SETTING UP BUSINESS_INDONESIA 2022 by Auren

SETTING UP BUSINESS IN

INDONESIA

2022

www.antea-int.com

Contents I. GENERAL ASPECTS

C. TAX & ACCOUNTING

II. MAJOR ECONOMIC INDICATORS

D. AUDIT & COMPLIANCE

A. MACRO INDICATOR INDONESIA B. MACRO INDICATOR OTHER COUNTRIES III. ECONOMIC OUTLOOK

VI. THE GOVERNMENT’S POLICIES A. BANK INDONESIA‘ MIX STRATEGIS 2022 B. FISCAL POLICY 2022 FOR “ECONOMIC RECOVERY AND STRUCTURAL REFORM”

A. INDONESIA ECONOMIC OUTLOOK – 2022

VII. INVESTMENT OPPORTUNITY IN INDONESIA INVESTMENT STRATEGIES.

B. INDONESIA ECONOMIC FORECAST – 2022

A. INVESTMENT STRATEGIES

C. THE WORLD BANK

B. PRIORITY BUSINESS FIELD

IV. THE COVID-19 PANDEMIC

C. INCENTIVES FOR INVESTMENT

V. DOING BUSINESS IN INDONESIA 2022

D. OPEN AND CLOSE BUSINESS YIELD FOR INVESTMENT

A. CORPORATE ESTABLISHMENT

E. EASE OF DOING BUSINESS IN INDONESIA ABBREVIATION

B. HUMAN RESOURCE & PAYROLL

I. General Aspects •

Indonesia is a 2,831.9 million sq km (742,308 sq miles) country, located in Southeast Asia, spread across a chain of thousands of islands between Asia and Australia.

INDONESIA SNAPSHOT

•

Ethnically it is highly diverse, with more than 300 local languages. The people range from rural hunter-gatherers to a modern urban elite.

Population: 269.603 million (2021)

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Indonesia has the world’s largest Muslim population and Southeast Asia’s biggest economy.

•

Historically, sophisticated kingdoms existed before the arrival of the Dutch, who consolidated their hold over two centuries, eventually uniting the archipelago in around 1900. After Japan’s wartime occupation ended, independence was proclaimed in 1945 by Sukarno, the independence movement’s leader.

GDP Growth: 5.2%(2022) by World Bank; 4.7%up to 5.5% (2022) by Central Bank (BI) Inflation rate: 3 - 4% (2021 -MoF), 2.30% (Trading Economics)

Having the 4th largest population in the world, Indonesia has a large domestic market to offer, over 53% of which lives in urban areas and adopts a modern lifestyle

Tax revenue : 1.23 quadrillion IDR (Dec.26, 2021 – Ministry of Finance) Ease of Doing Business: 73/190 (World Bank 2019)

•

SETTING UP BUSINESS IN

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Currency – Indonesian Rupiah Capital: Jakarta

Income Category: Lower middle income (The World Bank July 1, 2021 with a gross national income per capita of $3,870). Exchange rate: an average of 14,000 IDR per US dollar (2/21/2021)

Indonesian Crude Price (ICP) at $ 60 - 70 USD per barrel (2022)

II. Major economic indicators A. MACROECONOMIC ASSUMPTION - 2021 – 2022 Outlook (2021)

State Budget (2022)*

Economic growth (% yoy)

Indicators

3.7 - 4.5

5.0 - 5.5

Inflation (% yoy)

1.8 - 2.5

14.200 - 14.600

14.350

6,37 - 7.24

6.82

55 - 65

680 - 705

703

987 - 1,007

1.036

Exchange rate Rp./USD) Interest rate SUN 10 yr .(%) Indonesia Crude Price (USD/barel) Lifting Crude Oil (thousand barel/day) Lifting gas (thousand barel of oil equivalent/day)

Before yr.2021 using assumption of SPN (State treasury) interest rate SPN 3 months * State Revenue and Expenditure Budget Draft Source: Indonesia - Ministery of Finance

B. ECONOMICS GROWTH OF OTHERS COUNTRIES COUNTRY

2021

2022

2023

Malaysia

3.5%

5.7%

Thailand

1.3%

4.1%

4.7%

Philippines

4.6%

6.3%

4.9%

China’s

8.1%

4.8%

5.2%

India

9.9%

7.1%

Europe

5,2%

3.9%

2.5%

Source: The World Bank

SETTING UP BUSINESS IN

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III. Economic outlook Topic

Feature

INDONESIA’S ECONOMIC OUTLOOK FOR 2022

The Indonesian economy is expected to rebound by 4.4 percent in 2021. Growth is projected to increase to 5.0 percent in 2022, assuming a faster vaccine rollout. Even though the global and Indonesian economic growth has been weakened by the Covid-19-pandemic, but the Indonesian economy in the second quarter of 2021 gained positive growth for the first time since the outbreak of the Covid-19 pandemic in early 2020, amounting to 7.07% (YoY). Several macroeconomic indicators that affect Indonesia’s economic growth include the following: 1. 2. 3. 4. 5.

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Social-activity restrictions (PPKM) were re-tightened at the beginning of third quarter as Delta-variant struck. Therefore, the government increases the COVID fiscal package in 2021 and 2022 and focuses on the response in the health and social assistance sectors in order to be able to maintain recovery momentum The higher global commodity prices helped the mining sector to achieve a 7.8% annual growth. The job market is less affected than it was in 2020, but still to a lesser extent than it was before the pandemic. The unemployment rate did not increase significantly during the Delta wave, but remained higher than before the pandemic. Meanwhile, the labor participation rate remained stable. Although it has decreased since mid-2020, the loss of labor income is still ongoing, including in the 40 percent of households with the lowest income. Tax collection is starting to recover, but the tax-to-GDP ratio in September 2021 remains at 2.7 percent below pre-pandemic figures due to weak employment and corporate earnings

1. Basic Assumption. The approval of basic macroeconomic assumptions in the 2022 State Revenue and Expenditure Budget Draft (RAPBN) consist of four important points agreed upon by the government and the DPR as follows: 1. The economic growth was agreed to be in the range of 5.2% to 5.5 in 2022 assuming a faster vaccine rollout. Meanwhile, domestic demand and surplus export are expected to be the two main driving forces. 2. The inflation rate is set at 3% to support public purchasing power. Low and under control inflation within the 3.0% to 1% target corridor in 2022 will be supported by increasing national production capacity through efficiency and productivity gains to meet higher aggregate demand in the economy. 3. The rupiah exchange rate is determined to be no more than Rp14,350 per US dollar 4. The interest rate for Government Bonds (SUN) 10% in 2022 is set. The 3-month SPN (state treasury) interest rate is estimated at 5.4 percent. 5. Indonesian Crude Price (ICP) is estimated at around USD 63/barrel. Having high sensitivity to various global dynamics, the government continues to monitor the movement of oil and global commodity prices 6. Financial system stability will be maintained, coupled with a high Capital Adequacy Ratio (CAR) and loose liquidity conditions. 7. Deposit and credit growth are projected at 7.0-9.0% and 6.0-8.0% respectively in 2022. 8. Budget deficit is set at 4.85% of GDP, targeted to be under 3% in 2023. 9. The digital economy and finance will also expand quickly. In 2022, the value of e-commerce transactions is projected to reach Rp. 530 trillion, with electronic money predicted at Rp337 trillion and digital banking expected to exceed Rp. 48,000 trillion.

