Frequently Asked Questions: #investmentrestrictions

The on-call consultancy service typically addresses a wide range of issues related to PMA companies and business operations in Indonesia, including:

• Due diligence on potential business partners or investment opportunities
• Market intelligence gathering for specific industries or sectors
• Project management support for business expansion or new ventures
• Company status information searches to verify legal standing and compliance
• Guidance on navigating regulatory requirements and changes
• Assistance with interpreting and applying Indonesian business laws
• Support for resolving operational challenges or compliance issues
• Advice on corporate structuring and governance matters
• Clarification on tax obligations and optimization strategies
• Guidance on employment regulations and HR practices
• Support for obtaining necessary licenses and permits
• Assistance with understanding and complying with the Negative Investment List (DNI)
• Advice on foreign investment restrictions and local shareholder requirements
• Guidance on corporate secretarial matters and regulatory filings
• Support for financial reporting and accounting practices

The service aims to provide timely, expert advice to help foreign-owned businesses navigate the complexities of operating in Indonesia's business environment.

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A PMA (Penanaman Modal Asing) company is a foreign direct investment entity in Indonesia that allows foreign investors to own and operate a business in the country. Key points about PMA companies include:

• Legal structure for foreign investment in Indonesia
• Allows foreign ownership of businesses, subject to certain restrictions
• Regulated by the Indonesian Investment Coordinating Board (BKPM)
• Must comply with the Negative Investment List (DNI) which outlines sectors open or restricted to foreign investment
• Requires a minimum investment amount, typically around USD 700,000 (though this can vary)
• Offers benefits such as the ability to sponsor foreign work permits and conduct business activities across Indonesia
• Subject to specific tax regulations and reporting requirements for foreign-owned entities
• May require local shareholders in certain business sectors, as per the DNI
• Provides a formal structure for foreign investors to participate in Indonesia's growing economy

Setting up a PMA company involves several steps, including investment approval, company registration, obtaining necessary licenses, and ensuring ongoing compliance with Indonesian regulations. It's advisable to seek professional assistance when establishing and managing a PMA company to navigate the complex regulatory environment effectively.

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The Negative Investment List (DNI) is a crucial regulation in Indonesia that affects foreign investment in the following ways:

• Definition: The DNI is a list of business sectors that are either closed or have restrictions for foreign investment in Indonesia.

• Purpose: It aims to regulate and control foreign investment to protect certain sectors of the Indonesian economy and promote local business development.

• Impact on foreign investors:

  • Determines which business sectors are open, partially open, or closed to foreign investment
  • Specifies maximum foreign ownership percentages for partially open sectors
  • May require partnerships with local Indonesian companies in some sectors

• Key considerations:

  • The list is periodically updated by the Indonesian government
  • Some sectors may require a minimum investment amount for foreign participation
  • Certain sectors may have additional licensing or operational requirements

• Examples of restrictions:

  • Some sectors may be completely closed to foreign investment
  • Others may allow only partial foreign ownership (e.g., 49% or 67%)
  • Some businesses may require local partners or shareholders

• Importance for PMA companies:

  • Foreign investors must consult the DNI before planning their investment in Indonesia
  • It helps determine the feasibility and structure of a proposed PMA company
  • Compliance with DNI regulations is essential for obtaining necessary permits and licenses

• Seeking professional advice:

  • Due to the complexity and frequent updates of the DNI, it's advisable to consult with experts like Okusi Associates for the most current information and guidance on how the DNI affects specific investment plans.

By understanding and adhering to the DNI, foreign investors can ensure their PMA company plans align with Indonesian regulations and avoid potential legal issues or investment restrictions.

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Yes, specific licenses and permits are often required for certain business activities in Indonesia. The requirements can vary depending on the nature of the business. Here are some key points to consider:

• Basic Licenses: All companies, regardless of their business activity, need to obtain:

  • Domicile Certificate
  • Tax Identification Number (NPWP)
  • Company Registration (TDP)

• Sector-Specific Licenses: Depending on the industry, additional licenses may be required:

  • Trading companies may need an import license
  • Manufacturing companies often require industrial business licenses
  • Construction companies need construction services business licenses
  • Hotels and restaurants require tourism business licenses
  • Financial services companies need approval from the Financial Services Authority (OJK)

• Environmental Permits: Businesses that may have an environmental impact often need to obtain environmental permits or conduct environmental impact assessments (AMDAL).

