Business practicalities in Indonesia

Land and property rights

Australian businesses will encounter three key land rights regulations when establishing a company in Indonesia. These include:

• The right to use (Hak Pakai): Locals, foreign nationals and foreign legal entities that have a representative office can be granted the right to use land. This includes state land, freehold land and the right to manage land. The title is valid for 30 years and extendable for another 20 years for a maximum of 80 years.
• The right to build (Hak Guna Bangunan): A title that is granted on state or freehold land to Indonesian nationals and foreign companies PT PMAs to construct a building. The title is valid for 30 years and extendable for another 20 years for a maximum of 80 years.
• The right to cultivate (Hak Guna Usaha): Normally granted on state land, this title enables foreign PT PMAs to develop plantations. The title is valid for 30 years, extendable for 20 years, and a further 30 years for a maximum of 80 years.

If businesses are granted title to use, build or cultivate, they must commence activities on the land within two years of the title being granted.

Foreigners and foreign legal entities can own apartments and houses located within SEZs, free trade zones (FTZs) and industrial estates, provided they are worth more than the minimum threshold for the province where the property is located.

Intellectual property (IP)

Indonesia’s legal framework supporting intellectual property (IP) rights is underdeveloped. While it is a signatory to the Paris Convention, the Berne Convention, the Madrid Protocol and the WIPO Copyright Treaty, there is still uncertainty around patent protection, compulsory licenses and design rights.

The government body responsible for registration of IP rights in Indonesia is the Directorate General of Intellectual Property Rights (DGIP) under the Indonesian Ministry of Law and Human Rights. You can acquire and register IP protection for trademarks, copyright, designs and patents through DGIP. Existing IP can be searched on the DGIP database at dgip.go.id.

There are three main types of intellectual property in Indonesia: trademarks, patents and copyright. The following mechanisms are used for registration:

Violation of IP and enforcement options:

Despite a challenging environment for IP enforcement, Indonesia’s DGIP continues to work on improving enforcement mechanisms through anticounterfeiting, dedicated taskforces, and an online portal for tracking cross-agency IP enforcement activities.

Businesses seeking to enforce their IP rights can file proceedings with Indonesia’s Commercial Courts. Commercial Courts hear cases on IP cancellation, deletion, infringement and appeals of decisions of the Trademark Appeal Commission and Patent Appeal Commission. In 2023, the Central Jakarta District Court introduced an e-court registration system that provides a simplified filing system for civil IP proceedings.

Government authorities can issue fines up to IDR 2 billion (AUD 192,000) and five years imprisonment for trademark violations, IDR 1 billion (AUD 96,000) for patent violations and IDR 4 billion (AUD 383,000) and 10 years imprisonment for copyright violations.

Local content requirements

Local content requirements (LCRs) mandate the use of domestic inputs in industrial production to protect local industries or generate employment. Indonesia has one the most extensive LCR regimes in the world, impacting the telecommunications, pharmaceutical, METS, renewable energy and EV sectors, among others. Businesses should be aware of any LCRs for their respective sector when investing.

Import duties and tariffs 

Import duty rates come in three categories: ordinary rates, preferential rates and special preferential rates. 

• Ordinary rates apply to goods imported from countries outside the WTO system. Rates range from 0 to 170 per cent, although most imported items attract duties between 0 to 15 per cent.
• Preferential rates apply to goods from countries that have MFN status with Indonesia. MFN rates are applicable to goods imported from any WTO member state.
• Special preferential rates apply to goods from countries that have a preferential trade agreement with Indonesia. Australian businesses qualify for special preferential rates through the IndonesiaAustralia Comprehensive Economic Partnership Agreement (IA-CEPA), the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) and the Regional Comprehensive Economic Partnership (RCEP).

To find the tariff rate for specific goods, visit the Department of Foreign Affairs and Trade’s FTA Portal at ftaportal.dfat.gov.au.

The Directorate General of Customs and Excise (DJBC) is responsible for levying tariffs on imported goods. For up-to-date information visit beacukai.go.id.

Special Sales Tax (SST) applies to some products in addition to import duties. Value Added Tax (VAT) will also be applied to imported goods and services at a rate of 11 per cent (unless exempt under the VAT regulations) and 12 percent applied to luxury goods.

An import tax of 7.5 per cent applies to consumer goods sold via e-commerce with a value between USD 3 (AUD 4.5) and USD 1,500 (AUD 2,300). Imported textiles, clothes, bags, shoes and cosmetics are subject to taxes ranging from 10 to 30 per cent. 

Calculations and payments 

Indonesia follows the WTO Valuation Agreement on imported goods with certain variations. Import duty is calculated by multiplying the imported good’s dutiable value by the corresponding import duty rate. The dutiable value of imported goods is typically based on the cost, insurance and freight (CIF) level. 