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2. Key Success Factors There are several factors that accelerate Indonesia’s economic growth in 2022: 1. Policies for handling the pandemic and the National Economic Recovery (PEN) which will be effective in 2021 and strengthened with a focus on creating a workforce apart from health and community protection in 2022. Continuation of page 4 2. The issuance of the Job Creation law and its derivative rules. 3. The issuance of the government’s fiscal and financial policies, as well as strong structural growth. A. ECONOMIC FORECAST

The momentum for recovery in the future must be maintained by remaining alert to various risks, among others: 1. Internal factors a. An increase in COVID-19 cases and the spread of new variants b The implementation of the PEN Program. c. Various other factors such as the right economic policy response, significant job creation, to readiness to transform into digital technology 2. External factors: a. The influence of tapering off the FED, b. The rising commodity prices, global inflation, c. Energy crisis, climate change and supply chain disruption. THE WORLD BANK

The World Bank sees Indonesia’s economy would continue to recover with various sources of growth. The World Bank’s projection is more optimistic growth, increase by 5.2% in 2022, continue to recover with various sources of growth. Meanwhile, IMF forecasts a higher real GDP growth of 5.9% for Indonesia, as stated in its October 2021 edition of World Economic Outlook. Other projections from international institutions include: ADB (4.8%), and OECD (5.0%). Inflation was expected to increase in the next few months and may reach 2.2 per cent in 2022. With this positive outlook, there is still a lot of uncertainty and risks of the long-term impact of Covid-19 for Indonesia, such as an increase in unemployment, a decrease in investment, and a decline in potential growth. For 2022, IMF projected that the world economy would increase by 4.4 percent compared to the previous projection of 4.2 percent. For Indonesia, the fund lowered its growth projection to 4.3 percent this year from January’s 4.8 percent but kept the 5.8 percent estimation for next year.

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IV. The Covid – 19 pandemic The fulfillment of the economic growth target for 2022 will depend on how the Goverment of Indonesia handling of the Covid-19 pandemic. Given the narrowing macroeconomic policy space and the risk of a prolonged COVID-19 impact, it is important to continue structural reforms to support strong, green, resilient and inclusive growth. The government increases the COVID fiscal package in 2022 by 0.3 percent to 4.8 percent of GDP in 2020 and focuses on the response in the health and social assistance sectors. There are several important factors that drive Indonesia’s economic growth in 2022: A. THE VACCINATION PROGRAM B. THE ECONOMIC IMPACT OF THE HIGHLY CONTAGIOUS

Topic

Feature

A. THE VACCINATION PROGRAM

Indonesia has accelerated the vaccination program especially for vulnerable groups and in areas with high transmission rates, such as in urban areas and economic centers. Most provinces have achieved 70 percent vaccination coverage by 2022, and monetary and financial policies remain accommodative. The spread of vaccinations, are expected to boost Indonesia’s economic growth in the coming year

B. THE ECONOMIC 1. IMPACT OF THE HIGHLY CONTAGIOUS 2.

The intense synergy and clear communication between authorities, including Bank Indonesia, the Indonesia Financial Services Authority (OJK), Indonesia Deposit Insurance Corporation (LPS) and Government, mainly Ministry of Finance. The significant surge in the COVID-19 trend. PPKM (the public mobility restriction) that has been applied since July and early August 2021 creates tremendous impacts. Everyone’s participation is vital through the discipline of health protocols and vaccinations. The continued downward trend of daily Covid-19 cases in Indonesia has also increased people’s mobility to levels before the Covid-19 pandemic.

Thus, with a steady reopening of the economy in 2021 followed by further reopening and decline in social distancing through 2022, growth would rebound to 4.4% in 2021. Stronger consumption and investment would further strengthen growth to 4.8% in 2022 as confidence improves, provided an effective and safe vaccine is available to a large part of the population. However, there is still a lot of uncertainty and risks of the long-term impact of Covid-19 for Indonesia, such as an increase in unemployment, a decrease in investment, and a decline in potential growth.

SETTING UP BUSINESS IN

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V. Doing business in Indonesia 2022 An Introduction to Doing Business in Indonesia 2022 covers the following: A. Corporate establishment; B. Human resources and payroll; C. Tax and accounting; D. Audit and compliance.

Topic

Feature

A. CORPORATE ESTABLISHMENT

Requirement and Process of company registration based on Type of Legal Entities: • Local Company, Foreign Direct Investment Company known as a Limited Liability Company, and Representative Office.

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1. LOCAL COMPANY (PT) A foreigner can start doing business in Indonesia as a local citizen or a foreign investor under a local nominee arrangement as this kind of company allows only 100% local ownership. On the contrary to other legal entities, a local company is not a subject to such strict requirements and limits. Local Company (PT) is the most common legal entity in Indonesia Even though a local company is intended for Indonesian citizens only, there are some circumstances under which a foreign investor can incorporate a local company in Indonesia as well. Registration Process of a Local PT Step 1

Company Name Application Submit your company name to the Ministery of Law & Human Rights

Step 2

Article of Association Preparation This requires presence of notary

Step 3

Deed of Establishment Approval Approved by The Ministery of Law & Human Rights

Step 4

Certificate of Domicile Acquisition Obtained form local government to show business location

Step 5

Tax Payer Registration Number (NPWP) Application to secure other licenses, banking activities, and fulfilling tax obligations

Step 6

Application of NIB Alongside NIB, Business Licenses and Location Permit will also be granted one day following the registration via OSS

Benefits of a Local Company in Indonesia for Foreigners Even though there are other legal entities particularly designed for foreigners — a limited liability foreign-owned company and representative office — starting a local company might bring more benefits to some foreign entrepreneurs.

