Starting a business in Indonesia

Indonesia has implemented several reforms that contributes to a more welcoming environment to start a business. One of the major changes is the Omnibus Law which revised over 70 existing laws to streamline regulations. This has reduced the complexity of legal processes, making it easier for businesses to comply with requirements.

The introduction of the Online Single Submission (OSS) system has also improved the business licencing process. Through this platform, you can expect your application to be approved within a few hours.

Indonesia’s Positive Investment List also opens up more than 200 business sectors to foreign participation. In sectors like automotive and pharmaceuticals, businesses can hold full foreign ownership unless specific limitations are in place.

Here, business fields are categorised into priority sectors, sectors with specific conditions, sectors open to large enterprises requiring partnerships, and sectors fully accessible to foreign investors. Especially you’re operating in a priority sector, support is available when starting a business in Indonesia. 

Indonesia also has over 70 double taxation avoidance agreements (DTAAs), which can prevent double taxation on income earned in both your home country and Indonesia. Countries include the United Kingdom (UK), China, Hong Kong, Italy, Singapore, and more.

Through the DTAAs, withholding tax rates on dividends, interest, and royalties are lowered, with exemptions from withholding tax on service fees. If you’re planning to start and grow a business in Indonesia, the DTAAs may help reduce your overall tax liability.

As a member of ASEAN, Indonesia benefits from a range of agreements that lower or eliminate taxes on goods traded within the region. For example, Indonesia is part of a complete free trade area with five other ASEAN member states, comprising of Brunei, Malaysia, Singapore, Thailand, and the Philippines.

These countries have removed import duties on 99 percent of goods included in their Inclusion List, with some exceptions. When establishing a company in Indonesia, you may leverage these favourable trade conditions supporting the import and export of products across Southeast Asia.

Through its ASEAN’s membership, Indonesia also provides access to an expanded trade network reinforced by FTAs. For businesses operating in or entering the Indonesian market, these FTAs ensure fewer trade restrictions when entering locations like Japan, China, Hong Kong, Australia, and New Zealand. 

With a workforce exceeding 130 million people, Indonesia is currently ASEAN’s largest labour market and ranks fourth globally. The country is made up of a relatively young population, with a large percentage of individuals in their prime working years. Indonesia also has some of the most competitive wage rates in the region. This gives you the flexibility to manage labour costs while accessing a robust pool of working-age talent.

Besides its domestic workforce, Indonesia is also welcoming foreign nationals with new initiatives. From 1 April 2024, foreign nationals can reside in Indonesia while working remotely for their overseas employers through the Remote Worker Visa (E33G). The visa is valid for up to one year, with the option to extend for an additional year. The combination of a large local labour pool and growing access to skilled foreign workers offers your business the opportunity to tap into a diverse workforce. 

Additionally, World Bank data shows that Indonesia's middle class is expanding. Over 52 million Indonesians, or one in five people, are considered economically secure and their spending accounts for nearly half of household consumption in the country. The Indonesian government has also set a long-term goal to increase the middle-class population from 20 percent to 80 percent, signalling greater economic potential for the future.