Home Blog Hong Kong Business Investments in Indonesia Business Licenses | Business Setup | Indonesia Hong Kong Business Investments in Indonesia InCorp Editorial Team 11 October 2024 5 minutes reading time Table of Contents Hong Kong and Indonesia Partnership Promising Sectors for Hong Kong Investment Benefits of Investing in Indonesia for Hong Kong Investors Challenges and Considerations for Hong Kong Investors Simplify Your Indonesian Expansion with InCorp Indonesia offers Hong Kong businesses a great opportunity to explore new avenues for growth and expansion due to its strong economy and growing number of consumers. The country invests in many infrastructure projects and has a rapidly growing digital economy, making it an attractive destination for Hong Kong businesses with an entrepreneurial spirit. The two regions have a lot of potential for collaboration and Indonesia’s growth presents a unique opportunity for Hong Kong businesses to diversify their operations. Hong Kong and Indonesia Partnership Hong Kong ranks third as the largest foreign investor in Indonesia, with a value of USD 5.2 billion from January to September 2023. Singapore and China hold the first and second positions, with investments of USD 12.1 billion and USD 5.6 billion, respectively. The government’s support of downstream industries has positively contributed to investment realization, amounting to IDR 266.0 trillion, representing 25.3% of the total investment realization for this period. Looking ahead, the government remains committed to the downstream mining sector’s program, particularly the development of the electric vehicle ecosystem and the expansion of renewable energy downstream of silica sand and quartz sand into solar panels. Promising Sectors for Hong Kong Investment Indonesia has more than 270 million people, making it a great potential market for Hong Kong investors. Although some businesses are waiting for the upcoming February election before investing, many others are confident and moving forward. Some industries that show promise for growth in Indonesia include: 1. Ibu Kota Nusantara (IKN) Kevin Chiu, the director for Indonesia at the Hong Kong Trade Development Council (HKTDC), mentioned that some Hong Kong companies are eager to know more about the Nusantara New Capital project (IKN). 2. Energy Sector Various sectors show potential, particularly the energy sector, as exemplified by Xinyi Glass’s commitment to invest USD 11.6 billion in constructing glass and solar panel manufacturing facilities on Rempang Island. 3. Manufacturing Moreover, manufacturing companies, such as those producing toys and clothing, are exploring opportunities to focus on traditional OEM practices. 4. Services Numerous service companies, including law and accounting firms, express a desire to assist foreign investors in entering Indonesia. 5. EV Battery The Indonesian government, represented by PT Aneka Tambang Tbk (ANTAM), has entered into a collaboration with Hong Kong CBL Limited (CBL) through the signing of a Divestment Agreement for an Electric Vehicle (EV) Battery Project. This partnership aims to strengthen the supply chain for the lithium battery ecosystem in Indonesia. READ MORE:Understanding Indonesia’s Role In The ASEAN EconomyHow Trade In Indonesia Benefits The EconomyMaximizing Growth Potential In The ASEAN Economic Landscape Benefits of Investing in Indonesia for Hong Kong Investors Hong Kong investors who aim to invest in Indonesia may enjoy several benefits. BenefitsDescriptionsSuper Deduction TaxThis incentive applies to labor-intensive industries, vocational training programs, and research & development (R&D).Tax HolidayApply to 18 industry groups with a minimum investment between IDR 100 and IDR 500 billion for Mini-tax holidays and a minimum of IDR 500 billion for tax holidays.Tax AllowanceThe benefits include 30% of the investment value in tangible fixed assets and a reduced corporate net income tax of 5% annually for six years.Import Duty FacilityThe facility applies for 2 to 4 years, depending on specific criteria. Challenges and Considerations for Hong Kong Investors The potential for political uncertainty may contribute to a slowdown in investments. Coupled with strict economic policies and the looming threat of El Niño affecting import-export activities, this could potentially trigger a global economic downturn. A diverse domestic market, a growing middle class, demographic advantages, and abundant natural resources further underpin Indonesia’s economic strength. Nevertheless, the nation faces specific areas for improvement, notably in infrastructure, which requires continuous attention. Furthermore, high poverty, unemployment, and social and regional inequalities challenge Indonesia’s future economic growth. Hong Kong investors eyeing business opportunities in Indonesia may also encounter general challenges. 1. Foreign Ownership Limits Navigating Indonesia’s evolving business laws is crucial. Opportunities exist within specific sectors outlined in the Positive Investment List, subject to changing regulations. Foreign-owned Companies (PT PMA) or Representative Offices cater to different needs. 2. Government Regulations Business registration in Indonesia can be intricate. Acquiring a principal license from the Indonesia Investment Coordinating Board (BKPM) involves multiple document submissions, with regulations subject to regular changes. 3. Taxation Complexity Indonesia’s taxation system covers various aspects, and compliance is mandatory. Third-party services like InCorp Indonesia can assist in navigating this complexity. 4. Visa and Permit Challenges Obtaining visas and permits in Indonesia can take time and effort. However, seeking assistance from InCorp’s visa and permit processing services can ensure a smooth process. 