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A. CORPORATE ESTABLISHMENT Continuation of page 7

a. Not Restricted from Some Business Fields The Negative Investment List is a document that regulates foreign ownership of businesses based on business sectors they operate in. Thus, some business activities are fully closed to non-domestic investors, and some are partially limited. On the other hand, a local company is not a subject to this regulation, and it might be the only choice how to start a business in Indonesia in your field. b. Lower Incorporation Costs

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In comparison with a foreign-owned company, the paid-in capital of a local company is much lower. In general, it ranges from IDR 50,000,000 up to more than IDR 10,000,000,000. The amount of the capital defines the size of the company, which further determines whether a company is eligible to sponsor a work permit for a foreign worker (and how many). • Small : IDR 50,000,000 – 500,000,000 • Medium : IDR 500,000,001 – 10,000,000,000 • Large : above IDR 10,000,000,001 2. FOREIGN OWNED COMPANY (PT PMA) A foreign-owned company in Indonesia, known as PT PMA, has been designed to meet the needs of foreign entrepreneurs. On the contrary to the incorporation process of a local company or a representative office, establishment of a foreign-owned limited liability company (LLC) in Indonesia might be more challenging and time-consuming. The Negative Investment List stipulates the maximum allowed foreign ownership in particular business sectors, causing some industries to be fully closed or only partially open to foreigners. Therefore, having an expert partner in Indonesia or engaging professional assistance becomes a critical point to succeed when forming an international company in Indonesia. Foreign-owned limited liability company is a legal entity that can be fully owned by foreigners. However, the maximum foreign ownership is determined by the business sector and business activities. The restrictions are listed in a regulation called the Indonesian Negative Investment List. Establish a PT PMA Company: The Procedures. Step 1

Approval of Company It should consist of three words that are not vulgar or obscene

Step 2

Deed of Incorporation It should include an Asticle of Association, and a notary must be present

Step 3

After submission of Deen of Incorporation by the notary, the Ministery of Law and Human Rights will give approval

Step 4

Registration of Tax ID (NPWP) A valid NPWP is required for securing other company’s licenses, banking activities, and fulfilling tax obligations

Step 5

Domicile Letter Required to show the location of your business

Step 6

Application of NIB Alongside NIB, Business Licenses and Location Permit will also be granted one day following the registration via OSS

Step 7

Application of Others Licenses Depending on the business sector, additional licenses such as commercial license and tourism license may be required before operation

SETTING UP BUSINESS IN

INDONESIA

A. CORPORATE ESTABLISHMENT

Benefits of a Foreign-Owned Company Although the establishment process is more demanding, foreign-owned companies offer vital benefits that entirely compensate the previously invested time and efforts.

Continuation of page 8 a. Employment of Foreign Workers Continue on page 10...

b. A foreign-owned company can sponsor and issue work permits as well as stay visas (working ITAS) for its international employees. c. Furthermore, this kind of company is allowed to sponsor business visas of its business partners and clients arriving in Indonesia for a short stay. d. Full International Ownership To attract more foreign investors and multiple investments critical to the Indonesian economy, Indonesia has been relaxing the limited foreign ownership lately. Wholly-owned foreign companies became less rare, and it is, therefore, likely that you can start an international company without any partnership or local shares of your property. 3. REPRESENTATIVE OFFICE Commonly considered as a branch of parent company overseas, it can be your first step to enter the Indonesian market. The purpose of this legal entity is marketing activity, preparing the establishment of PT PMA, or conducting market research. No direct selling or generating revenues is allowed. Registering a Representative Company in Indonesia A representative office means market presence without large capital investment. The primary purpose of representative offices in Indonesia is testing the water before the actual company incorporation. Furthermore, a representative office might conduct market research, approach potential clients and build brand awareness of your business. However, no activities that generate profit are allowed, and this is the prominent factor that distinguishes a representative company in Indonesia from other legal entities. Registration Process of a Representative Office in Indonesia Step 1: obtaining a representative office (KPPA) license Step 2: obtaining domicile letter from the local subdistrict Step 3: applying for taxpayer registration number (NPWP) Step 4: getting a company registration certificate (TDP) The Benefits of Representative Office in Indonesia a. Low Incorporation Cost As mentioned, a representative office (RO) is an affordable way of how to penetrate the market in Indonesia. Whether you are not sure about your target audience or the presence of business partners, these companies will help you to understand the Indonesian market properly. b. Visa Sponsorship Even though representative offices are not permitted to generate revenues, they are entitled to sponsoring work and stay permits for their foreign employees. Moreover, an RO can sponsor a business visa for business partners coming to Indonesia.

SETTING UP BUSINESS IN

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A. CORPORATE ESTABLISHMENT

Organisational Structure To establish a representative office in Indonesia might be the most feasible solution for many entrepreneurs due to its lenient corporate structure. As opposed to a foreign company no shareholder or director is required, and only one chief executive is sufficient.

Continuation of page 9 Currently, four types of representative offices are available: a. KPPA: General RO of a Foreign Company b. KPPPA (known as KP3A or K3PA): RO of a Foreign Trading Company c. BUJKA: RO of a Foreign Construction Service Company d . KPPA MIGAS: RO of a Foreign Oil and Gas Company B. HUMAN RESOURCES & PAYROL Continue on page 11...

Indonesian Employment Law And Covid-19: As a result of the serious economic disruptions from COVID-19, there are several options available to employers under Indonesian employment law, as follows: 1. SALARY CUTS AND UNPAID LEAVE a. If employees freely agree to the employer’s proposal to salary cuts and/or unpaid leave, that agreement should be recorded in writing. b. If there is a union at the company then the employer must consult with and secure the approval of the union for any agreed salary cuts and/or unpaid leave. c. If employees decline to agree to salary cuts and/or unpaid leave, the employer can seek to encourage agreement by implying that employees who do not agree to the proposed changes could potentially be made redundant, subject to a mutual termination agreement (“MTA”) or, if disputed, approval from the labor court. It is important to secure the consent from each employee for proposed salary cuts and/or unpaid leave. The agreement with employees must be signed in the Indonesian language. A dual-language form of the agreement can be drafted but the prevailing language must be Indonesian. If the agreement is not signed in the Indonesian language, there is a risk that it could be considered null and void if disputed in the courts. 2. EMPLOYEE TERMINATIONS The central government and regional governments have not issued any impending regulations with regard to the termination of employment, specifically during the COVID-19 pandemic. Companies should therefore, follow the regulations stipulated in the Labor Law. There are a number of different scenarios employers might consider in response to COVID-19 as follows: a. The complete closure of the business. The business is no longer financially viable and the redundancy of all the employees, or laying off only a portion of the workforce. Considerations include the following: 1.

Under the Indonesian Manpower Law, terminations for efficiency basically can be done only when there is a closure of the business (including partial closure or a reduction of overall business activities), either preceded with or without losses for two consecutive years (this is relevant for determining termination entitlements).

Whether a force majeure event would be an acceptable reason for employee terminations with minimal severance payment.

If the business is not being shuttered, employee terminations can still be done but only with the express written agreement of employees by way of a mutual termination agreement (“MTA”).

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B. HUMAN RESOURCES & PAYROL

Without an MTA the proposed terminations will be deemed as being disputed and can only be settled through the labor court, a process that can take six months or more, during which the employees’ salaries must be paid.

Indonesia does not recognize the concept of notice of termination. Unless an MTA is reached, the lengthy and costly termination process for permanent employees is as follows:

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a) The parties (the employer and employees, or if applicable, a labor union) are required to meet in an attempt to reach an amicable termination settlement, a process known as bipartite negotiation.

