Business licenses are an essential aspect of beginning and owning a business in Indonesia. Certain commercial operations are prohibited by the country’s laws if the company in issue lacks any of the required business licenses.
Any company that meets the requirements for getting a license or permission is eligible to apply. The business license in Indonesia will be issued if the government officials are satisfied with the application.
Which Law Governs the Business Licenses in Indonesia?
Regulation of Government No. 24 of 2018 on the Electronically Integrated Business Licensing Service is the fundamental regulation that oversees the issuing of business licenses in Indonesia. “Regulation 24/2018” is the official name for this statute.
The OSS is a mechanism that makes it easier to get business licenses in Indonesia. It can be utilised on behalf of governors, ministers, mayors, leaders of government agencies, regents, and other government officials.
The OSS can also be utilised by a variety of business entities, including partnerships, sole proprietorships, limited-liability companies, and state-owned corporations. Business licenses, NIBs, commercial and operational licenses, and Foreign Worker Recruitment Plans are among the goods that can be processed through the OSS (RPTKAs).
What is Regulation 24/2018 in Indonesia?
Regulation 24/2018 further mandates that the competent authorities begin the process of reforming business licenses. Reclassification, elimination, combining, changing names, and changing license requirements are all examples of business license reform.
It also lays out the requirements for obtaining a business license. There are 20 business sectors that have licenses that are subject to reform, which includes, among others:
License reforms in areas not covered by Regulation 24/2018 are implemented in accordance with the regulations in place in such sectors. According to Regulation 24/2018, there are 3 types of businesses that require business licenses to operate.
Businesses that require infrastructure but lack it must first apply for a location permit, a water permit, and an environmental license, which are all granted depending on commitment. Licensees can do the following:
Unless any relevant rules or regulations specify otherwise, business licenses in Indonesia are valid until the business no longer conducts business operations.
On the basis of commitment, commercial and operational licenses will be issued. They have to do with the items that will be marketed or procured, as well as the standardisation, certification, and licensing of business activities, as well as the registration of goods and services needed to conduct business. They are valid for the amount of time specified in their validity period.
Primary Business License Types in Indonesia
Business license is the most popular among the Indonesia company. They engage in general commercial activities as well as the provision of goods and services use this license.
An industrial business license is required for companies that manufacture but are not involved in oil, gas, or geothermal activity.
Before beginning any commercial activity, building companies must get a construction business license. Although other types of company licenses exist in Indonesia, the three types listed above are by far the most common.
Why Should I Obtain a Business License in Indonesia?
All forms of business licenses are required across Indonesia. Even while business owners may apply for one or more of these licenses, they may not be aware of the reasons why business license applications in Indonesia are vital.
- Legalising of the business
Of course, the most significant reason is that it legalises the business entity and its operations. A company entity that tries to undertake commercial activities without the necessary license breaks the Indonesian business regulations and could face a variety of penalties. As a result of the government’s mission, such enterprises may be penalised by being forced to close their company.
- Build trust & credibility
A company that possesses a business license in Indonesia has proof that all of its commercial activities are lawful and proper. This is also true in terms of its product promotion as well as its structure. Those who know that a business has gotten an official license will know that the business and its owner are honest and trustworthy because they have gone through all of the required verification procedures. Therefore, the amount of profit they are expected to collect will likely increase.
- Improve reputation
Another key reason for a business to obtain a business license is that certain business licenses are only applicable to particular types of businesses. Businesses in these industries with such licenses can demonstrate that their competence and experience in the subject is legitimate, and that they are thus better able to service their customers’ requirements and wishes. This will improve the company’s reputation and, as a result, its income.
Business License Requirements in Indonesia
Any business wishing to receive a business license in Indonesia must meet certain standards, such as:
There is a slew of paperwork that must be submitted in order for an Indonesian company to obtain a business license. These include:
Business License Application Procedure in Indonesia
A business license can be applied for in front of the head of the Indonesian Investment Coordinating Board (BKPM) or the head of the Regional Investment Coordinating Board (BKPMD).
Before issuing the license, the authorities assess the company’s domicile, business activity, and foreign investment license. After that, the applicant must fill out and sign an application form at a BKPM or BKPMD office. All required documentation must be included. The license will be issued if the authorities are pleased with the application. The processing, approval, and issuance of a business license in Indonesia typically takes 14 working days.
A Business Identification Number or Nomor Induk Berusaha (NIB) is a number required to start a business in Indonesia.
An NPWP is a number given to every taxpayer in Indonesia. It serves as a form of personal identification with regard to all of a taxpayer’s taxation rights and obligations. They also allow the Indonesian government to better monitor taxpayers and determine if any tax crimes may have been committed.
An RPTKA is a plan which allows foreign workers in Indonesia to receive a work permit. Business owners are to submit RPTKAs to the Ministry of Manpower on behalf of their foreign employees. The validity of an RPTKA may last for anywhere between one and 12 months.
Why are the oil, gas, and geothermal sectors excluded from the industrial business license requirements?
The oil, gas, and geothermal sectors are among the leading contributors to Indonesia’s economic growth and development. Therefore, the government believes that the country would be better served by excluding manufacturing businesses in these sectors from the list of manufacturing companies required to receive an industrial business license.