Economic & Business Laws — Indonesia

Economic and Business Laws for Immigrants to Indonesia

*Note: Indonesian immigration and investment regulations change frequently. Always verify current requirements with Indonesia's Ministry of Law and Human Rights (Kemenkumham), BKPM/Kementerian Investasi (Investment Ministry), and a licensed local advisor before making decisions.*

Right to Work by Visa Type

Visas That Do NOT Permit Work

• Visit Visa (B211A/B211B): Tourism, social, business meetings only—no employment, even remote work for foreign companies is legally ambiguous and risky
• Social-Cultural Visa: Family visits, study, research—no employment
• Second Home Visa: Long-term (5-10 year) residence visa requiring proof of funds (~$130,000 USD deposit/property), but does not grant work rights

Visas That Permit Work

• Limited Stay Visa (KITAS) with Work Permit: Requires sponsoring employer
• Requires RPTKA (Foreign Worker Utilization Plan) approval from Ministry of Manpower
• Requires IMTA/Notifikasi (work authorization notification)
• Tied to specific employer and job position
• Valid 6 months to 2 years, renewable
• Investor KITAS: For foreign shareholders/directors of PT PMA companies
• Requires minimum capital investment (typically IDR 1 billion+ share ownership)
• Allows work only within the sponsoring company
• Second Home Visa holders: Cannot work as employees but *can* often serve as company directors/commissioners if also structured as investors
• Digital Nomad/Remote Worker Visa (introduced 2022, evolving): Allows remote work for foreign employers only—not for Indonesian companies or clients

Key Restriction

• Foreigners generally cannot work without employer sponsorship; freelancing on a tourist/business visa is illegal and enforcement has increased since 2023

Starting a Business as a Foreigner

PT PMA (Foreign-Owned Limited Liability Company)

• The primary legal vehicle for 100% or partial foreign ownership
• Minimum investment: IDR 10 billion (~$650,000 USD) per business line/KBLI code, excluding land and buildings
• Minimum paid-up capital: IDR 2.5 billion (~$165,000 USD), though many sectors require more
• Registered through OSS (Online Single Submission) system
• Requires:
• Deed of establishment (notarized)
• Domicile/lease agreement
• Tax ID (NPWP)
• Business licenses (NIB - Nomor Induk Berusaha)

Cannot Use Local Nominee Structures

• Using an Indonesian nominee to hold shares/property on behalf of a foreigner is illegal and unenforceable in court (Supreme Court precedent)
• Common historically but carries high legal and financial risk—nominee agreements offer no legal protection if disputed

PT (Local Company)

• Reserved for Indonesian citizens; foreigners cannot be shareholders except through PT PMA structure

Foreign Investment Restrictions

Positive Investment List (Daftar Positif Investasi)

• Replaced the old "Negative Investment List" in 2021 (Presidential Regulation 10/2021, amended by 49/2021)
• Specifies sectors that are:
• Open 100% to foreign investment
• Partially open (capped foreign ownership %, e.g., 49%, 67%)
• Closed to foreign investment (reserved for government or small/medium local enterprises)

Closed or Restricted Sectors (examples)

• Small-scale retail and traditional markets
• Certain agriculture/plantation activities below minimum size
• Media and broadcasting (capped foreign ownership)
• Certain transportation and logistics services
• Cannabis cultivation (illegal)
• Small/micro enterprises reserved for domestic MSMEs

Sector-Specific Caps (examples, subject to change)

• Construction services: up to 67% foreign ownership
• Telecommunications: varies by sub-sector, often 65-100%
• Pharmaceuticals: capped, varies
• Tourism (hotels, restaurants): generally open but check KBLI codes

Special Economic Zones (KEK)

• Offer tax holidays, streamlined licensing, and sometimes higher foreign ownership caps
• Located in areas like Batam, Sei Mangkei, and others

Property Ownership Rights for Non-Citizens

Foreigners CANNOT Own Freehold Land (Hak Milik)

• Freehold ownership is constitutionally reserved for Indonesian citizens only

Available Options for Foreigners

• Hak Pakai (Right to Use)
• Available to foreign individuals holding valid KITAS/KITAP
• Initial term: 30 years, extendable +20 years, renewable +30 years (up to 80 years total)
• Minimum property value requirements vary by region (e.g., Jakarta ~$1.5 billion IDR, Bali varies)