Exemptions

Import duty exemptions are provided for a range of goods and entities, including: 

• Materials used for the production of export goods
• Newly established or expanding foreign companies in the construction and mining sectors.

Export duties 

Export duties are charged on only a few items – leather, wood, cocoa beans, palm oil and metal mineral products.

Import and export regulations

MoT and the Ministry of Finance (MoF) are responsible for regulating trade in Indonesia. Under the Omnibus Law, MoT has the authority to issue approvals, verifications, obligations and licences on import-export activities.

Businesses require a Business Identification Number (NIB) to begin exporting, in addition to a range of other approvals depending on their product or service.

As discussed in Section 3.1, halal certification is required for most food and beverage imports and will be gradually introduced for a range of other products. Certification by Indonesia’s Halal Product Assurance Organising Body (BPJPH) or an approved certification body in Australia is required.

Import restrictions apply to low-value items imported via cross-border e-commerce and quotas apply to products covered by the Commodity Balance System. This system has introduced a new process for acquiring import licences for specific commodities and permits the government to regulate imports based on domestic supply and demand.

Indonesia’s Directorate General of Tax (DJP) imposes a wide-ranging tax regime that includes income taxes (corporate and personal), turnover and indirect taxes (VAT and specific business tax), as well as land and buildings tax, stamp duty, carbon taxes and regional taxes.

This section provides an overview of the taxes Australian businesses can expect to face when operating in Indonesia. Not all applicable taxes are covered in this guide, and the information provided is general. Businesses should seek professional tax advice for understanding the taxes specific to their activities and the tax practices specific to Indonesia, including how tax rates and refunds are applied.

Table 1: Overview of Indonesia’s taxes for businesses

Corporate Income Tax (CIT)

Businesses are subject to the tax rates imposed under the Harmonised Tax Law (2021). The standard CIT rate is 22 per cent. Companies incorporated in Indonesia are taxed on their worldwide income.

Branches of foreign companies are only taxed on profits from operations in Indonesia. Laws have been passed but not yet implemented that require businesses that engage in offshore e-commerce and meet certain economic presence criteria to be treated as a permanent establishment and subject to CIT.

Indonesia has signed double taxation avoidance agreements with more than 70 other countries, including Australia. These treaties eliminate double taxation by identifying exemptions or reducing liabilities in Indonesia for Australian businesses and residents.

Personal income tax 

Individuals who meet one or more of the following criteria are classified as tax residents under Indonesian law:

• Have been physically present in Indonesia for 183 days or more in any 12-month period
• Have a permanent residence in Indonesia
• Are present in Indonesia during a fiscal year and intends to reside in Indonesia.

Personal income tax (PIT) generally applies to tax residents’ worldwide taxable personal income, although the Omnibus Law has added a provision to the Income Tax Law that foreigners who have become domestic tax subjects can be taxed only on Indonesian-sourced income (including if paid offshore) if they meet certain skill requirements. This provision is available for the first four years from becoming a tax resident.

For individuals not classified as tax residents, a flat PIT rate of 20 per cent applies to employment income from Indonesia. However, the double taxation agreement between Australia and Indonesia may affect this rate.

Table 2: Personal income tax rates

Indirect taxes

Value added tax (VAT): VAT is a broadly-based consumption tax applied to most goods and services bought and sold in Indonesia. All companies and individuals conducting business in Indonesia must pay VAT on applicable goods and services. 

VAT is charged at two different rates:

• 0 per cent: Applies to exports of goods and services
• 11 per cent: The standard VAT rate that applies to all goods and services, although 12 per cent is levied on some luxury items.

The VAT law allows the Indonesian Government to change the rate within the range of 5 to 15 per cent.

Non-resident suppliers of digital services within Indonesia are required to collect 10 per cent VAT.

Luxury-goods sales tax (LST): In addition to VAT, some imported goods are subject to LST, including motor vehicles, luxury boats and aircraft. Rates range from 10 to 125 per cent.

Land and buildings tax (PBB): Land and buildings tax is a regional tax. It covers all land and buildings except for those in forestry, plantation, mining and industries located in national waters outside the territory of the regional area. The maximum PBB rate is 0.5 per cent on the sale value of the land or building.

Carbon tax: A carbon tax is imposed on carbon emissions. The carbon tax rate is a minimum of IDR 30/kg CO2e (AUD 0.003) for all emissions that exceed a specific cap. The tax will be implemented in stages according to market readiness, beginning with the coal-fired power sector.

Auditing and accountancy play a vital role in enhancing transparency and accountability in a business, especially one engaged in a foreign market. It increases business performance by identifying risks and highlighting areas for improvement.