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b) If a settlement is reached, an MTA should be executed and registered at the relevant labor court; c) If negotiations fail, either the company or the employee may file the dispute with the relevant manpower affairs office. The manpower office will ask both parties whether the dispute should be resolved through conciliation with private conciliators or mediation with a mediator from the manpower office. d) If the non-binding written recommendation of the conciliator or mediator is rejected, the matter must be brought by either party to the relevant labor court to approve the termination and the benefits payable in connection with the termination. e) If the labor court decision is appealed the case then goes to the Supreme Court. b. Statutory Severance Requirements 1.

For contract/fixed-term employees: The balance of the contract must be paid to fixed-term employees terminated before the end of their fixed-term employment agreement.

For permanent employees: A permanent employee’s entitlement in connection with termination of employment depends on their years of service and the circumstances of the separation. The categories of possible separation entitlements under Article 156 of the Manpower Law consist of: a) severance pay of up to nine months’ wages, b) service pay of up to 10 months’ wages, and c) other compensation (ie, for unused annual leave, any applicable relocation costs or expenses, compensation for housing, medical and hospitalization, and other separation benefits as may be agreed).

Under the Indonesian Manpower Law, in the event of terminations as a result of the company closing down due to two consecutive years of continuous losses or due to force majeure, terminated permanent employees are entitled to single severance pay, single service pay, and compensation In the event of terminations for downsizing due to efficiency reasons (ie, not due to financial losses or force majeure), terminated permanent employees are entitled to double severance pay, single service pay and compensation. Note that an ex gratia payment of two to three months’ salary on top of the permanent employee’s mandatory severance entitlements may be necessary to ensure the mployee signs an MTA to avoid the costly labor court process. 3. EMPLOYMENT WAGES 1.

Worker/Labor Protection and Business Continuity for the Prevention and Control of COVID-19. Under the circular – Letter of Republic of Indonesia Ministry of Manpower No. M/3/HK.04/III/2020 on Worker/Labor Protection and Business Continuity for the Prevention and Control of COVID-19 – employers must continue paying the full wages of employees working from home unless an agreement between the two parties says otherwise.

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B. HUMAN RESOURCES & PAYROL

Employees who are under the ODP (monitored) status will still be entitled to full salaries. An ODP status means the person has a travel history of entering a COVID-19 hotspot and came in contact with possible COVID-19 patients, and thus have to go into self-isolation. Employees who are under the PDP status (surveillance) are those that have displayed symptoms of COVID-19, such as fever, respiratory problems, and dry coughs and are undergoing self-isolation – they will be categorized as being on sick leave. The company will then have to adhere to the Law No. 13 of 2003 (Labor Law).

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Under the Labor Law, the employee on sick leave is entitled to:

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100 percent of wages during the first four months of sick leave;

75 percent of wages during the second four months of sick leave;

50 percent of wages during the third four months of sick leave; and

25 percent of wages during each subsequent month of sick leave (until the termination of employment is agreed upon).

Possible Deduction Of Employees’ Payroll And THR In essence, companies cannot make wage deductions beyond those agreed upon by employers and employees in their respective work contracts. This can be excluded if the clause regarding wage deduction is prescribed in a work contract, collective agreement or the company regulations. This wage deduction also applies to certain conditions, such as fines, compensation, and advance payment of wages. Although, based on the Circular of the Minister of Manpower No. M/3/HK.04/III/2020 regarding Worker/Labor Protection and Business Continuity in the Context of Preventing and Countering Covid-19, it mentions that for companies that limit business activities by considering business continuity, changes in wage levels and ways of payment can be made in accordance with agreement between the company and their employees. However, this does not have a strong legal basis, which may lead to industrial relations disputes, where dispute of rights are defined in Article 1 number 2 of Law No. 2 of 2004 regarding Industrial Relations Disputes Settlement: “dispute of rights refers to a disput which occurs due to the non-fulfillment of rights because there is inconformity between the implementation or interpretation of provisions under laws and regulations, employment agreement, company regulation, or collective labor agreement.” THR is a part of non-wage income. As is the case in a wage, the company shall also pay the THR to employee(s) at least 7 (seven) day before the Religious Holiday. THR is regulated in a number of regulations including Government Regulation No.78 of 2015 concerning Wages and Regulation of the Minister of Manpower (GR No.6 of 2016 concerning THR for employees in the Company). As per the Minister of Manpower Regulation No.20 of 2016 concerning Procedures for Granting Administrative Sanctions, companies who fail to pay on time or does not pay THR to employees may be subject to consequences in the form of fines or administrative sanctions with accordance to the prevailing laws and regulations. However, for companies that have difficulty paying THR amid Covid-19, they can open a dialogue with employees to reach agreement on other options in paying the THR to employees. The company can propose a suspension of THR payments up to a mutually agreed period or the company can pay THR in stages to employees

Postponement Of Employees’ Minimum Wages For The Protection Of Employees’ Right Companies are facing issues such as low running income, disrupted production, but the burden of expenditure is keeping the business world on the verge of mass bankruptcy. With the economic decline, companies may not be able to pay finance expenses without any income including their employees’ wages by the end of June 2020. It is stipulated in Law No.13/2003 that the employer is prohibited from paying the employees’ wages lower than the minimum wages. However, an employer who is unable to pay the minimum wages can ask for a postponement for the payment of minimum wages to their employees. This postponement of the payment of minimum wages is explained in Article 90 paragraph (2) of Law No.13/2003 wherein the specific article.

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B. HUMAN RESOURCES & PAYROL

The postponement of the payment of minimum wages by a company that is financially unable to pay minimum wages is intended to temporarily release the company from having to pay minimum wages for a certain period of time. If the postponement comes to an end, the company is then under an obligation to pay minimum wages that are applicable at the time of postponement, where the remaining wages that were not paid during the postponement period will be paid to the employee (aggregate amount of remaining wages for the postponement period) subsequent to the end of postponement period.

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The procedure for the postponement of the payment of minimum wages is regulated in Minister of Manpower and Transmigration Decree No. Kep.231/MEN/2003 concerning Procedures for Postponing the Application of the Minimum Wage. The application for the postponement of the minimum wage payment obligation must be submitted by the employer to the Governor through the provincial Manpower Office no later than 10 (ten) days before the minimum wage is implemented effectively The application itself must be made in the form of a written agreement between the employer and the employees/labor union, which was made pursuant to an in-depth, honest, and open negotiation between the 2 (two) parties. Thus, if the employer is in financial distress due to the Covid-19 outbreak and has not been able to pay his employees’ wages according to the minimum wage, then the employer can postpone payment of wages by first negotiating with the employees or worker union/ labor union. However, the postponement of payment of the minimum wage by employers to employees does not eliminate the obligation of employers to pay the difference in minimum wages during the postponement period (where the remaining amount of wages that was postponed must be given to the employee after the end of the postponement period). C. TAX AND ACCOUNTING

In a bid to provide certainty to tax and fiscal during COVID-19 pandemic, the Government has issued Government Regulation Number 29 of 2020 on Income Tax Facilities to Address Corona Virus Disease (Covid-19). The statement was made by Taxation Regulation Director II Yunirwansyah in a virtual Media Briefing on Taxation on Thursday (25/6), in Jakarta.