• Leasehold (Hak Sewa)
• Long-term lease agreements (often 25-30 years, renewable)
• Most common structure for foreign residents, especially in Bali

• PT PMA Ownership
• A foreign-owned company can hold Hak Guna Bangunan (HGB) – Right to Build
• Valid for business/commercial property, not personal residential use
• Term: 30 years, extendable +20, renewable

KITAP (Permanent Stay Permit) Holders

• Same Hak Pakai rights as KITAS holders—no upgrade to freehold ownership
• KITAP does not equal citizenship rights regarding property

2024 Update

• Some regulatory discussions ongoing about extending foreign ownership rights, but freehold restrictions remain constitutionally protected (Agrarian Law No. 5/1960)

Banking Access for New Immigrants

Opening a Bank Account

• Requires KITAS or KITAP (valid limited or permanent stay permit)—tourist visa holders generally cannot open accounts at major banks
• Required documents typically include:
• Valid passport
• KITAS/KITAP
• NPWP (Tax ID number)—increasingly required even for basic accounts
• Domicile letter (SKTT) from local civil registry
• Reference letter (some banks require employer or sponsor reference)

Common Banks for Foreigners

• Commercial Banks: BCA, Mandiri, BNI, CIMB Niaga, Permata Bank
• Some banks are more foreigner-friendly with English-speaking staff (BCA, Commonwealth Bank branches historically, though international bank presence has decreased)

Limitations

• Credit history from abroad doesn't transfer—building local credit takes time
• Loan/mortgage access for foreigners is very limited; most property purchases are cash transactions
• Some banks restrict account types or require minimum balances for foreign nationals

Digital Banking

• Local fintech/digital banks (Jenius, Jago, Blu) increasingly accept foreigners with KITAS, offering more flexible onboarding

Labor Law Protections for Immigrant Workers

Governing Law

• Manpower Law No. 13/2003, as amended by Job Creation Law (UU Cipta Kerja) No. 6/2023 (formerly Omnibus Law)

Protections That Apply to Foreign Workers

• Minimum wage laws: Regional minimum wages (UMR/UMP) technically apply, though foreign workers in skilled/expert roles are typically paid well above minimum
• Termination protections: Requires valid legal grounds; severance pay obligations apply (calculated by tenure)
• Work hour limits: Standard 40 hours/week, overtime compensation required
• Social security (BPJS):
• BPJS Ketenagakerjaan (employment social security): mandatory for foreign workers employed 6+ months
• BPJS Kesehatan (health insurance): mandatory enrollment for foreign workers residing 6+ months

Key Restrictions/Limitations

• Foreign workers cannot hold HR/personnel management positions (reserved for Indonesian nationals by law)
• Certain positions are reserved exclusively for Indonesian citizens (published in restricted position lists by Ministry of Manpower)
• Work permits are employer-specific—changing jobs requires new RPTKA/permit process, creating dependency on employer sponsorship
• No automatic path from work visa to permanent residency; KITAP eligibility generally requires 3-4 consecutive years on KITAS (varies by visa category) plus additional requirements

Dispute Resolution

• Foreign workers can access Industrial Relations Courts (Pengadilan Hubungan Industrial) for labor disputes
• Practical challenges: language barriers, unfamiliarity with local legal system, and visa status tied to employer create power imbalances

Recommended Due Diligence Steps

• Consult a licensed Indonesian lawyer (Advokat) for business structuring and property transactions
• Verify current KBLI codes and foreign ownership percentages via OSS system before starting any business
• Confirm visa/work permit compatibility with Ministry of Manpower before accepting employment
• Use licensed notaries (Notaris) for all property and corporate transactions—informal nominee arrangements carry serious legal risk
• Check Bank Indonesia and OJK (Financial Services Authority) updates for banking regulation changes
• Monitor Positive Investment List revisions, as sector openness changes periodically via Presidential Regulation updates

Given the complexity and frequency of regulatory changes—especially post-2023 Job Creation Law implementation—engaging a qualified local immigration/corporate lawyer before any major financial or employment commitment is strongly advised.

More about immigrating to Indonesia