When you plan to incorporate a company in Indonesia as a foreigner, you’ll need to be aware of the company law under the Regulation No. 40 of Year 2007 for Limited Liability companies. Aside from that, another regulation that is deemed crucial is Regulation No. 25 of Year 2007 which focuses on Capital Investment (Investment Law) in Indonesia.
These are the key regulations that every foreign investor must know, and we’ll share the information in this article in compliance to the foreign investment law in Indonesia.
General Provisions
Article 1
In this Law,
Article 2
Provisions in this law shall apply to any investments in any sectors within the territory of the Republic of Indonesia.
Principles and Objectives
Article 3
Investment shall be organised based on the principle of:
Basic Policy of Investment
Article 4
Government stipulates the basic policy of investment for:
Form of Corporation and Domicile
Article 5
Domestic investment may be in the form of corporation, non-corporation, or individual business, in accordance with the rules of law.
Treatment to Investment
Article 6
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.
Article 7
The government shall neither nationalise nor take over the ownership right of any investors, except through the law.
In the event that the 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.
Article 8
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 constitute assets owned by the state as stipulated by the law.
Any investors shall have the right to transfer or repatriate foreign currency to, among others:
Manpower
Article 9
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.
Article 10
Efforts shall be devoted to settling any industrial related dispute with deliberation between any investment company and the workers and if such effort fails to materialise, the settlement shall be made through a three-party mechanism.
The above stated points are essentially the key points that are required to be taken into consideration by foreign investors in regard to the capital investment in Indonesia as stated down in Regulation 25 of Year 2007.
Positive Investment List
The Positive Investment List provides guidance on which sectors foreign investors are able to invest in. This list was issued to replace the negative investment list, resulting in the number of restricted sectors from 350 to 46. Therefore, there are still certain sectors that foreign entrepreneurs could not incorporate a company in.