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Taxpayers who support the Government’s efforts in tackling COVID-19 pandemic are eligible for income tax facilities. Based on the Regulation, the Government provides 5 tax facilities; among others: 1.

Indonesian Resident Taxpayers (WPDN) who produce medical equipment and/or Household Health Supplies (PKRT) to handle COVID-19 are entitled to an additional reduction in net income by 30 percent of the costs incurred. The medical equipment includes of N95 surgical masks and respirators, body protection, medical disposable ventilators, and diagnostic test reagents for Covid-19. Meanwhile the PKRT may include antiseptic hand sanitizers and disinfectants.

For taxpayers who give donations to address COVID-19, the donations can be deducted from gross income. These donations must be supported by the receipt of donations and received by charitable institutions that have Taxpayer Identification Numbers (NPWP) such as National Disaster Management Agency (BNPB), Regional Disaster Management Agency (BPBD), Ministry of Health, Ministry of Social Affairs, or charitable institutions. However, the deduction must either follow provisions of Government Regulation Number 29/2020 or Number 93/2010.

In Government Regulation Number 29 of 2020, the donations may be given to the BNPB, BPBD, Ministry of Health, Ministry of Social Affairs, or charitable institutions that have the NPWP. The charitable institutions are obliged to report the donations. In this regard, donations may be given in the form of money, goods, and others.

Donations that have been deducted as a reduction in gross income under Government Regulation No. 93 of 2010, cannot be further reduced under Government Regulation Number 93/2010. The taxpayers must choose between Government Regulation Number 29 or Number 93

The Regulation also states that individual taxpayers that are health workers and assigned to provide health services to address Covid-19 will receive additional income from the Government in the form of honoraria or other benefits.The additional income is subject to final Article 21 Income Tax withholding at a rate of 0 percent.

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C. TAX AND ACCOUNTING Continuation of page 13

The health workers consist of medical staff and health support staff including cleaners, administrative staff, morticians, ambulance drivers, and other supporting staff.

Income of taxpayers in the form of the Government’s compensation and reimbursement for the use of assets based on Government Regulation Number 34 of 2017 is subject to a final income tax of 0 percent.

Taxpayers of publicly-listed company who are willing to buyback shares traded on the stock exchange are entitled to a 3 percent lower rate. Thus, 40 percent of their shares will be traded on the Indonesian Stock Exchange (BEI) or owned by at least 300 parties. Each party may only own shares of less than 5 percent of the total issued and fully paid shares within a minimum of 183 calendar days within a tax year. The parties do not include publicly-listed company taxpayers that repurchase their shares and/or are affiliated. The taxpayers are considered meeting these requirements once they received appointment and approval from the Ministry/ Financial Services Authority (OJK). The share buyback is carried out from 1 March until 30 September 2020. The share can only be owned until 30 September 2020. They are obliged to submit report of share buyback in their Annual Tax Returns (SPT). (Ministry of Finance/EN)

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(Source: Office of Assistant to Deputy Cabinet Secretary for State Documents & Translation Date 26 Juni 2020) Tax Developments In Response To Covid-19 Tax-related measures introduced in Indonesia in response to the COVID-19 pandemic are regulated under Ministry of Finance (MoF) Regulation No. 86/ PMK.03/2020 and MoF Regulation No. 110/PMK.03/2020 on Tax Incentives for Taxpayer Affected by the Coronavirus Outbreak, and Government Regulation in Lieu of Law (Perppu) no 1 year 2020. Article 21 Employee Income Tax For the months of April – December 2020 for employees who: •

receives income from a qualified employer (There are 1,189 categories of industries and companies, those listed in the Attachment A of MoF No. 86/PMK.03/2020) • has a Tax ID number (NPWP) • receives an annualized regular gross income not exceeding IDR 200 million. Bonus and Religious. Holiday Allowance are not included in calculating the threshold. The employer should give the Art. 21 income tax as additional payment to the employee. The taxpayer should prepare e-billing with notes “employee income tax is borne by Government based on MoF 86/PMK.03/2020.” Tax Developments In Response To Covid-19 Tax-related measures introduced in Indonesia in response to the COVID-19 pandemic are regulated under Ministry of Finance (MoF) Regulation No. 86/ PMK.03/2020 and MoF Regulation No. 110/PMK.03/2020 on Tax Incentives for Taxpayer Affected by the Coronavirus Outbreak, and Government Regulation in Lieu of Law (Perppu) no 1 year 2020. Article 21 Employee Income Tax For the months of April – December 2020 for employees who: • • • •

receives income from a qualified employer (There are 1,189 categories of industries and companies, those listed in the Attachment A of MoF No. 86/PMK.03/2020) has a Tax ID number (NPWP) receives an annualized regular gross income not exceeding IDR 200 million. Bonus and Religious. Holiday Allowance are not included in calculating the threshold.

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C. TAX AND ACCOUNTING Continuation of page 14 Continue on page 16..

The employer should give the Art. 21 income tax as additional payment to the employee. The taxpayer should prepare e-billing with notes “employee income tax is borne by Government based on MoF 86/PMK.03/2020.” Article 22 Income Tax on Imports can be exempted for companies who: •

have a business classification stated in that is among those listed in the Attachment H of of MoF No. 86/PMK.03/2020 (there are 721 specific industrial fields or companies that have been granted KITE (Import Facility for Export Purposes)).

•

Qualified taxpayers must apply for this incentive via DJP Online website. If approved, the DJP Online system will issue a Tax Exemption Letter (SKB) that is valid starting from the issuance date up to and including 31 December 2020.

The taxpayer should submit realization letter to DGT (three months period for April – June 2020), realization letter should be submitted on 20 July 2020 at the latest and on the 20th of the following month thereafter, through DJP online with specific format that can be uploaded from DJP online. Article 25 Income Tax •

50% reduction of the Article 25 Monthly Tax Installments for qualified taxpayers (1,013 specific industrial fields, listed in the Attachment M of MoF No. 110/PMK.03/2020) is provided.

•

50% reduction of the Article 25 Monthly Tax Installments for qualified taxpayers (1,013 specific industrial fields, listed in the Attachment M of MoF No. 110/PMK.03/2020) is provided.

•

This reduction in tax installments is valid until the tax period of December 2020.

•

Qualified taxpayers must inform the tax office that they are utilizing this incentive via DJP Online website.

