A.    NATURE OF INVESTMENT

In Indonesia the term "investment" denotes two meaning. The first meaning is direct investment and the second meaning is indirect investment. Direct investment is investment through the mechanism of Foreign Investment Law. While indirect investment is investment by way of buying shares through the stock exchange.

Here we will focus on Foreign Direct investment ("FDI") and will not deal with foreign indirect investment. Matters that have concerned with FDI is handled by the Investment Coordinating Board (Badan Koordinasi Penanaman Modal) or better known as "BKPM". Please note, however, that investment in mining, forestry, oil, banking and insurance are not under the exclusive purview of BKPM. These sectors are handled also by relevant ministries.

B.

LEGAL ASPECT

Share Ownership 
A PMA company is general established as a joint venture between foreign and Indonesia partners. The partnership may involve legal entities (Corporations) or individual persons. A joint venture entity shall take the form of a Limited Liability company, which is subject to Indonesian Company Law (No. 1, year 1995), denoted as PT (Perseroan Terbatas) and its implementary Regulation. A PMA company may be established as a straight investment, namely with 100 % foreign ownership.

C.

TAXATION

Income Tax
Income tax in Indonesia is progressive and applies to both individual and corporate taxpayers. In order to provide more facilities for taxpayers, the self-assessment system is still maintained, but its application is improved continuously. 
Tariffs of tax on tax on taxable income of taxpayers shall be as follows:

Land and Building Tax
Land and Building Tax is payable annually on land, buildings and permanent structures. The effective rates are nominal, typically not more than one tenth of one percent per annum (0,1 %) of the value property.

D.

INCENTIVES

Import Duties 
All Investment projects approved by BKPM PMA will be granted exemption/relief from import duty and levies on the importation of capital goods namely machinery, equipment's, spare parts and auxiliary equipment's.

Export Manufacturing
Restitution (drawback) of import duty and import charge on the importation of goods and materials needed to manufacture the exported finished products.

Bonded Zones
The Industrial companies which are located in the bonded areas is provided with incentives as follows:

-	Exemption from import duty, import surcharge, excise, income tax of Article 22, Value Added Tax and Sales Tax on luxury goods on the important of capital goods and equipment including raw materials for the production process.
-	Allowed to divert their products amounted to ¼ of their export (in terms of volume) to the Indonesian customs area, through normal import procedure including payment of customs duties.
-	Allowed to lend their on own machinery's and equipment's to their subcontractors located outside the bonded zone for no longer than two years in order to further process their own products.

E.

LAND AND BUILDING

Indonesian land legislation's do not recognize the concept of free hold land rights. To foreign investors, the following three main rights are significant:
- The Land Cultivation Right (Hak Guna Usaha, abbreviated HGU)
- The Right of Building on Land (Hak Guna Bangunan, abbreviated HGB)
- The Right of Use on Land (Hak Pakai, abbreviated HP)

These rights authorize the use of land in some ways, and their differences are mainly on the duration of validity, the nature of utilization, the opportunity to mortgage, and proof of tittle:
The Land Cultivation Right (HGU) is the right to use state owned for the purpose of agriculture namely plantation, fishing or cattle raising. By law the title is granted for a maximum period of 35 years, but may be extended to 25 years if the land is properly use and managed. This title of right is given to Indonesian partner(s) or legal entities domiciled in Indonesia including PMA companies. It can be used as a collateral or transferred to a third party with the government's approval. 

The Right of Building on Land (HGB) is the right to construct and own buildings on a piece of land that one has purchased. The title is granted for a maximum period of 30 years which can be extended for a maximum period 20 years. The title is granted to Indonesian Individual(s) and/or legal entities domiciled in Indonesia, including PMA companies, and can be used as collateral or transferred to a third party. The Right of Use on Land (HP) id the right to use land for any purpose for period of 25 years, it can be extended for 20 years. It has no collateral value to the owners and not transferable.

F.

G.

- Release regulation for PMA factory does not have to be located in industrial estate or bonded warehouse
- Tax holidays for 22 types of industries.
- More line of business for PMA investments, such as import trading, distribution, retail and restaurant.

H.

I.

J.

K.

Nature of Investment

Legal Aspect

Taxation

Incentives

Land and Building

Relevant International Agreements

New Deregulation

Expatriates and Work Permits

Representative Office

The Requirements

Forms of Approval/Permit/License