• Location-Based Permits: Some regions or special economic zones may have additional licensing requirements.

• Professional Licenses: Certain professions (e.g., lawyers, doctors, architects) may need individual professional licenses in addition to company licenses.

• Online Business Permits: E-commerce businesses may require specific permits related to online transactions and data protection.

• Foreign Investment Considerations: PMA companies may face additional licensing requirements or restrictions based on the Negative Investment List (DNI).

It's important to note that licensing requirements can change, and it's advisable to consult with a professional service provider or relevant government agencies to ensure compliance with the most up-to-date regulations for your specific business activity.

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The Negative Investment List (Daftar Negatif Investasi or DNI) is a key regulation in Indonesia's foreign direct investment (FDI) regime that outlines restrictions on foreign investment in various business sectors. Here are the key points about the DNI and its effects on foreign investment:

• Purpose: The DNI specifies which business fields are:

  • Closed to foreign investment
  • Restricted to investment (e.g. reserved for Indonesian SMEs or state-owned companies)
  • Open to foreign investment but with certain conditions or ownership limitations

• Structure: The list categorizes business fields under government classifications and determines:

  • Sectors where foreign investors can have 100% ownership
  • Sectors requiring partnerships with Indonesian businesses
  • Specific regulations that apply to certain sectors

• Updates: The DNI is typically updated every two years to reflect changes in investment policies.

• Scope: The current DNI contains 280 business fields. Sectors not listed are supposed to be open to 100% foreign ownership.

• Effects on foreign investment:

  • Determines maximum foreign ownership percentages for different sectors
  • Requires foreign investors to partner with local companies in some fields
  • Sets compliance requirements with local regulations for certain sectors
  • Creates some uncertainty due to potential for wide interpretation

• Minimum investment: While not directly part of the DNI, there is a nominal minimum investment of USD 300,000 for foreign-owned companies.

• Location: Foreign investment companies generally have freedom to choose their location in Indonesia.

The DNI plays a crucial role in shaping foreign investment in Indonesia by defining the sectors and conditions under which foreign companies can operate. It's important for foreign investors to carefully review the latest DNI and consult with experts to understand how it applies to their specific business plans in Indonesia.

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Foreign investment restrictions in Indonesia are governed by the Negative Investment List (DNI), which outlines sectors that are closed or have limitations for foreign ownership. Key points to consider:

• The DNI is periodically updated by the Indonesian government to reflect changes in investment policies.

• Sectors are categorized as:

  • Fully closed to foreign investment
  • Open with certain restrictions (e.g., maximum foreign ownership percentage)
  • Open with specific requirements (e.g., partnerships with local SMEs)
  • Fully open to foreign investment

• Some commonly restricted sectors include:

  • Media and broadcasting
  • Certain retail and distribution activities
  • Some transportation services
  • Specific agricultural products

• Restrictions can vary based on:

  • Percentage of allowed foreign ownership
  • Minimum capital requirements
  • Location (e.g., special economic zones may have different rules)
  • Specific licensing or partnership requirements

• It's crucial to consult the most recent version of the DNI before planning any foreign investment in Indonesia.

• Some sectors may require a combination of foreign and local ownership, promoting partnerships with Indonesian entities.

• Certain strategic industries (e.g., defense, natural resources) often have more stringent restrictions or are entirely closed to foreign investment.

• The Indonesian Investment Coordinating Board (BKPM) can provide guidance on interpreting the DNI for specific business activities.

• Even in open sectors, there may be additional licensing or operational requirements for foreign-owned companies.

• The government occasionally introduces new policies or incentives to attract foreign investment in priority sectors, which may override some DNI restrictions.

Always consult with legal experts or investment advisors familiar with the latest Indonesian regulations to ensure compliance with current foreign investment restrictions.

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