Foreign investors who are interested to invest in Indonesia should understand Regulation No. 25 of year 2007 on Capital Investment (Investment Law) as this law, which embraces direct investments in all sectors, addresses all key issues that are faced by investors to start a business in Indonesia.
Besides the company law which is laid down under Regulation No. 40 of Year 2007 on Limited Liability Company, in Indonesia, another regulation that is also deem to be crucial for foreign investors to comply is Regulation No. 25 of Year 2007. This regulation focuses on the Capital Investment (Investment Law) in Indonesia.
In this Article, you will be provided with the key information on the important key factors that a foreign investors need to take into consideration to comply Regulation No. 25 of Year 2007 on foreign investment law in Indonesia.
In this Law, the meaning of:
- Investment shall be any kinds of investing activity by both domestic and foreign investors for running business within the territory of the Republic of Indonesia.
- Domestic Investment shall be any investing activity for running business within the territory of the Republic of Indonesia, made by any domestic investor using domestic capital.
- Foreign Investment shall be any investing activity for running business within the territory of the Republic of Indonesia, made by any foreign investor using either foreign capital entirely or joint capital with domestic capital.
- Investor shall be any individual or corporation that makes investment in form of either domestic or foreign investors.
- Domestic Investor shall be any individual of Indonesian citizen, Indonesian corporation, the state of the Republic of Indonesia, or any region making investment within the territory of the Republic of Indonesia.
- Foreign Investor shall be any individual foreign citizen, foreign corporation, or foreign state making investment within the territory of the Republic of Indonesia.
- Capital shall be any asset in form of money or any forms other than money possessing economic value owned by any investor.
- Foreign Capital shall be any capital owned by any foreign country, individual foreign citizen, foreign corporation, foreign legal entity, and/or Indonesian legal entity, whose capital is owned partially or entirely by foreign party.
- Domestic Capital shall be any owned by the state of the Republic of Indonesia, individual Indonesian citizen, or corporation or non-corporation.
- One-Stop Integrated Service shall be any licensing or non-licensing activity delegated or authorised by any institutions or agencies possessing licensing or non-licensing authority, whose issuance process shall begin with application stage up to the document issuance stage conducted in a single place.
Provisions in this law shall apply to any investments in any sectors within the territory of the Republic of Indonesia.
Principles and Objectives
Investment shall be organised based on the principle of:
- legal certainty;
- the equal treatment without discriminating the country of origin;
- impartial efficiency;
- environmental friendly;
- balance of progress and national economic unity.
Government stipulates the basic policy of investment for:
- Encouraging the creation of conductive national business climate for investment in order to strengthen the competitiveness of national economy; and
- Accelerating the increase of investment.
Domestic investment may be in form of corporation, non-corporation, or individual business, in accordance with the rules of law.
The Government shall provide the same treatment to any investors originating from any countries making investment in Indonesia pursuant to the rules of law.
Treatment set forth above shall not apply to investor of certain countries that have received privilege by virtue of an agreement with Indonesia.
The government shall neither nationalise nor take over the ownership right of any investors, except through the law.
In the event that Government either nationalises or takes over the ownership right of any investors set forth above, the Government is required to pay compensation whose amount is stipulated based on market price.
Any investors may transfer their assets to another party they choose in accordance with the rules of law.
Any assets other than those set forth in paragraph (1) above shall constitutes assets owned by the state as stipulated by the law.
Any investors shall have the right to make transfer or repatriation in foreign currency to, among others:
- Profit, bank interest, dividend, and any other revenue;
- Funds required for:
- Purchasing raw materials and support materials, intermediate products, or final product;
- Reimbursement of capital goods in order to secure the investment.
- Additional fund required for financing investment
Any investment company shall prioritise in recruiting workers those of Indonesian citizen, shall be entitled to use experts of foreign citizen on certain position and expertise in accordance with the rules of law and are required to improve the competence of workers of Indonesian citizen through work trainings pursuant to the rules of law.
Efforts shall be devoted to settle any industrial relation dispute with deliberation between any investment company and the workers and if such effort fail to materialize, the settlement shall be made through three-party mechanism.
The above stated points are essentially the key points that are required to be taken into consideration by foreign investors in regards to the capital investment in Indonesia as stated down in Regulation 25 of Year 2007.
For any further inquiries regarding the Incorporation of a company in Indonesia, do not hesitate to contact us at Paul Hype Page to assist you.
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