUP) can
be obtained within
approx. 7 working
days

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 7. Tax Regimes

Indonesia's Major Taxes

• Corporate Income Tax Rates:

1 Corporate Income Tax (CIT) ћћ Previous year: 25%

ћћ 2020 & 2021: 22%
ћћ Starting from 2022: 20%

• 10% VAT rate imposed on most manufactures, retailers,

wholesalers & importers
2 Value-added Tax (VAT)
• Exports of tangible and intangible goods and services are
exempted from VAT

• Apllies on worldwide income of Indonesian tax residents

3 Personal Income Tax (PIX) • No-resident taxpayer is liable for income earned in Indonesia

• Applies to international and domestic entities enganging in

e-commerce activities
4 E-commerce Tax • Foreign e-commerce businesses or internet companies having
signficant presence in Indonesia is deemed as an Indonesia
tax residence

Tax Allowance

A total of 30% reduction in net income

tax in 6 years, 5% each year Income tax on dividends at 10%
(Applies for 166 eligible business fields)

Accelerated depreciation and amortization 5 to 10 year compensation for tax losses

Exemption on import duties, VAT, sales

tax on luxury goods, and excise for
businesses operated in Free Trade Zones

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 7.

Super Tax Deduction

Machines, goods, materials for production Up to 200% reduction of gross

are exempted for 2-year import duties income of educational activities

Companies utilizing minimum 30% of local 60% reduction of net income of

components are waived for import duties in 4 years labor intensive industries

Up to 300% reduction of gross income

subject to income tax of R&D activities

Tax Holiday

Eligible entities complying with the Indonesia capitalization rules and making investment into ‘pioneer industries’ can benefit
from the following CIT incentives:

Corporate Income Tax Incentives

Capital Investment Tax holiday (%) Period (years)

Up to 100 billion rupiah (US$6 million) less

I 50 5
than 500 billion rupiah (US$30 million)

More than 500 billion rupiah (US6 million)

II 100 5
less than 1 trillion rupiah (US$60 million)

More than 1 trillion rupiah (US$60 million) less

III 100 7
than 5 trillion rupiah (US$300 million)

More than 5 trillion rupiah (US$300 million) less

IV 100 10
than 15 trillion rupiah (US$902 million)

More than 15 trillion rupiah (US$902 million)

V 100 15
less than 39 trillion rupiah (US$1.8 billion)

VI More than 30 trillion rupiah (US$1.8 billion) 100 20

(Noted: US$1=16,602 rupiah as of March 23, 2020)

Notice: After the aforementioned periods of CIT incentives, investment type 1 is eligible for an additional 25% tax holiday allowance
while the rest can obtain an additional 50% CIT reduction in two years.

13 I Investing in Indonesia 2020 Graphic© Asia Briefing Ltd.

 7.

18 Pioneer Industries

Agricultural, Plantation or Forestry – Based Manufacturing Industry of Main

Processing Industries that produce Pulp Components for Trains

Digital Economy Manufacturing Industry of Robotic Components

Manufacturing Industry of Vehicle and

Economic Infrastructures
Main Components for Vehicles

Manufacturing of Irradiation Equipment,

Inorganic Base Chemical Industry
Electro Medical or Electrotherapy

Manufacturing Industry of Electronic and

Telematics Device’s Main Components Oil and Gas Purification and Refinery Industry

Manufacturing Industry of Main

Components for Aircraft and Other Organic Base Chemical Industry
Supporting Aircraft Industries

Manufacturing Industry of Main Components Petrochemical Industry, Based on

for Electrical Power Generation Engines Petroleum, Natural Gas or Coal

Manufacturing Industry of Main Components

Pharmaceutical Raw Material Industry
for Industrial Engines and Main Components

Manufacturing Industry of Main

Upstream Base Metal Industry
Components for Ships

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 7.

Double Taxation Agreements (DTAs)

Countries with signed DTAs with Indonesia (As of January 2020)

Algeria Czech Republic Jordan Norway Slovakia Tunisia

Armenia Denmark Korea (North) Pakistan South Africa Turkey
Australia Egypt Korea (South) Papua New Guinea Spain Ukraine
Austria Finland Kuwait Philippines Sri Lanka United Arab Emirates
Bangladesh France Laos Poland Sudan United Kingdom
Belarus Germany Luxembourg Portugal Suriname United States of America
Belgium Hong Kong Malaysia Qatar Sweden Uzbekistan
Brunei Hungary Mexico Romania Switzerland Venezuela
Bulgaria India Mongolia Russia Syria Vietnam
Canada Iran Morocco Serbia Taiwan Zimbabwe
China Italy Netherlands Seychelles Tajikistan
Croatia Japan New Zealand Singapore Thailand

15 I Investing in Indonesia 2020 Graphic© Asia Briefing Ltd.

 8. HR and Payroll Compliance

Basic Employment Benefits Personal Income Tax (PIT) Obligations

12 days of annual leave Non-residents is taxed at a flat 20% on gross income

(For a standard five working days
per week)

Residents are subject to progressive tax on worldwide income

Social Security Scheme (BPJS)

Personal Income Tax Rates

Annual Income Rate (%)

Religious Holiday Allowance (THR)
(Equivalent to at least 1 month Up to 50 million rupiah (US$3,000) 5
of employee’s salary)
Between 50 - 250 million rupiah
15
(US$3,000 - US$15,000)

Between 250 - 500 million rupiah

25
(US$15,000 - US$30,000)

500 million rupiah (US$30,000) and above 30

Social Security (BPJS) Contribution Rates

It is mandatory for all Indonesian citizens, expatriates and their families to participate in the social security programs.

BPJS Contribution Rates

Employer Employee

BPJS Employment – Death 0.3% /

0.24% - 1.74% (Depends on

BPJS Employment – Accident /
industries and risk level)

BPJS Employment – Retirement 3.7% 2%

BPJS Employment – Pension

2% 1%
(Maximum threshold is IDR 8,939,700 (US$538))

BPJS Health
4% 1%
(Maximum threshold is IDR 12,000,000 (US$723))

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 CHINA

INDIA
THE PHILIPPINES

THAILAND
VIETNAM

MALAYSIA
SINGAPORE

INDONESIA

Dezan Shira Asian Alliance Members

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Asia’s complex regulatory environment and assisting clients with all aspects of establishing, maintaining, and growing business operations. With
a large team of lawyers, tax experts, auditors, researchers, and business analysts throughout Asia, Europe, and the US, Dezan Shira & Associates
serves multi-jurisdictional clients as a one-stop-shop and a partner for growth in Asia.

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