Foreign investors who intend to conduct business in Indonesia should understand foreign investment regulations, such as requirements for obtaining business licenses or permits that are related to foreign company registration documents.
The specification type of business licenses depends upon the type of business activities being pursued. Some business entities may require more than one business license, so, you must know what types of business licenses you need.
A Trading Business License, known as the SIUP, is required only for companies engaged in any kind of trading business. This license is considered an operational permit and is required for obtaining bank loans and participating in government tender. In practice, the SIUP will be issued by the Ministry of Trade and takes 3 to 7 days. The SIUP will be valid for 5 years and can be extended.
Any industrial company that is located in the industrial area must obtain an Industrial Business License called an IUI. This license also becomes the operational permit and is valid for 5 years and can be extended. An IUI will not be valid in the event an IUI holder stops the industrial operation.
A Construction Services License (IUJK) is required for a company engaged in any construction business or participating in any tenders in Indonesia. Based on the latest update of the Negative Investment List, a construction consultancy services company is only allowed 67% foreign ownership. The Construction Service License is regulated by the Ministry of Public Works and can be renewed after the initial period of 3 years.
Mining Business License/IUP is for a company engaged in mining activities/tenders and requires one license (IUP) per type of coal or mineral per company. The IUP is regulated by the Ministry of Energy and Mineral. Generally, the IUP period for coal exploration is limited to 7 years and production to 20 years but can be extended twice for a maximum of 10 years. For metallic minerals, the IUP exploration period is a maximum of 8 years, then production for 20 years. It can be extended just like the IUP for coal.
General requirements for the above licenses that must be submitted are the Certificate of the Company’s Domicile, Company Registration Certificate and Taxpayer Identification Number. Once again, one business entity doesn’t mean just one license: Many other licenses are required. Likewise, different business entities may have one license or permit. Aside from the licenses listed above, there are some specific ancillary licenses to be obtained, such as:
An import license consists of an Importer Identification Number/Angka Pengenal Impor (API) and Customs Identification Number. But we will specifically note the API that is regulated under Trade Minister Regulation No 59/M-DAG/PER/9/2012 and its amendment No. 27/M-DAG/PER/5/2012. This license might be possessed only by a particular company/business entity. One business entity is also permitted to only have one type of import license: an API-U or API-P:
If you are interested in bringing products such as food, cosmetics, medicine, and medical equipment into the Indonesian market, you must register the products. Regulations for the registration of food, cosmetics, and medical products are obtained under the Agency for Drugs and Food Control (BPOM). Meanwhile, registration for medical equipment is obtained through the Ministry of Health. The registration process takes approximately 1 to 2 months to complete, depending upon the type of product. You should apply for product registration under the local company’s name, so you must find a local company that is ready to register your products or you must directly set up your company in Indonesia so you can register your product under your company’s name. Another option is to engage us to register your product.
The Online Single Submission (OSS) system in Indonesia has been effective since July 2018. The system has been gradually improved, and eventually, all permit and licensing processes will be streamlined under the OSS.
Licensing processes covered under the OSS include the import licenses as well. This is such good news for investors and importers because, with the OSS, there is no need for them to obtain an API and a NIK (Customs Registration) as basic import licenses anymore.
NIB is the Basic Import License
With this new system, all business entities will need to register themselves through it. After completion of registration at the OSS, each business will get a Business Identity Number NIB (Nomor Induk Berusaha).
The NIB will not expire as long as the company is in operation. This NIB number makes all processes much easier as it replaces the Company Registration Certificate, Importer Identification Number (for import license), and Customs Registration NIK (Nomor Induk Kepabeanan).
With that being said, import companies or companies engage in import activities do not have to go through the process of acquiring API and NIK anymore. However, importers need to make sure that they still comply with technical import requirements with relevant authorities.
When preparing to set up your company in Indonesia, you should also pay attention to the environmental impact of your business. Certain business activities such as industry, manufacturing, or exploration require an environmental impact analysis from the Ministry of Health.