Know These Provisions to Become Best Foreign Director in Indonesia: 2025 Legal Do’s and Don’ts (Part 3)

Know These Provisions to Become Best Foreign Director in Indonesia: 2025 Legal Do’s and Don’ts (Part 3)

“To become the best foreign director in Indonesia, it is essential to pay attention to what is allowed and not allowed according to the applicable regulations.”

Indonesia is one of the largest economies in Southeast Asia. In an effort to increase foreign investment, the Indonesian government provides opportunities for foreign workers, including foreign directors, to work in companies operating in Indonesia.

The employment of foreign directors in Indonesian companies has various implications, both in terms of regulations and economic and social impacts. Furthermore, in the era of globalization, many companies in Indonesia appoint foreign directors to lead operations and business strategies.

The presence of foreign directors in Indonesian companies offers significant benefits, including knowledge transfer and enhanced international competitiveness. However, they must understand and comply with the applicable legal regulations and carry out their duties with full responsibility to ensure that the company operates optimally and sustainably.

Read More: Foreign Individuals as Directors in Indonesia: 5 Points Legal Do’s and Don’ts of 2025 (Part 1)

1.Best Foreign Director: Board of Directors Meeting

The meetings of the Board of Directors meetings are an important mechanism in company management. This meeting is a forum for directors to discuss strategic policies, make important decisions, and evaluate the company’s performance. 

By Indonesian law, the meetings of the Board of Directors is also a way to pass resolutions and decisions of the Board of Directors, especially if there are more than 1 (one) members of the Board of Directors.

Meetings of the Board of Directors are held to:

1. Discuss and decide on company strategic policies.
2. Supervise the implementation of operational tasks by management.
3. Prepare and evaluate annual reports or financial performance.
4. Discusses decision making regarding investment, expansion, or risk management.

For resolutions to be passed through meetings of the Board of Directors, several requirements must be met, namely:

1. Quorum for Attendance: The meeting must be attended by more than 50% of the members of the Board of Directors, unless otherwise stipulated in the company’s Articles of Association.
2. Meeting Notification: The notification must be made in writing and delivered within a specified timeframe (e.g., 7 days before the meeting) and must include the meeting agenda.
3. Meeting Agenda: The agenda discussed must align with what is stated in the invitation.
4. Recording of Decisions: The meeting resolutions must be documented in minutes of the meeting, signed by all attending members of the Board of Directors.

It should also be noted that the Board of Directors can make valid decisions without holding a Board of Directors Meeting, provided that all members of the Board of Directors have been notified in writing and all members of the Board of Directors have unanimously given their approval.

Read More: Company with Foreign Directors: 5 Points Legal Dos and Don’ts of 2025 (Part 2)

2. Principles of the Board of Directors in Carrying Out Duties and Responsibilities

The Board of Directors has the obligation under Indonesian laws to carry out the management of the company in good faith, with full responsibility, and comply with the provisions stipulated in the Law and the Company’s Articles of Association.

There are a few principles applicable to the Board of Directors under the Indonesian laws in carrying out their duties and responsibilities as follows:

1. Fiduciary Duty. Every member of the Board of Directors is obliged to carry out their duties in good faith and with full responsibility for the interests and business of the company. 

Each member of the Board of Directors must be fully and personally liable over the loss of the Company if it resulted from its fault or negligence in performing the Board of Directors duties.

1. Business Judgment Rule. The Board of Directors shall not be liable for the loss of the Company if it is proven that: 
   1. Such loss is not resulted from its fault or negligence;
   2. It has performed the management of the Company with good faith and prudent for the interest of the Company in the pursuit of its purposes and objectives;
   3. There is no conflict of interest, either directly or indirectly over the management that result to the loss; and
   4. It has taken a precaution measure to avoid the loss.

3. Best Foreign Director: Work and Residence Permit for Foreign Board of Directors

There are several requirements that foreign members of the Board of Directors must fulfill regarding work and residency permits in Indonesia. Every foreign worker employed by an employer of foreign workers in Indonesia is required to have a residency permit.

In this regard, companies need to pay attention to the Foreign Worker Utilization Plan (RPTKA), which outlines the planned employment of foreign workers for specific positions and a specific period.The RPTKA must be approved as a recommendation for obtaining a visa and residency permit for foreign workers to work.

There are several types of residence permits used based on Government Regulation Number 31 of 2013 concerning Implementing Regulations of Law Number 6 of 2011 concerning Immigration as last amended Government Regulation No. 40/2023.

Limited Stay Permit Card (KITAS)

Foreign directors working in Indonesia must have KITAS as a valid residence permit document. KITAS is issued by the Directorate General of Immigration and is valid for one year, with an extension option of up to five years. The KITAS application process involves:

1. Apply for a limited stay visa (VITAS) through the Indonesian representative office abroad.
2. Document verification and validation at the local immigration office after arriving in Indonesia.
3. Payment of Government Fees related to KITAS.Permanent Stay Permit (ITAP)

If a foreign director has worked and lived in Indonesia for a long time, they can apply for ITAP. This permit grants permanent residency status in Indonesia and is usually applied for after five consecutive years of holding KITAS.

Read More: Expanding Business to Indonesia: Do You Really Need to Establish an Indonesian Company?

4. Tax Obligations for Foreign Board of Directors

In general, a foreign individual is considered as Taxpayer Subject in Indonesia and must register for a Taxpayer Identification Number (NPWP) when:

1. He/she resides in Indonesia;
2. He/she is in Indonesia for more than 183 days (can be non-consecutive) within a period of 12 months since his/her arrival in Indonesia; or
3. Within a tax year, the foreign individual is in Indonesia, and has the intention to reside in Indonesia.

A foreign individual becomes a taxpayer (wajib pajak) if he/she has received or obtained income with nominal value above the Non-Taxable Income (Penghasilan Tidak Kena Pajak or PTKP). Any income that comes from inside Indonesia territory and outside Indonesia territory is considered as taxable income.

Therefore, tax obligations in Indonesia shall apply to foreign individuals appointed as Foreign Board of Directors in an Indonesian Company (PT). It is highly advised to first consult certified tax consultants in both Indonesia and other countries where the foreign individuals are residing to further understand the tax implications of being appointed as Foreign Board of Directors in Indonesia.

It must be noted that NPWP (Tax Identification Number) is a mandatory requirement in order for foreign individuals to extend their KITAS in Indonesia.

5. Social Security Obligations for Foreign Board of Directors

Foreign individuals who work in Indonesian Company (PT), including as Board of Directors, for more than 6 (six) months, must be registered in the national social security program, or known as BPJS. Registration at the BPJS will result in the obligation of paying contributions every month, both by the Company and the Employee.

References:

1. Law Number 40 of 2007 concerning Limited Liability Company
2. Law Number 6 of 2023 concerning Stipulation of Government Regulations intended to become Law, in Lieu of Law no. 2 of 2022 concerning Job Creation
3. Law Number 13 of 2003 concerning Manpower
4. Government Regulation Number 34 of 2021 concerning Foreign Workers Utilization

Do you have further questions concerning Directors in Indonesia, or concerning companies and company law in Indonesia? Contact our lawyer now via email ask@bplawyers.co.id or 082112341235.

Author: Sekar Ayu Primadani/Genies Wisnu Pradana

This article has received approval for publication by Partner BP Lawyers Counselors at Law.