Home Blog Understanding the Shift from IMB to PBG for UMKM in Indonesia Business Licenses | Business Setup | Indonesia Understanding the Shift from IMB to PBG for UMKM in Indonesia InCorp Editorial Team 18 October 2024 7 minutes reading time Table of Contents What is IMB in Indonesia? The Importance of IMB (PBG) in Indonesia The Differences Between PBG and IMB PBG Application Requirements Guide to IMB and PBG for UMKM in Indonesia The Cost of IMB (PBG) in Indonesia Obtain PBG in Indonesia with InCorp Every investor looking to start a business in Indonesia must know the country’’ building permit regulations. Previously, the IMB (Izin Mendirikan Bangunan) was the essential permit required for constructing or modifying buildings. However, as of November 2021, the IMB has been replaced by the PBG (Persetujuan Bangunan Gedung), a new regulatory framework that governs building approval. Understanding the PBG process is crucial for investors to ensure compliance and a smooth business setup in Indonesia. What is IMB in Indonesia? IMB stands for Izin Mendirikan Bangunan, a legal permit or building registration document in Indonesia that allows the construction of buildings and ensures that the constructed buildings are consistent with the land allocations. An IMB also ensures that the building’s design and structure meet the purposes of use, comfort, and safety criteria under Indonesian law. An IMB is used from construction until the end of a building’s lifetime. Buildings under the IMB permit are used primarily for residential and commercial purposes. PBG Replaced IMB as of November 2021 Under Regulation No. 16 Year 2023, since November 2021, the IMB Building Permit has been replaced with the Persetujuan Bangunan Gedung (PBG), the Building Approval Permit, streamlining the process and adapting to modern regulatory standards. The Importance of IMB (PBG) in Indonesia The IMB (Izin Mendirikan Bangunan) and its successor, the PBG (Persetujuan Bangunan Gedung), are essential for a building’s entire lifecycle, from construction to its operational phase. This is particularly crucial for investors looking to start a business in Indonesia. An IMB is mandatory for business owners who wish to buy or rent a building anywhere in the country. Since the introduction of the PBG in November 2021, the PBG has become the primary permit governing construction processes. However, properties with an existing IMB remain valid under specific regulations. Acquiring or renting a building without a valid IMB or PBG is against the law and may result in significant penalties. Not only is it important to obtain either permit, but you must also ensure that the permit obtained from the authority or landlord clearly states the intended use that aligns with the actual purpose of the building for residential or commercial activities. Before applying for an IMB or PBG, reviewing the spatial planning and land zoning regulations in the area where you intend to build is essential. Different land categories and zones designate specific allowable uses for buildings. READ MORE:Building Property in Bali as a Foreigner in 2024: What You Need to Know10 Benefits of Renting A Warehouse in East Java for Businesses The Differences Between PBG and IMB The transition from IMB to PBG introduces several significant changes in the regulatory framework: AspectsPBGIMBPurposePBG (Persetujuan Bangunan Gedung) regulates the construction process and allows owners to apply for a permit during or after construction.The IMB (Izin Mendirikan Bangunan) was required to be obtained before or at the start of construction, necessitating the building owner’s submission of technical details.Stages and ApplicationPBG can be processed during or after construction, provided the building’s function is reported and aligned with relevant spatial planning regulations.Under the IMB, the application had to be submitted before construction began, and the owner was required to specify the building’s intended function at that time.Requirements and SanctionsPBG mandates that building planning complies with layout, reliability, and prototype design standards, with penalties for not reporting changes in function.The IMB imposed administrative and technical requirements that building owners needed to meet, but it did not have sanctions for failing to report changes in the building’s function.Validity PeriodPBG allows for mixed functions within buildings.The IMB remains valid if obtained before the implementation of Government Regulation No. 16 of 2021, while the new regulations govern the PBG. PBG Application Requirements The application process for the PBG (Persetujuan Bangunan Gedung) involves several steps, including submitting specific documents. Here’s a detailed guide on how to obtain a PBG while ensuring compliance with existing regulations, including the previous IMB requirements: Architectural Plan Documents: This includes details about the architectural planning service providers, design concepts, floor plans, and other related designs. Utility Plan Documents: This covers the calculations for clean water, electricity, waste management, and fire protection systems, along with drawings of sanitation systems and other related designs. Structural Plan Documents: These documents comprise drawings of lower, upper, and basement structures, as well as structural calculations, including