No Longer Based on DNI, the Business Sector With 100% Foreign Ownership Is Expanded

All forms of business activities are open to investment, except for the six business sectors and activities that can only be carried out by the government.

Indonesia as a developing country certainly needs foreign investment as one of the driving forces of the economy. The way to attract foreign parties to invest in Indonesia is by offering promising benefits in the future. The Indonesian government through Presidential Regulation No. 10/2021 concerning the Investment Business Sector (PP 10/2021) has changed the concept of investment to become a priority business sector. This change is expected to encourage investors to invest in Indonesia. It can be seen that Presidential Regulation 10/2021 is an implementation of Law Number 11 of 2020 concerning Job Creation (Job Creation Law).

In contrast to the previous rule, which carries the concept that every investor is obliged to know what fields are open and closed so that he can find out what business fields he can choose, this new regulation carries the concept that all fields of investment are open, except for those that are restricted and with certain conditions. With this rule, a Foreign Capital Company (PMA) can establish a company in any sector with almost 100% ownership, except for the six closed sectors and business fields with certain conditions.

1. Closed business sector
   The closed business fields regulated in PP 10/2021 refer to Article 12 of the Job Creation Law including:
   1. Class I Drug Industry Development;
   2. All forms of gambling and/or casino activities;
   3. Catching of Fish Species listed in Appendix I of CITES;
   4. Taking or utilizing coral or coral reefs from nature;
   5. Chemical weapons manufacturing industry; and
   6. industrial chemicals industry and ozone depleting substances industry
2. Open business fields
   PP 10/2021 explains that open business fields are divided into four categories, including:
   1. Priority business fields;
   2. Allocated business fields or partnerships with cooperatives and MSMEs
   3. Business fields with certain conditions; and
   4. Business fields that are not included in points a, b, and c but can be operated by all investors.
3. Provisions and facilities for priority business fields
   Priority business fields must meet the criteria, including national strategic programs/projects, capital intensive, labor intensive, high technology, pioneer industry, export orientation, and/or orientation in research, development, and innovation activities. Furthermore, it is also stated that investors who invest in the priority business sector will be given fiscal incentives and/or non-fiscal incentives.

Then, there are fiscal incentives and non-fiscal incentives. Fiscal and customs incentives for priority business sectors are in the form of exemption from import duty on imports of machinery, goods, and materials for industrial development. The tax incentive itself consists of three things. First, the tax incentives which include income tax for investment in certain business fields and/or in certain areas (Tax Allowance). Second, corporate income tax deduction (Tax Holiday).

Third, reduction of corporate income tax and net income reduction facilities for investment and reduction of gross income for certain activities (Investment Allowance). Investment Allowance includes a reduction in net income from new investment or expansion of business in certain business fields, which are labor-intensive industries, and/or reduction of gross income for carrying out work practice, internship, and/or learning activities in order to foster and develop certain competency-based human resources

Meanwhile, the non-fiscal incentives include an ease of business licensing, provision of supporting infrastructure, guaranteed energy availability, guaranteed availability of raw materials, immigration, employment, and other conveniences in accordance with the provisions of laws and regulations.

4. Capital provisions may be below IDR 10 billion for technology-based startups in the KEK area (Special Economic Zone)

Foreign investors must invest more than IDR 10 billion when establishing a PT PMA. However, in PP 10/2021 there is an exemption or invalidity of IDR 10M capital for investment activities carried out in special economic zones for pilot business activities. PT PMA which is located in a special economic zone in the technology-based startup sector can invest equal to or less than IDR 10 billion excluding the value of land and buildings.

Special economic zone based on website www.kek.go.id including:

SEZs that have been operating:

• • Sei Mangkei SEZ
  • Tanjung Lesung SEZ
  • Palu SEZ
  • Mandalika SEZ
  • Galang Batang SEZ
  • Arun Lhokseumawe SEZ
  • Tanjung Kelayang SEZ
  • Bitung SEZ
  • Morotai SEZ
  • Maloy Batuta Trans Kalimantan (MBTK) SEZ
  • Sorong SEZ

SEZs in Development Stage:

• • Tanjung Api-Api SEZ
  • Singhasari SEZ
  • Kendal SEZ
  • Likupang SEZ

Author: Hasyry Agustin/Rio Aldi

With this regulation, of course, investing in Indonesia will become easier. Do not let you miss this convenience of investing opportunity because you do not find the right consultant for your PT PMA establishment. Consult your investment plan and PT PMA establishment to us via ask@bplawyers.co.id or 082112341235.