with the law declared in 1967, the 2007 law is more accommodating to foreign investors. This shows the difference of opinion toward foreign influence and income during the 40 years that has passed between the laws. Even more recently, Presidential Decree no. 36
of 2010 was passed in regards to the List of Open and Closed Businesses and the Restriction for Investment (Investment Negative List), which updated Indonesia’s Investment Negative List of December 2007 as regulated by Presidential Decree No. 76 of 2007. The revised Negative Investment List seeks to implement Indonesia’s commitment to the Asean agreements and treaties, and thus will promote foreign direct investments from nations including but not limited to those who belong to south-east Asia. This revision will only affect either foreign or domestic investment; stock market investments do not have to comply with the list. Article 18 of Law number 25 year 2007 states
that tax incentives should be given. These incen- tives include: income tax reduction, custom exemption to machineries, capital goods and tools; customs exemption on raw materials; VAT (value added tax) exemption; accelerated amortisation and depreciation; and, incentives on land and building tax. There have recently been many laws in regard to FDI such as the Ministry of Finance regulation No. 16/PML/032007 regarding granti- ng income tax facilities for investment on certain business sectors or certain regions, Directorate General of Tax No. 67/PJ/07/2007 regarding the procedure of granting income tax for investment on certain business sectors and/or certain regions. These more recent laws affect the changes of FDI regulations that are being accepted and implement- ed in Indonesia. The varying degrees of specificity is a telltale sign that Indonesia has a greater under- standing of the importance and benefits of foreign direct investment: this can be seen by a comparison with the laws during the 1960s which only had two different regulations, encompassing the entirety of investment in general. The varying types and degrees of leniency show the maturing of Indonesia’s government and its entrance into the international trading scene. On August 15 2011, the Minister of Finance
Regulation No. 130/PMK.011/2011 (the Tax Holiday Regulation) was finally enacted for the purpose of providing tax allowances and an income tax holiday of between five and 10 years to compa-
About the author Chandra Adhisurya Nataadmadja is a senior associate at Suria Nataadmadja & Associates. He graduated from the Law Faculty of Pelita Harapan University (SH, 2007), and obtained his MBA degree from Economy Faculty, University of Business and Economics, Beijing, with specialisation in Business Administration (MBA, 2009). Before joining Suria Nataadmadja & Associates, he was an associate at Shanghai Hilights Law Office in Shanghai. He has advised domestic and international investors in relation
to corporate and commercial transactions including structuring of acquisitions, real estate transactions, and equity investments with a principal focus on energy and natural resources sectors.
“
The varying types
and degrees of leniency show the maturing of Indonesia’s government
”
nies in specific industries. There are two types of tax facility, namely the exemption of corporate income tax and the deduction of corporate income tax. The exemption from corporate income tax is granted for a maximum of 10 years and for a min- imum period of five years as of the year tax of the corporate taxpayer’s commercial production. When the exemption period ends, the corporate tax payer is granted a deduction from its corporate income tax in the amount of 50% of its two years’ indebt- ed tax. One of the most significant enhancements in
developing the public service for investment administration is Pelayanan Terpadu Satu Pintu, or PTSP. Foreign or domestic investors will only need to go to one government agency to apply and process all business licence applications. PTSP is intended to allow investors to expedite the process of obtaining all of the required business licences.
Regulation of foreign-invested companies The government agency in charge of the coordina- tion of foreign investments in Indonesia is the Indonesia Investment Coordinating Board (known as Badan Koordinasi Penanaman Modal, or BKPM), which acts as the main regulator of for- eign investments into the country. The BKPM also works together with the Regional Investment Coordinating Board (or BKPMD), which is simply the regional branches of the BKPM. The BKPMD also fulfils important tasks in relation to dealing with foreign investment matters. The BKPM is in essence the one place foreign entrepreneurial investors go to if they wish to invest in Indonesia. Investors interested in investing in energy, natu-
ral resources, power, oil, gas, banking, finance and insurance, however, must also report to other fac- tions of the Indonesian government, mainly the Ministry of Energy and Mineral Resources, the Ministry of Finance and the Bank of Indonesia (which is Indonesia’s central bank). If all of the required documents are in order, the
actual process of applying to the BKPM will take approximately one week to the issuance of the approval letter. In practice, however, the most time consuming process of this procedure is the process of translating the foreign investor’s corporate docu- ments into English or Indonesian (which are the languages accepted by the BKPM) and the com- municating of Indonesian regulations to various foreign investors. For foreign investors that want to
Contact information
Chandra Adhisurya Nataadmadja Suria Nataadmadja & Associates
The East Building, 12th Floor Jl. Lingkar Mega Kuningan Kav.
E.3.2.No.1, Jakarta 12950, Indonesia T. + 62 21 2554 2601 F. + 62 21 2554 2605 E.
suria@surialaw.com W:
www.surialaw.com
012
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