Value Added Tax (VAT) •

The government will automatically consider qualified taxpayers (listed in the Attachment P of MoF No. 86/PMK.03/2020) as low-risk and provide a preliminary VAT refund facility for the fiscal periods April through December 2020.

•

Applicable for VAT returns (including amendments) that are submitted before 20th January 2021 with overpayment status, with a maximum amount of IDR 5 billion (per month).

•

Taxpayer is not in the preliminary evidence audit position and did not perform any criminal actions during the last five years before VAT return submission.

New digital economy tax measures • •

• •

On 31 March 2020, the Indonesian government issued the Government Regulation in Lieu of Law (Peraturan Pemerintah Pengganti Undang- Undang/Perppu) No.1 Year 2020 (the regulation) which purports to apply new measures to the digital economy. On 16 May 2020, Perppu 1/2020 was passed into Law No. 2 Year 2020. The new law imposed tax on over-the-top electronic transaction. This tax is imposed on foreign traders, foreign service providers, and / or trade operators through an overseas electronic system (PMSE) that cannot be designated as a permanent establishment (BUT). The issuance of these regulations occurred in the context of the Indonesian government’s response to Covid-19. Starting July 2020, PER-12/PJ/2020 imposes 10% VAT to the provision of intangible goods and services through an e-commerce system by non- residents for consumption in Indonesia. The obligation to register and account for VAT applies to foreign e-commerce providers (including foreign platforms, foreign individuals and digital companies). Foreign e-commerce providers are entitled to appoint a representative in Indonesia to fulfil their tax obligations. On-line platform operators may wish to verify their VAT obligations in Indonesia. SETTING UP BUSINESS IN

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C. TAX AND ACCOUNTING

•

The obligation to collect VAT from payments made by Indonesian buyers and customers is the responsibility of the e-commerce business providers (either e-commerce foreign or domestic providers, or offshore traders). The Indonesian tax office will appoint the e-commerce business providers as VAT collectors if the transactions satisfy certain thresholds in the Indonesia market. Continuation of page 15 E-commerce marketplace providers will be appointed as VAT Collectors if their activity in the Indonesian market meets either of the following thresholds: • transaction value with customers in Indonesia exceeding IDR 600 million in a year or IDR 50 million in a month; • access to their e-commerce platform from Indonesia exceeds 12 thousand users in 12 months, or one thousand users in one month. Other tax measures • MoF Regulation No. 125/PMK.010/2020 on import Value Added Tax (VAT) for newsprint paper and/or magazine paper, borne by the 2020 state budget until December 31, 2020 • Liquefied Natural Gas or LNG has been added to list of products the imports of which will no longer be charged with VAT : Government Regulation No. 48/2020 on the amendment to Government Regulation No. 81/2015 on the import and/or submission of taxable strategic goods that are exempted from added value taxes, • MoF Regulation No. 96/PMK.010/2020 on the amendment to MoF Regulation No. 11/PMK.010/2020 on the implementation of Government Regulation No. 78/2019 on Income Tax Facilitation for Investment in Certain Business Fields and/or Certain Regions. The regulation effectively gives the Indonesia Investment Coordinating Board (BKPM) the authority to determine the eligibility of companies for the tax allowance as the application must now be done through the BKPM’s Online Single Submission (OSS) system. This regulation came into effect starting August 10, 2020. RECOVERY PLAN 1. Business or taxation Incentives Taxes borne by the government such as reduction in article 25 (corporate income tax), exemption from income tax Article 21 (employee income tax), Article 22 on imports tax, and preliminary VAT refunds. 2. Ministries & Regional Governments Almost 35% of Ministeries & Regional government budget has been allocated to boost tourism sector, food security and fisheries, industrial estates, ICT development, Central Government loan to regional governments, and anticipating economic recovery. REQUIREMENTS TO QUALIFIED INCENTIVES 1. Companies/individual need to obtain an Ease of Import for Export Purposes (KITE) under certain Business Classification Code (KLU) in the Attachment MoF No. 110/PMK.03/2020. 2. Exemption of Income Tax Article 22 on Import Tax and purchases of the aforementioned goods by agencies/government institutions, referral hospitals, and other parties designated to assist in handling the COVID-19 outbreak as mentioned in appendix I of 86/PMK.03/2020 (PMK 86/2020). 3. Preliminary VAT refund for low-risk Taxable Entrepreneur (PKP) who submits an overpayment of VAT Tax Return overpayment for April – December 2020 tax period up to IDR 5 billion per month. 4. An exemption of Income Tax Article 21 on Employee Income Tax with annual gross income up to Rp200 million. Taxpayer should prepare e-billing with 5. notes “employee income tax is borne by Government based on PMK 86/2020.

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D.AUDIT & COMPLIANCE

REQUIREMENTS TO QUALIFIED INCENTIVES 1.

Companies/individual need to obtain an Ease of Import for Export Purposes (KITE) under certain Business Classification Code (KLU) in the Attachment MoF No. 110/PMK.03/2020.

Exemption of Income Tax Article 22 on Import Tax and purchases of the aforementioned goods by agencies/government institutions, referral hospitals, and other parties designated to assist in handling the COVID-19 outbreak as mentioned in appendix I of 86/PMK.03/2020 (PMK 86/2020).

Preliminary VAT refund for low-risk Taxable Entrepreneur (PKP) who submits an overpayment of VAT Tax Return overpayment for April – December 2020 tax period up to IDR 5 billion per month.

An exemption of Income Tax Article 21 on Employee Income Tax with annual gross income up to Rp200 million. Taxpayer should prepare e-billing with notes “employee income tax is borne by Government based on PMK 86/2020.

A. Guide for Foreign Investors Investors should be paying attention to Company Law, Investment Law and Market Law. 1.

The Company Law a. Foreign investors should understand, which sets outs the requirements for audit compliance and preparing financial statements. Other important and relevant laws are the Investment Law and Capital Markets Law.

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b. If a company’s fiscal year differs from the calendar year, then their deadline for reporting and paying corporate income tax is four months after the end of their fiscal year. c. There is currently no single unifying regulation on auditing and compliance in Indonesia. Foreign investors will need to be aware that regulations regarding auditing, accounting, and financial reporting are stipulated over several laws and bylaws, and that a good understanding of these can ensure their business stays compliant. d. Investors should use the services of registered local advisors to make sure they understand the prevailing regulations. 2.

The Investment Law Lys out of the basic requirements on how to operate in Indonesia. These are part of key compliance norms: a. Implementing good corporate governance; b. Undertake corporate social responsibility activities; c. Comply with the labor law; d. Submit quarterly investment activities to the Investment Coordinating Board (BKPM); e. Honor the cultural traditions of communities. f. Criteria for the company to be audited g. Companies with assets exceeding 50 billion rupiah (US$3.6 million); h. Public companies; i. Companies that issue debt instruments; j. The company is a state-owned enterprise; or k. The company collects or manages public funds (such as banks and insurance companies).

