CRITERIA FOR BUSINESS ACTIVITIES TO OBTAIN INVESTMENT FACILITIES FOR FOREIGN DIRECT INVESTMENT ("FDI")

The Indonesian government supports FDI activities by providing necessary facilities and facilitations. The purpose of these investment facilities is to increase foreign investors' interest in investing in Indonesia. Provisions regarding investment facilities can be found in Law Number 25 of 2007 concerning Investment ("Investment Law") as amended by Law Number 6 of 2023 concerning the Ratification of Government Regulation Number 2 of 2022 concerning Job Creation into Law ("Job Creation Law"). According to Article 18 of the Investment Law as amended by the Job Creation Law, it is essential to note that Investment Facilities can be granted to Investments that:

1. Expand their business; or
2. Undertake new investments.

FDIs that can obtain facilities must meet the following criteria at a minimum:

1. Absorb a significant amount of labor;
2. Belong to a high-priority scale;
3. Involve infrastructure development;
4. Transfer technology;
5. Engage in pioneering industries;
6. Located in remote areas, underdeveloped regions, border areas, or other areas deemed necessary;
7. Uphold environmental sustainability;
8. Conduct research, development, and innovation activities;
9. Partner with micro, small, medium enterprises, or cooperatives;
10. Use capital goods, machinery, or equipment produced domestically; and/or
11. Include tourism business development.

According to the Investment Coordinating Board Regulation Number 4 of 2021 concerning Guidelines and Procedures for Risk-Based Business Licensing Services and Investment Facilities ("BKPM Regulation No. 4/2021"), as mentioned in Article 66 paragraph (2), the provided facilities are as follows:

1. Duty-free importation;
2. Income tax for investments in specific business sectors and/or certain areas;
3. Corporate income tax reduction;
4. Corporate income tax reduction and income tax facilities for investments in specific business sectors and/or certain areas in Special Economic Zones (SEZs);
5. Gross income reduction for specific research and development activities in Indonesia;
6. Gross income from conducting internships, apprenticeships, and/or learning activities for human resource development based on specific competencies; and
7. Net income reduction for new investments or business expansion in specific labor-intensive industries.

The brief overview above provides a general description of the investment facility regulations for Foreign Direct Investment (FDI) companies. If you wish to learn more about this matter, Suria Nataadmadja & Associates Law Office can assist you.