Permanent Business License: What You Need to Know About It

Permanent Business License and Permit: What You Need to Know About It

  • InCorp Editorial Team
  • 13 December 2023
  • 6 minute reading time

Starting a business in Indonesia might feel like overcoming one huge challenge. Unfortunately, the process of fighting Indonesian bureaucracy does not even end when your company is finally set up. People will officially and legally recognize your business only when it’s able to acquire its permanent business license in Indonesia.

What Is a Permanent Business License?

The permanent business license (IUT) is a mandatory document for foreign investment companies (PT PMAs) wanting to operate businesses in Indonesia.

A newly formed company, however, will only receive the temporary principal license (Izin Prinsip) while the incorporation process is ongoing. Only when the company established and has fulfilled the legal regulations can it be eligible to apply for the permanent business license. It is including settling the paid-up capital and accomplished its investment plan.

Permanent Business License Is Not a Matter of Choice

Even though the reality might be different, the permanent business license Indonesia is a required license for businesses according to the existing regulations. Sadly, the Indonesian government does not check whether PT PMAs comply with these laws or not acquire these licenses. However, this may change at any time.

Not acquiring the license can be a big risk your business may not want to take. This is so because, when your principal license expires, your company will no longer be able to conduct its business in Indonesia. However, it is possible to extend the principal license up to 5 years.

Benefits of Permanent Business License Indonesia

Even though some businesses consider IUT as an unnecessary document, the following benefits of complying with the regulation will prove otherwise. The license can actually boost your business and raise it up to another level.

Ability to Hire Foreign Employees

Not having a permanent business license will limit you from being able to issue non-extendable work permits to foreign shareholders, directors, and commissioners only. Consequently, whether you are considering hiring foreign experts or extending KITAS for the directors and commissioners, having the IUT is one of the requirements.

Ability to Invite New Shareholders

Acquiring an IUT will also enable your business to invite new shareholders or even sell your company unless your business has been operating for less than a year.

Minimal Hassle on Investment Activity Reports

Before acquiring a permanent business license in Indonesia, your company is must submit investment activity reports (LKPM) quarterly. Acquiring IUT decreases the frequency of the submission of these reports biannually.

Permanent Business License Application Procedure

permanent business license application procedure

Successfully navigating the business license application process in Indonesia often requires professional support, and InCorp Indonesia stands as a reliable service provider for such assistance. Below is a succinct outline of the steps involved:

1. Business Registration

Register your business entity (PT, PMA, CV, etc.) by accessing the OSS platform. Fill out the required forms and submit them electronically.

2. NIB Acquisition

You’ll automatically receive a NIB (business identification number) upon successful registration within one day. This serves as your main business registry number.

3. Submit Quarterly Investment Report (LKPM)

For a permanent license, you must submit Investment Activity Reports (LKPM) quarterly for at least two years. These reports detail your investment activities and progress.

4. Business License Application

Identify the relevant authority for your business type and location to submit your application. PMA companies with significant investments should apply to BKPM. Most other businesses should apply to BKPMD.

5. Application Processing and Issuance

The relevant authority will process your application and may request further information or clarifications. You’ll receive your official permanent business license if there’s no issue with the application.

When to Apply for a Permanent Business License

Note that you can apply for IUT only in case your principal license has not expired yet. Its validity depends on the business sector your business is participating in; Nevertheless, it should be between 1 and 3 years from the time you started your business. In case your business has been operating longer and has not acquired an IUT just yet, consider applying with professional help. Cekindo is here to assist you and answer all your inquiries on this matter.

Requirements to Obtain A Permanent Business License in Indonesia

You Should have a Physical Office

Getting a virtual office is not advisable as having a physical office is one of the requirements for an application for a permanent business license in Indonesia. If you started your business with a virtual office only, you would need to go through the process of changing your domicile letter, location, and other company legal documents. Feel free to contact Cekindo in order to get assistance on this process.

Proof of Investment

When starting a company in Indonesia, you need to submit an investment plan to obtain a principal license. The proof of investment, which should reflect the original investment plan, is one of the conditions necessary for acquiring IUT.

Local Partners

Since the BKPM will be the only institution that will determine whether your company is eligible to convert to IUT, one of the requirements is to provide information on how many local partners you are engaged with (with partnership agreement documents).

Requirements for Different Business Classification

Distinct business categories come with specific criteria for obtaining a permanent business license. Consider the following examples:

  • Service and Trading Company: Secure a one-year physical office rental agreement.
  • Restaurant and Hotels: Complete hotel construction and obtain an endorsement from the Hotel and Restaurant Association.
  • Distributors: Obtain a distributor appointment letter and commit to a warehouse rental for a minimum of one year.
  • Factories: Establish a minimum of 80% machinery and secure a three-year rental agreement for the factory.
  • Medical Devices Business: Secure a crucial recommendation letter from the Ministry of Health for the medical devices business.
  • Mining Company: Acquire a Recommendation Letter from the Ministry of Energy and Mineral Resources for mining ventures.
  • Primary Products of Wood Forest: Essential is the Recommendation Letter from the Ministry of Forestry for businesses dealing with primary wood forest products.
  • Education Sector: A mandatory recommendation letter from the Ministry of Education for businesses in the education sector.

Check more details about the procedures and requirements for a permanent business license in Indonesia. Feel free to contact our friendly consultancy staff for your queries and information requests.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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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.

Frequent Asked Questions

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

There are two main types, namely, primary business licenses and non-primary business licenses. The primary ones commonly apply to various industries, such as general and industrial business licenses. Additional non-primary ones are included, depending on the operations of your business. Examples of non-primary business licenses are operational and commercial licenses.

Yes, you must apply for it to be able to issue work permits for your foreign employees. This permanent business license is also a prerequisite for the applications for other business licenses and import licenses.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.