soil investigation data for buildings exceeding two floors. Technical Specifications Documents: A comprehensive description of the materials used, including their type, characteristics, and quality. Once the required documents are prepared, follow these steps to apply for a PBG: Create a new account on the SIMBG website and confirm your email. If you already have an account, log in to the SIMBG website and complete your data. Fill in the relevant forms and save your data. Begin the PBG application process online at simbg.pu.go.id. Upload all technical and administrative documents, then monitor your SIMBG account for notifications regarding document completeness. If your documents are verified as complete, attend consultations with the Professional Expert Team (TPA) in Architecture, Structure, and MEP. Make any necessary revisions to your documents based on the TPA consultation. Determine the local retribution fee and obtain the Regional Retribution Determination Letter (SKRD) from DPMPTSP. Pay the local retribution fee as outlined. Issue the Statement of Compliance with Building Technical Standards (Rekomtek). DPMPTSP will issue the PBG upon completion of all processes. Guide to IMB and PBG for UMKM in Indonesia Recent regulatory changes include provisions for a new type of IMB explicitly designed for warehouses catering to micro, small, and medium enterprises (UMKM). However, it’s essential to note that the IMB has been replaced by the Persetujuan Bangunan Gedung (PBG) since November 2021, which now governs the building permit process. Here are the details regarding permits for UMKM buildings: UMKM Buildings Smaller than 1,300m² These buildings can qualify for simplified approval processes under the PBG. The business function index calculation is set at 0.5% for the PBG retribution amount. UMKM Buildings of 1,300m² Prototype designs are often utilized for these structures. The PBG issuance process includes assessing technical plan documents, obtaining necessary written approvals, and issuing the PBG document. The regional government is required to complete this process within three business days of submitting the PBG application. The business function index calculation remains 0.5% for the PBG retribution amount. UMKM Buildings Larger than 1,300m² Like smaller buildings, complex buildings not utilized for public interest must follow the appropriate regulations under the PBG framework. READ MORE:10 Benefits of Renting A Warehouse in East Java for BusinessesSteps to Set Up a Representative Office in Jakarta The Cost of IMB (PBG) in Indonesia The cost of obtaining a PBG in Indonesia varies depending on the building project’s location, size, and complexity. Fees can differ between regions due to local government regulations. InCorp can provide accurate cost estimates tailored to the specific project details and location. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Subscribe 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 Obtain PBG in Indonesia with InCorp Navigating the evolving regulations around obtaining a PBG in Indonesia can be complex. As pro-business policies and regulations change, many investors need help staying informed and compliant. A lack of awareness about the current business environment can lead to costly delays and missed opportunities. At InCorp, we simplify the PBG application process with: Expert guidance on Indonesia’s building regulations, ensuring a smooth and efficient application process. Regulatory updates about the latest business and construction regulations change to avoid unnecessary roadblocks. Tailored solutions for your project needs, from small-scale businesses to large commercial ventures. From document preparation to final permit approval, we handle every step of the PBG application on your behalf. Avoid common mistakes and unnecessary expenses, ensuring your project stays on track. To speak with one of our consultants, submit your details through the form below, and we’ll contact you shortly. Read Full Bio 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 What is the Indonesian employment status in PMA company? In Indonesia, employment arrangements are categorized into temporary employment agreements (PKWT) and permanent employment agreements (PKWTT). Temporary contracts are for short-term, seasonal, or experimental work, while permanent contracts are for continuous employment. What requirements are needed if my Indonesian company registers the product? Register the product with BPOM (National Agency of Food and Drugs) and MoH (Ministry of Health). The type of testing and document requirements depend on the type of product you want to register. Also, the time frame for registration could vary between 3 to 15 months. 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. What responsibilities does a PMA company have in terms of non-tax compliance? In Indonesia, a PMA company is typically required to submit various reports to relevant authorities, such as: Annual financial report Investment realisation report Manpower and employee welfare report Expatriate utilisation report Company loan repot Foreign exchange and prudential principles report However, depending on the business activities and classification relevant authority may require additional reports from a PMA company. Get in touch with us. 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