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D.AUDIT & COMPLIANCE

By law, a company must keep its accounting records and books for at least ten years from the end of its reporting period. Moreover, audits are to be conducted based on the Indonesian Financial Accounting Standards (SAK), which are set by the Financial Accounting Standards Board (DSAK IAI) and the Indonesian Sharia Accounting Standards Board (DSAS IAI), for sharia-based companies.

Continuation of page 17 Since 2015, the DSAK IAI has converged its accounting standards with that of the International Financial Reporting Standards (IFRS), issued by the IFRS Foundation and the International Accounting Standards Board (IASB). (The IFRS are a set of global accounting standards that apply to all financial reporting, quality control, and auditing standards relating to all profit-oriented entities.) This is part of Indonesia’s efforts to make local financial statements more comparable and understandable across international boundaries as the country aims to attract greater foreign investment and play a more prominent role within the G20.

VI. The government’s policies The Government of Indonesia has issued stimulus policies in order to boost Indonesia’s economic growth in the coming year. The national economic growth was driven by ongoing global economic improvement such as export performance, coupled with growing domestics demand in term of consumption and investment. A. BANK INDONESIA MIX STRATEGY 2022 B. FISCAL POLICY 2022 FOR “ECONOMIC RECOVERY AND STRUCTURAL REFORM”

Topic

Feature

A. BANK INDONESIA MIX STRATEGY 2022

The Bank Indonesia policy mix in 2022 will remain synergized as part of the national economic policy direction to accelerate recovery (pro-growth) while maintaining economic stability (pro-stability). The policy mix comprise five important policy instruments, consist of one policy as pro-stability and four policies as pro-growth.

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Pro-stability policy:

Bank Indonesia monetary policy in 2022 will be oriented towards maintaining stability in terms of the inflation target and rupiah stability, as well as macroeconomic and financial system stability. Monetary policy normalization will be performed in a measured and prudent way to avoid disrupting the national economic recovery process. This policy is issued to overcome the risk of increasing global financial market instability pressures from monetary policy normalization (tapering) by the Fed and in several other advanced economies 2.

Pro-growth policy:

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A. BANK INDONESIA MIX STRATEGY 2022

2) Payment System Policy Payment system digitalization will be expanded to accelerate the national digital economy and finance by strengthening industry consolidation, developing modern payment system infrastructure (QRIS, SNAP, BI-FAST), expanding QRIS acceptance to 15 million merchants, expanding crossborder QRIS cooperation and continuing the electronification of regional government financial transactions, G2P social aid program (bansos) disbursements 4.0, and different transportation modes, as well as digitalization of the MSME and tourism sectors. 3) Financial Market Deepening Policy Money and foreign exchange market deepening will be accelerated in accordance with the Money Market Deepening Blueprint (BPPU) 2025 to strengthen the effectiveness of policy transmission, create modern money market infrastructure based on international standards and develop financing instruments, including sustainable finance. 4) MSME Policy and the Sharia Economy and Finance Programs to develop an inclusive economy and finance for MSMEs as well as the sharia economy and finance will be expanded through digitalization and by expanding domestic and export market access.

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Pro-stability policy:

Pro-growth policy:

Consist of four policies below, pro-growth will be oriented towards the joint efforts to accelerate national economic recovery (pro growth), as follows: 1) Macro prudential policy: An accommodative macro-prudential policy will be maintained and expanded to revive bank lending to priority sectors and MSMEs, thereby accelerating the national economic recovery while maintaining financial system stability and pursuing development of the green economy and finance. 2) Payment System Policy Payment system digitalization will be expanded to accelerate the national digital economy and finance by strengthening industry consolidation, developing modern payment system infrastructure (QRIS, SNAP, BI-FAST), expanding QRIS acceptance to 15 million merchants, expanding crossborder QRIS cooperation and continuing the electronification of regional government financial transactions, G2P social aid program (bansos) disbursements 4.0, and different transportation modes, as well as digitalization of the MSME and tourism sectors. 3) Financial Market Deepening Policy Money and foreign exchange market deepening will be accelerated in accordance with the Money Market Deepening Blueprint (BPPU) 2025 to strengthen the effectiveness of policy transmission, create modern money market infrastructure based on international standards and develop financing instruments, including sustainable finance. 4) MSME Policy and the Sharia Economy and Finance Programs to develop an inclusive economy and finance for MSMEs as well as the sharia economy and finance will be expanded through digitalization and by expanding domestic and export market access.

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B. FISCAL POLICY 2022 FOR “ECONOMIC RECOVERY AND STRUCTURAL REFORM”

The preparation of the Macroeconomic Framework and Fiscal Policy Principles (KEM PPKF) document is carried out in an atmosphere of high uncertainty due to the Covid-19 pandemic. The PPKF 2022 KEM document which will be the basis for the preparation of the 2022 State Budget was prepared by taking into account the latest economic dynamics and future economic prospects as well as the challenges and development targets to be achieved. In the KEM PPKF 2022 document, the fiscal policy architecture is designed to support “Economic Recovery and Structural Reforms.” In general, the direction of fiscal policy in 2022 is as follows: 1.

The first, continuing efforts to strengthen economic recovery while still prioritizing the health sector over the handling of Covid 19 as the key to national economic recovery

Second, maintain the sustainability of social protection programs to strengthen the foundation of social welfare, prevent an increase in poverty and vulnerability due to the impact of Covid 19, and as an effort to strengthen the leverage of MSMEs and the business world.

Third, improving competitiveness and productivity requires Information and Communication Technology (ICT) infrastructure, connectivity, and energy, as well as food security to support Indonesia’s economic transformation

Fourth, optimizing state revenues, including taxation, strengthening spending through spending better and financing innovation. This will be key in the context of consolidating a fair and sustainable APBN policy.

Fifth, ensuring the implementation of fiscal policy in 2022 can run optimally, so that it becomes a solid foundation for realizing smooth fiscal consolidation in 2023.

Through the acceleration of economic recovery, structural reforms and fiscal reforms, fiscal policy in 2022 is expected to be effective, prudent and sustainable, which is reflected in the increasing state income, increasing quality of state spending, the primary balance moving towards a positive direction, the deficit decreasing and the debt ratio under control.

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VII. Investment opportunity in Indonesia Topic

Feature

A. INVESTMENT STRATEGIES.

The Indonesian Ministry of Investment/BKPM along with central and local governments work together in order to solve the investment problems in Indonesia, to improve “an ease doing business in Indonesia, the investment ecosystem and business activities” Therefore, the Government prepared and implemented strategies such as:

B. PRIORITY BUSINESS FIELD

A strategic project map of investment opportunities in Indonesia, which is a structured investment design in the form of a pre-feasibility study. This study will analyze investment from various aspects, infographics, and spatial-based project information.