5. Language Barriers Indonesia’s diverse culture presents a language barrier. Effective marketing involves localizing products; hiring locals fluent in relevant dialects can address this. 6. Infrastructure Development Certain regions may have infrastructure challenges. Businesses may need to invest in or adapt to these limitations. 7. Cultural Sensitivity Understanding and respecting Indonesian culture is crucial for building strong business relationships. 8. Competition and Saturation Intense competition in Indonesia’s emerging market demands thorough research and unique value propositions. 9. Labor Regulations Indonesian labor laws are complex. Adhering to regulations and establishing clear HR policies are essential. 10. Intellectual Property Protection Safeguarding intellectual property rights requires registration and legal assistance. Navigating these challenges demands research, local partnerships, and compliance. Adapting to the local business environment while maintaining integrity is key for Hong Kong investors in Indonesia. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Notify Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Simplify Your Indonesian Expansion with InCorp Indonesia offers a beautiful investment landscape for Hong Kong businesses. Entrepreneurs looking to explore investment opportunities in the country can benefit from the comprehensive services provided by InCorp Indonesia. Specializing in incorporation, licensing, and investor KITAS services, InCorp Indonesia streamlines the entire process of setting up businesses in Indonesia. Fill out the form below for a free consultation. Read Full Bio Verified by Daris Salam COO Indonesia at InCorp Indonesia With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships. Frequently Asked Questions What are the functions and responsibilities of a PMA company’s board and management? Indonesian Company Law establishes a two-tier governance system with Directors managing day-to-day operations and representing the company, while the Board of Commissioners supervises and advises them. The articles of association may empower board of Commissioners to provide consent or assistance to Directors for specific legal acts. What kind of license does a PMA company need to get? In Indonesia, the licensing system has been updated with the implementation of the Omnibus Law. Businesses are categorized into four risk levels based on the PMA company classification. Licensing requirements vary accordingly, with three main types: Business Identification Number (NIB) Low-risk businesses needing only an NIB Standard Certification Standard Certification is necessary for medium-low and medium-high-risk businesses Licenses/Permits High-risk businesses require licenses/permits Additionally, basic requirements, including business location, must be met. Many licensing processes are facilitated through the Online Single Submission (OSS) platform managed by the Investment Coordinating Board (BKPM). Are there investment facilities provided for foreign investors in Indonesia? 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. Can a PMA company keep non-Rupiah bookkeeping and use a language other than Indonesian? For tax purposes in Indonesia, companies must maintain their books in Rupiah, using the Indonesian language, and store them within the country. Exceptions for using USD and English in bookkeeping require prior notification to the authorities and any use of languages other than Indonesian needs approval from the Ministry of Finance. Get in touch with us. Lead Form Contact Full NameEmailPlease provide corporate email where possiblePhone NumberOffice SetupWhich city are you planning to expand into?JakartaSemarang/Central JavaBali/LombokBatam/SumateraSurabaya/East JavaOther ProvincesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Package (20% OFF)[SPECIAL PACKAGE] Product Registration + License Holder (20% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Service (20% OFF)[SPECIAL PACKAGE] Comprehensive Industrial Package (15% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Service (20% OFF)[SPECIAL PACKAGE] Comprehensive Industrial Package (15% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration (25% OFF) + Office Space (Private Office 30% OFF)[SPECIAL PACKAGE] Company Registration + Investor KITAS (25% OFF)[SPECIAL PACKAGE] Accounting + Tax Services+ Annual Fintax Report (20% OFF)[SPECIAL PACKAGE] Payroll Services for Executive Role (20% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration (20% OFF) + Office Service (25% OFF)[SPECIAL PACKAGE] Company Registration + Micro Finance Services (25% OFF)[SPECIAL PACKAGE] Property Assistance: Due Diligence + AJB Purchase/Lease Agreement (25% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesServices Company Registration Renting Virtual and Serviced Office Mergers and Acquisitions Business and Import Licenses Corporate Recovery and Insolvency Closing of Company (Dissolution) Land and Property Ownership Shelf Company Local NomineeServices Accounting and Tax Reporting Audit and Review Transfer Pricing Compliance Tax RefundHuman Resource Sub Services Payroll Outsourcing Employer of Record Recruitment and HR Establishment Employment ServiceServices Business Visa Work Permit and KITAS Dependent Visa (Spouse and Family) OtherBusiness Visa Subservices Business Visa Visit Visa Visa ExtensionServices Medical Device Beauty (Skincare and Cosmetic) Food and Beverage Health Supplement Household Product Halal Certification TrademarkServices Legal Consultation Legal Agreement Service Due Diligence and Background Check Company Documents RevisionBusiness Advisory Business Advisory Services ESG Reporting & Advisory Internal Audit Risk ManagementMore Services Market Research and Analysis Local Distributor and Partner Bank AccountMessageSubmit What you’ll get A prompt response to your inquiry Knowledge for doing business from local experts Ongoing support for your business 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.