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How Indonesia Government Attract Foreign Companies Relocation

4 min read|Last Updated: September 6, 2022|
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For a number of reasons, business owners from all over the world opt to migrate their businesses. Some may do so because of the tax benefits given by the country where the company is relocating. Others relocate their business because they feel their products or services will be more marketable in the new country than in their home country.

Another reason is that they are looking to broaden the company’s reach and make it more well-known in other nations.

In recent years, Indonesia has been on the map for a place to set up a company due to many factors. The country’s government’s push for foreign companies also accelerated their economic growth.

Purpose of Company’s Relocation

The economic operations of relocated international enterprises help to enhance the economy of the country where they are based. This is due to the fact that these businesses must pay taxes on the money they get in the new nation. These taxes are subsequently paid to the government, which will invest the funds in ways that will improve the economy of the country.

Foreign enterprises that have set up companies in another nation also contribute to the reduction of that country’s unemployment rate by creating job possibilities. Larger businesses can make a greater impact in this area than smaller businesses since they can offer more available opportunities to job seekers.

The Indonesian government has taken attempts to attract more foreign enterprises to the country’s borders as a result of the benefits offered by relocated foreign companies.

How has the Indonesian Government Encourage the Relocation of Foreign Companies?

The Indonesian government has aided foreign enterprises in relocating to the country by granting a tax benefit for research and development investment.

Since June 2019, the Indonesian government has provided any eligible company, whether local or foreign, a tax deduction of up to 200%. A corporation that invests US$100 million in research and development will be rewarded with a tax advantage of US$200 million.

This tax incentive has already had the anticipated impact; multinational companies have begun shifting to Indonesia at an increasing rate since it went into effect.

Tax benefits are also available to foreign business owners that begin training or apprenticeship programs. To be eligible for tax breaks, a foreign company must be actively establishing human resource skills that will allow it to supply workers to industries and enterprises all over Indonesia.

In this case, any eligible foreign company can claim a tax credit of up to 200% of the total expenditures of the training or apprenticeship programs they started. This tax incentive will be very beneficial to foreign enterprises who want to improve the skill level of their staff or improve operational efficiency. This is especially true for businesses that already have regular training programs in place.

The Indonesian government also intends to expand infrastructure spending. This is because foreign enterprises that are considering relocating will notice the enhanced quality of infrastructure in the country, recognize that this new level of infrastructure is suitable to conducting economic activities, and relocate to Indonesia as a result.

Indonesia currently spends roughly 11% of its GDP on infrastructure development. The government is seeking to raise this percentage to 20%. Despite the fact that this increased spending has yet to take effect, it is projected to attract more foreign enterprises to Indonesia and therefore boost the country’s economic competitiveness.

Indonesia Incorporation Specialist Jacey

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FAQs

Is Indonesia an emerging economy?2022-01-04T09:26:27+08:00

The economy of Indonesia is the largest in Southeast Asia and is one of the emerging market economies of the world. It is the 15th largest economy in the world by nominal GDP and the 7th largest in terms of GDP (PPP). 

What are some business opportunities in Indonesia for foreign direct investment?2022-01-04T09:25:56+08:00

These are the 4 Business Opportunities that are Emerging in Indonesia

  • e-Commerce business
  • Traveling industry
  • Manufacturing
  • Infrastructure
Why is Indonesia good for international business?2022-01-04T09:25:16+08:00

Indonesia is a thriving democracy with significant regional autonomy. It is located on one of the world’s major trade routes and has extensive natural resource wealth distributed over an area the size of the United States and comprised of over 17,000 islands. It is a top-ten market for U.S. agricultural products. 

Can a foreign company do business in Indonesia?2022-01-04T09:22:06+08:00

The legal entity through which a foreign person, foreign company, or foreign government body can conduct business in Indonesia (meaning generating revenue streams and profit) is the PT PMA. The establishment of a PT PMA is regulated by Law No. 40/2007 regarding Limited Liability Companies (Company Law).  

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