An Electronically Integrated Risk-Based Business Licensing System or Online Single Submission Risk Based Approach (OSS-RBA). This system allows potential investors and business actors to start a business with a fast and easy licensing system

The Job Creation Law has been ratified by the Ministry of Investment/BKPM, which consists of 186 articles, and was signed by President Joko Widodo on November 2, 2020. The Job Creation Act, which summarizes 77 laws, is divided into 11 clusters, including ease of doing business and improving the investment ecosystem and business activities. This law will increase labor absorption by encouraging investment and providing enormous space for strengthening Micro, Small and Medium Enterprises (MSMEs).

Providing a number of fiscal incentives to attract local and foreign investors. The government has also prepared a list of investment priorities. Investors who invest in priority industries are entitled to fiscal incentives. This policy was implemented because of the awareness that to attract investors, four things are needed, namely convenience, certainty, efficiency and transparency

The Indonesian government has released Presidential Regulation (Perpres) Number 49 of 2021 concerning Amendments to Presidential Regulation Number 10 concerning the Investment Business Sector. These changes are made in the context of limiting the implementation of Investment as well as controlling and supervising alcoholic beverages. However, the list of priority business fields still refers to Presidential Decree No. 10 of 2021. Referring to article 4 paragraph 1 of Presidential Regulation Number 10 of 2021, priority business fields are business fields that meet the criteria, namely: 1.

National strategic program/project

Capital intensive

Labor intensive

High technology

Pioneer industry

Export orientation, and/or

Orientation in research, development and innovation activities

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C. INCENTIVES FOR INVESTMENT.

Investors who invest in industries that meet these criteria are entitled to fiscal incentives. 1.

The fiscal incentives provided consist of tax incentives and customs incentives. 1) Tax incentives include: a. Income tax for investment in certain business fields and/or in certain areas (tax allowance) b. Reduction of corporate income tax (tax holiday) c. Reduction of corporate income tax and net income reduction facilities in the context of investment as well as reduction of gross income in the context of certain activities (investment allowance). The investment allowance provided includes:

•

Reduction of net income on new investment or business expansion in certain Business Fields which are labor-intensive industries, and/or

•

Reduction of gross income for the implementation of work practices, apprenticeship and/or learning activities in the context of human development and development based on certain competencies.

Customs incentive

Customs incentives in the form of exemption from import duties on the import of machinery and goods and materials for the construction or industrial development in the context of investment. D. OPEN AND CLOSED BUSINESS FIELDS FOR INVESTMENT

The Presidential Regulation Number 49 of 2021 mentions several business fields are open and closed for investment.

E. EASE OF DOING BUSINESS IN INDONESIA

Article 2 paragraph 1 states that all Business Fields are open for Investment, except those declared closed for investment and activities that can only be carried out by the Central Government.

Article 2 paragraph 2 describes the business fields that are closed for investment, namely Business fields that cannot be cultivated as stated in Article 12 of Law no. 25 of 2007 concerning Investment as amended by Law no. 11 of 2020 concerning Job Creation, and Alcoholic Beverage Industry, Alcoholic Beverage Industry (Wine), and Malt Containing Beverage Industry.

Indonesia is ranked 73 among 190 countries in The Ease of Doing Business in. Indonesia, according to the latest World Bank annual ratings. The minimum level was 129 place and maximum 72 place.

The government expects Indonesia to register improvements across the majority of indicators that make up the World Bank’s ease of doing business (EODB) report, including a shorter time to start a business.

Since 2021, starting a business in the country is estimated to take around 2.5 days, which would mark an improvement from the 10-day time recorded in the 20 EODB assessment. The improvement is expected to reflect in the bank’s 2022 report.

In September 2021, the World Bank announced it was “discontinuing” its “Doing Business” report, which ranks countries on the ease of opening and operating a company.

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Abbreviation The National Economic Recovery (PEN) Money Market Deepening Blueprint (BPPU) PPKM (the public mobility restriction) Job Creation (UUCK) The Investment Coordinating Board (BKPM) Micro, Small and Medium Enterprises (MSMEs). Government Bonds (SUN Indonesian Crude Price (ICP) Capital Adequacy Ratio (CAR) The Indonesia Financial Services Authority (OJK) Indonesia Deposit Insurance Corporation (LPS) PMK (Finance Ministerial Regulation) G2P social aid program (bansos) DGT : Directorate General of Taxation - The Ministry of Finance JCI : the Jakarta Composite Index DPK: third-party funds (in bahasa: Dana Pihak Ketiga) ICP: the Indonesian Crude Price (ICP) ‘ FDI: Foreign Direct Investment Company The Investment Coordinating Board (in bahasa Badan Koordinasi Penanaman Modal) Foreign Investment Company (in bahasa Pnanaman Modal Asing) Trading Representative Office (“TRO”) : an Indonesian or foreign national appointed by a foreign company or an overseas company group as representative in Indonesia for promotion and marketing of the company’s products in Indonesia. Foreign Representative Office (“FRO”) : The FRO is led by one or more Indonesian or foreign citizens being appointed by a foreign company or an overseas company group as representative in Indonesia to carry out the following activities: Handling interests of the company or its affiliated company; and Preparing the establishment and business development of a foreign investment company operating in Indonesia or another country LLC : Limited Liability Companies in bahasa Perusahaan terbatas) Public Company (Perseroan Terbuka) The Workers Social Security Program (in bahasa BPJS) Construction Representative Office (in bahasa -Badan Usaha Jasa Konstruksi Asing – “BUJKA”) T he List of Business Fields (in bahasa –Daftar Negatif Investasi) Permanent Stay Permit/Card (in bahasa KITAP = Kartu Izin Tinggal )

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This guide has been prepared by KAP DJOKO, SIDIK & INDRA, an independent member of Antea KAP DJOKO, SIDIK & INDRA Graha Mandiri, Jl. Imam Bonjol No.61, RT.9/RW.4, Menteng, Central Jakarta City, Jakarta 10310, Indonesia Tel: +6221 39839735 kapdsi.kpusat@gmail.com www.kapdsi.com

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Antea members in Indonesia:

JAKARTA Contact partner: Indra Soesetiawan Tel.: + 6221 39839735/ 39838735 Mail: kapdsi.kpusat@gmail.com Web: www.kapdsi.com

Mallorca, 260 àtic 08008 – Barcelona Tel.: + 34 93 215 59 89 Fax: + 34 93 487 28 76 Email: info@antea-int.com www.antea-int.com

JAKARTA (legal services) Contact partner: Fadriyadi Kudri Tel.: +62 21 5225453 Mail: f.kudri@kndlawyers.com Web: www.kndlawyers.com

This publication is intended as general guide only. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied on as a substitute for such an advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, not Antea Alliance of Independent Firms neither its members accepts no responsibility for any errors or omission it may contain whether caused by negligence or otherwise, or forany losses, however caused, sustained by any person that relies upon it. © 2022 ANTEA

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