Indonesia Positive Investment List

Indonesia Improves Foreign Investment Landscape with A Positive Investment List

  • InCorp Editorial Team
  • 27 June 2024
  • 5 minutes reading time

Following the enactment of Indonesia’s Omnibus Bill, its Government has released an update of business sectors and lines (also commonly referred to as KBLI) that are now open to foreign investment in Indonesia. Although the revised Negative Investment List was drafted to attract more foreign investors and has been dubbed the “Positive Investment List”, this long-awaited list may not carry the weight of its namesake. 

A further dive into the Presidential Regulation (Perpres) 10/2021 presented both business opportunities, benefits, and challenges in different areas of doing business in Indonesia. In this article, we hope to simplify and provide you with a broad and better understanding of Indonesia’s Positive Investment List. 

Understanding The Four Categories of Indonesia’s Positive Investment List

A key thing investors should note is the creation of a new category in the latest Positive Investment List. 

Positive Investment List CategoriesBusiness Lines open to foreign investments
Priority Sectors (NEW)245 
Business Fields With Specific Requirements Or Limitations46
Corporations with Cooperatives & local MSMEs 51
Closed Sectors112

Indonesia’s Priority Sectors – 100% Foreign Company Ownership in Indonesia

Under Presidential Regulation (Perpres) 10/2021, foreign companies (commonly referred to as PT PMA) interested in these business lines will need to meet a set of criteria including but not limited to; national projects, export-oriented, use of advanced technology, labor intensive and high capital investment. 

READ MORE:

According to BKPM, the following table illustrates Indonesia’s Priority Sectors.

While the new regulation did not clearly define labor intensive, according to the Ministry of Industry, labor-intensive is defined as businesses that employ at least 200 workers with a labor cost that accounts for 15% of total production costs. 

The government has set up ambitious criteria for its priority sectors, but foreign companies that find themselves in this category are set up for a range of fiscal and non-fiscal incentives, including tax holidays. Capital-intensive businesses over IDR 500 billion receive a 100% cut in Corporate Income Tax for up to 20 years. Investments worth IDR 100 – 500 billion will be granted a 50% reduction in Corporate Income Tax, based on Peraturan Menteri Keuangan Nomor: 130/2020 which regulates Indonesia’s tax holiday policy. In comparison, foreign companies that relocate their operations to Malaysia benefit from an income tax rate of 0 – 10% for a period of up to 10 years. 

In total, there are 245 business lines included under the priority sector. 183 business lines are eligible to get tax allowances, while 18 can get tax holidays, and 44 can get investment allowances.

Business Line

Current Arrangement

Tax Incentives

Previous limitation

Pharmaceutical Products for Human Consumption

Open for 100% foreign investment

Tax allowances

Maximum 85% foreign investment 

Canned fruit and vegetables

Open for 100% foreign investment

Investment allowances

Maximum 30% foreign investment

Digital Economy (Including website hosting and e-commerce)

Open for 100% foreign investment

Tax Holiday

–

Storage, Purification, and Distribution of Drinking Water

Open for 100% foreign investment

Tax allowances

Maximum 95% foreign investment

Golf Field

Open for 100% foreign investment

Tax Holiday

Maximum 67% foreign investment (70% for ASEAN Countries)

Partnerships with Indonesia Cooperatives and MSME (Micro Small Medium Enterprise)

As the Indonesian government continues to transform and respond to the changes brought on by COVID-19, it is necessary for its Positive Investment List to consider how MSME, digitalization, and new consumer demands will look in a post-pandemic investment landscape.

There are 51 business lines under this category, the notable sectors are:

Foreign investors or foreign companies looking to enter these businesses will require a form of local business partnership arrangement, under the following forms of partnerships with Indonesian companies. 

Profit sharingSubcontractingOutsourcingDistribution

Asides from the four listed arrangements (above), the Ministry of Cooperatives and SMEs have created a climate that encourages medium-sized enterprises to list on Indonesia’s Stock Exchange in an attempt to aid its financing capabilities. 

READ MORE:

Business Fields With Specific Requirements Or Limitations

The amendments to this category left a smaller mark, as they affected a handful of business sectors, namely media, broadcasting, aviation, sea transport, wood, and coffee sectors.

There are a total of 46 business lines included in this category. Here are some of them:

Business LineArrangementRequirement
Publishing for newspapers and magazinesMaximum foreign investment at 49%Through the capital market and in the framework of business expansion or development.
The domestic line for public serviceMaximum foreign investment at 49%–
Overseas Liner and Tramper FreightMaximum foreign investment at 49%–
Inter-Provinces’ Pioneer LineMaximum foreign investment at 49%–
READ MORE:

Indonesia Closed Sectors From Foreign Investment

A total of six sectors remain closed or restricted for investments from both domestic and foreign companies.

  • Class-I narcotics and cultivation;
  • All forms of gambling activities;
  • Fishing of endangered species;
  • Utilization of corals found in nature for the production of jewelry, souvenirs, building materials, etc.;
  • Chemical weapons production; and
  • Industrial ozone-depleting substances industries and industrial chemicals.

How InCorp Indonesia can Assist

Find out first-hand, what it takes to expand into Indonesia. We are here to help clients rethink structure & cost to deliver on business ROI.

Stay on top of regulations with tailor-made solutions to break into Indonesia. Contact us for a 1:1 consultation by filling in the form below.

Verified by

Ales Cina

Consulting Manager at InCorp Indonesia

Aleš manages solution delivery at InCorp Indonesia, optimizing incorporation processes and client relationships. His experience in internal auditing, retail, and sales offers valuable global insights. Aleš, with a degree in Economics and Finance from the Czech Republic, helps clients navigate cross-border business challenges, focusing on cultural and legal insights.

Frequently Asked Questions

    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.

    Yes, in a foreign-owned (PT PMA) company, a foreigner can be a director or a commissioner

    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.

    A limited liability corporation is required by Indonesian company law to have two or more shareholders, who may be either a legal entity or an individual. The foreign investor must find a second shareholder to own shares in the PMA firm for investments that are 100% open, which could be an affiliated party.

Get in touch with us.

Lead Form

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.

More on Business Setup

How Indonesia Can Benefit from ASEAN-Korea Business Partnership

How Indonesia Can Benefit from ASEAN-Korea Business Partnership

Read more
Understanding Different Types of Business Licenses in Indonesia

Understanding Different Types of Business Licenses in Indonesia

Read more
How to open a real estate agency in Bali

How to Open a Real Estate Agency in Bali

Read more