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Frequently Asked Questions


What is the legal system in Indonesia?

The legal system in Indonesia is a mixture of traditional customary law (adat), Islamic law (syariah), old Dutch laws and modern legislation.

How is the Indonesian judicial system organized?

The Indonesian judicial system is organized into three levels. The lower court is the District Court (Pengadilan Negeri) established in all districts and municipalities (Kotamadya or Kabupaten) in Indonesia. The first appellate court is the High Court (Pengadilan Tinggi) established in all provinces in Indonesia. The highest court is the Supreme Court (Mahkamah Agung).

How is judicial decision made?

Indonesian civil law, unlike common law systems, does not adhere to strict doctrines of precedent; each case must be determined on its own facts and merits, although consideration may be given to academic theories and prior decisions in similar cases, especially decisions of the Supreme Court.

What are other courts in Indonesia?

Indonesia also has separate three-tiered structures or courts for handling disputes in administrative law (which hears administrative law cases filed against the government), military law and Islamic family law. In addition, Since 1998, a number of specialized courts have been added to the Indonesian judicial system, including the Commercial Court, handling bankruptcy and intellectual property matters, the Anti-Corruption Court, the Human Rights Courts, and special tribunals for tax, labor, and fisheries disputes. A Constitutional Court (Mahkamah Konstitusi) was established in 2003. the Constitutional Court was established with a jurisdiction to hear disputes concerning various matters including: the constitutionality of legislation, general election, the dissolution of political parties, and the scope of authority of state institutions established pursuant to 1945 Basic Constitution (Undang-Undang Dasar 1945).

What are the categories of employment agreements?

Employment agreements in Indonesia are categorized into:
  • Employment agreements for a definite period in which an employment relationship has a definite term or based on the completion of a certain job.

  • Employment agreements for an indefinite period in which the employment agreement does not have specific term or require a completion of a certain job.


How is foreign company representative office regulated in Indonesia?

In Indonesia, a representative office may not, as a general rule, own or maintain production facilities or operational activities, and therefore, cannot accept orders, participate in tenders, sign contracts or engage in the importation of goods. A representative office in Indonesia may be an Indonesian company, an Indonesian individual, or an expatriate individual. If the representative office is to be headed by an expatriate, a work permit for the representative must be applied for together with the application for the representative office license.

What are the types of business representation in Indonesia?

  • Representative offices licensed by BKPM

  • Representative offices licensed by Department of Trade

  • Foreign bank representative offices

  • Representative offices in the field of construction services


Are there any exchange controls in Indonesia?

There are no strict foreign exchange controls currently in place in Indonesia. However, the Indonesian government has issued several regulations on the monitoring of foreign exchange traffic and places certain restrictions on the holding of Rupiah by non residents. This monitoring measure mainly comes in the form of reports on the foreign exchange flow in and out of Indonesia.

Who is the government agency that oversees money laundering?

Indonesia has established an Anti-Money Laundering Agency (“PPATK”) with broad powers of investigation and prosecution to prevent international money laundering activities.


Can foreigner make direct investment in any sector in Indonesia?

While Indonesian foreign investment law is intended to encourage foreign direct investment in Indonesia, it requires that the Indonesian government must regulate the fields of business activity that are open to foreign investment and set the priorities and any special conditions to be placed on foreign investments. The foreign investment law allows the Indonesian government to determine that certain areas are closed to further investment. It also stipulates that industries relating to national defense are to remain totally closed to foreign investment and that certain sectors that are important to the State and affect the livelihood of the Indonesian population cannot be undertaken by foreign investors alone (i.e., without ocal participation).

How is investment negative list regulated?

The Indonesian government from time to time has issued a list of desired investments and a list of fields of business activity which are closed to further foreign investment. The list is commonly called the Negative List for Investment (Daftar Negatif Investasi). In preparing the Negative List, there has been a concerted effort to keep the number of restricted sectors to a minimum and to remove numerous conditions that previously had been imposed.

Are there minimum capital/investment requirements?

The Indonesian Investment Coordinating Board (BKPM) has not set a minimum amount of total investment, capital or equity necessary for a foreign investment project to be approved. BKPM will consider the likely capital requirements for investments in the business sector applied for in determining whether a proposed investment is adequately capitalized. Generally, investments in the service sectors are approved at much lower levels of investment than investments in manufacturing or other industries with high equipment needs.

What is the timeframe involved for establishment of foreign investment company?

The whole process ordinarily takes up to 4 – 6 months until the foreign investment company (PMA) obtains all the licenses necessary to operate in Indonesia.

What is our obligation as a holder of a BKPM approval?

After obtaining a BKPM approval, PT PMA has the obligation to submit a report of Capital Investment Activities (Laporan Kegiatan Penanaman Modal or LKPM) to BKPM. PT PMA that has not yet obtained a Permanent Business License (IUT) shall submit LKPM to BKPM semi annually. PT PMA that has obtained IUT must submit LKPM annually. This report is in the standard form of BKPM.

When must we obtain the IUT?

When PT PMA reaches the stage of commercial production, it shall apply for an IUT (Permanent Business License) to BKPM. Before the issuance of IUT, the initial investment approval serves as a temporary operating license. Upon issuance of the IUT, PT PMA is authorized to conduct its activities for 30 years period.

What should we do to import capital goods/raw materials?

PT PMA that wishes to import capital goods/raw materials must have a Limited Importer License Number (Angka Pengenal Import Terbatas or APIT). The APIT is obtained through BKPM. Goods imported under an APIT are subject to a reduced withholding tax compared to the normal rate. PT PMA may obtain favorable import duty reductions on imported production equipment, spare parts and raw materials that are not locally available. PT PMA must submit Master List application to BKPM or the Customs and Excise Office (in certain circumstances).


How is minimum wage regulated?

The term minimum wage in Indonesia relates to the Regional Minimum Wages that vary from province to province, with each province having the authority to regulate its own minimum wage. Regional Minimum Wages are determined by the Department of Manpower and are subject to the annual review by the Employers Association.

How is working hour regulated?

An employer is not permitted to make its employees perform work for more than 7 hours a day for 6 work days per week or 40 hours a week. However, the total working hours may be distributed into 5 work days per week with no more the than 8 hours work per each day. Employees who have to work for more than 40 hours per week are entitled to receive overtime payment.


My question is not answered here. What else can I do?

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