business license indonesia agriculture

Business Licensing within Agricultural Sector in Indonesia

  • InCorp Editorial Team
  • 21 May 2019
  • 4 minutes reading time

Sustained by its diverse landscape and fertile soils, the agricultural sector in Indonesia has long been a potential sector and an important source of income for many local households and foreign investors.

Though serving as one of the pillars of Indonesian economy, it is believed that agriculture is yet to achieve its full potential. Therefore, a significant progress has been made over the years under the leadership of President Jokowi with the recent reform initiatives.

These initiatives are established with the purpose of simplifying and streamlining all business licensing processes in order to encourage more foreign investments. One of the recent business updates – Regulation 5/2019 – from the government for agriculture companies in Indonesia sees the unwavering effort of the administration: to push the ease of doing business in Indonesia to a new height.

This article elaborates the latest update of this regulation on business licensing for agriculture companies in Indonesia, and why this is the best time for you to invest in the agriculture sector.

Why Invest in Agricultural Sector in Indonesia

Indonesia is the major producer of diverse agricultural products. These agricultural products include palm oil, rubber, coffee, cocoa, cassava, tea, tropical spices and rice. Not only does this sector contribute to Indonesia’s main household income, but it also boosts the country’s export revenue and overall economy, which grows at least 5% every year.

As of the first quarter of 2018, GDP from agriculture industry in Indonesia surged to IDR 84,578 billion (USD 6.1 billion), compared to the fourth quarter of 2017 at IDR 43,801 billion (USD 3.2 billion).

In addition to the impressive growth, according to the statistics from Statista.com, the GDP growth of Indonesia’s agriculture sector will hit another 4% in 2019.

Business Licensing for Agriculture Companies in Indonesia under Regulation 5/2019

The Indonesian government has recently enacted the Regulation 5/2019 on Procedures for Business Licensing within the Agricultural Sector. This regulation was issued to optimise the process of obtaining a business license in Indonesia through the Online Single Submission (OSS), a streamlined process that is done electronically through an online platform.

The Regulation 5/2019 addresses matters that include the following:

  • Business licensing classification
  • Business licensing requirements
  • Fees of business license application
  • Supervision

Business License Classification

Licensing within the agricultural sector in Indonesia can be divided into two categories:

Business licenses

  • Crops business licenses and registrations
  • Plantation business licenses and registrations
  • Horticultural business licenses and registrations
  • Animal medicine business licenses
  • Livestock business licenses and registrations

Operational or commercial licenses

  • Livestock and seed import and export licenses
  • Seed import and export licenses
  • Food ingredients (derived from plants, animals, etc.) import and export licenses
  • Pet import and export licenses

You can apply for business licenses, operational licenses or commercial licenses only when you have obtained your business identification number (Nomor Induk Berusaha – NIB).

Business Licensing Requirements

For each type of business license, commercial or operational license, there are comprehensive requirements enforced under the Regulation 5/2019. However, we are going to discuss the requirements for crop business licenses and plantation business licenses.

Plantation Business Licenses

In general, you must fulfill the following requirements to secure your plantation business licenses:

  • Location permit
  • Environmental license
  • Forest relinquishment permit (if forestry areas are used)
  • Right to cultivate (Hak Guna Usaha – HGU)
  • Right to build (Hak Guna Bagunan – HGB)
  • Work plan for the development of a processing business
  • Statement of ownership of seed resources
  • Statement of employment of experts
  • Statement of ownership of production unit

Crop Business Licenses

In general, you must fulfill the following requirements to secure your crop business licenses:

  • Location permit with appropriate scale on map
  • AMDAL environmental impact assessment or UKL/UPL
  • Work plan for the development of a crop production unit
  • Statement of willingness to participate in cooperation
  • Guarantee of the supply of raw material
  • Statement of the implementation of food quality assurance systems
  • Land procurement letter

How Cekindo Can Help Indonesia Agriculture Companies

Interested in doing business in the country’s agricultural sector? Get in touch with us today to know more about business license and business incorporation in Indonesia by filling in the form below. Or visit our offices in Jakarta, Bali and Semarang.

Verified by

Hotdo Nauli

Senior Legal & Delivery Manager at InCorp Indonesia

Hotdo heads the Legal and Delivery team at InCorp Indonesia, managing Product Registration, Legal Advisory, and Business Licensing. With over 8 years of experience, she focuses on compliance and integrity, ensuring all client operations align with Indonesian laws and regulatory standards, including contract reviews and sector-specific licenses. She is also a licensed advocate and a member of the Indonesian Advocates Association (PERADI). 

Frequently Asked Questions

    A foreigner is not allowed to form a CV in Indonesia

    In a PMA Company in Indonesia, shareholders typically have limited liability, meaning they’re not personally liable for agreements or losses beyond their shareholding, except in certain circumstances. Liability may extend if the company isn’t properly established or if shareholders exploit the company in bad faith, engage in unlawful acts, or deplete company assets to the detriment of creditors.

    A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances.

    • Import facilities
      Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production.
    • Tax holiday
      The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status.
    • Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy.

    • Tax allowance
      For companies in certain designated areas or regions, the government may provide the following tax concessions:
      Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration.
      Accelerated depreciation and/or amortisation deductions
      An extension of tax losses carried forward for a maximum of ten years
      A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents
      The applicant eligible has to meet high-level-criteria for the above tax facilities:
      High investment value or for export purposes
      High manpower absorption
      High level of local content
    • Investment allowance
      The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project.
    • Super deduction
      This facility could be granted to certain businesses, such as:
      60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame.
      Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities.
      Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia.

    The investment requirement for PMA companies in Indonesia varies based on their classification under the Indonesia Industrial Standard Classification (KBLI). Generally, a minimum investment of IDR 10,000,000,000 (ten billion Indonesian Rupiah), excluding investment in land and buildings, is needed to conduct one business activity in one location.

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Disclaimer

The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind. We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.