Accounting standard

Local and foreign businesses are required to comply with the Indonesian Financial Accounting Standards (SAK) when recording financial transactions.

Australian businesses with Indonesian operations often manage two accounting records, one based on SAK and the other on Australian Accounting Standards (AAS).

The Indonesian Financial Accounting Standards Board (DSAK) - the independent national accounting standard-setting body - has committed to full adoption of the International Financial Reporting Standards (IFRS).

Statutory audits

Annual financial statements of foreign-invested business entities must be audited by an independent auditor in Indonesia if they have assets exceeding IDR 50 billion (AUD 4.8 million).

Books and records 

Accounting records must be in the Indonesian language. However, foreign investment companies, permanent establishments, subsidiaries of foreign companies and taxpayers can present their financial statements in English. Approval must be granted by DJP.

The Indonesian Rupiah should be used as the accounting currency. Companies need permission from DJP to use the US Dollar, the only other eligible currency.

The Indonesian financial year is the calendar year (1 January – 31 December). All companies must retain records used in the preparation of their accounting books for 10 years.

Quality control 

MoF’s Centre for Supervision of Financial Service (PPPK) is the independent audit oversight authority and is responsible for the supervision of the accountancy profession, including monitoring the professional activity of statutory auditors.

The PPPK issues practicing licenses to individual auditors and audit firms, establishes the requirements to obtain and maintain a practicing license, sets continuing professional development requirements for auditors, and investigates and disciplines individual auditors and audit firms.

The PPPK is a member of the International Forum of Independent Audit Regulators and the ASEAN Audit Regulators Group.

Doing business in Indonesia will often require employing local and foreign workers. Understanding Indonesia’s labour market regulations, recruitment methods and country-specific management styles is crucial to building and supporting an effective team.

Labour market

Skill level: Indonesia has a large, young but underskilled workforce. Skills shortages have emerged due to outward migration of skilled workers, an aging population and a lack of capacity to provide education and training. Although an upper secondary qualification is often the minimum requirement for successful labour market participation, 42 per cent of Indonesians aged between 25 and 34 years have not received one.

Employment contracts: Businesses can hire workers on either fixed term (PKWT) or ongoing (PKWTT) contracts. Fixed term contracts can be either projectbased, time-based or based on non-permanent work. The contract type determines the nature of work and contract period.

Ongoing contracts are the most common type of employment contract in Indonesia. A probationary period of three months is standard, during which time either party can terminate the contract with one to four weeks’ notice. Once the probationary period is over, an employer must issue a letter declaring the employee ongoing. Businesses may also utilise Professional Employer Organisation or Employer of Record services to outsource the legal responsibilities of hiring and managing staff on shore. However, this approach comes with risks as businesses don’t always have legal control of their staff.

Minimum wage: Indonesia’s Omnibus Law has changed the formula for calculating the minimum wage, eliminated sectoral minimum wages and introduced provisions for hourly wages.

The minimum wage applies to all workers who have worked less than one year in a company. After one year, the employee is paid in accordance with the wage scale of the company. Provincial governments determine the minimum wage based on economic and employment conditions.

Table 3: Monthly minimum wage

Note: City minimum wages can be different to the province in which they are located.

Human resources and employment law: Key pieces of Indonesia’s human resources and employment law include the Labour Union Law No. 21 (2000), the Industrial Relations Dispute Settlement Law No. 2 (2004), and the Job Creation Law No. 6 (2023), which updated Law No. 2 (2022). The Job Creation Law introduced reforms, including changes to minimum and hourly wage calculations, severance payments and income support for redundant workers. In 2024, the Constitutional Court ordered a judicial review of 21 employment-related provisions covering areas such as foreign workers, fixed-term contracts, outsourcing, leave, wages and termination. The Court strengthened worker protections— most notably limiting fixed-term contracts to five years and restoring collective bargaining rights for wages—and required legislators to consolidate the revised provisions into the Employment Law within two years.

Working hours: 40 hours per week, either seven hours per day for six days or eight hours per day for five days.

Holidays: Workers are entitled to 12 days of annual paid leave.

Overtime: Employers must provide overtime pay if work exceeds seven hours per day across six working days or eight hours per day across five working days. Employees are paid overtime for work on weekends and public holidays.

Sick leave: Employees are entitled to sick leave as certified by a doctor. There is no set number of days for sick leave, but an employee’s salary is reduced depending on the duration of the leave:

• 0 – 4 months: Employer pays 100 per cent compensation
• 4 – 8 months: Employer pays 75 per cent compensation
• 8 – 12 months: Employer pays 50 per cent compensation
• + 12 months: Employer pays 25 per cent compensation.

Social, health and unemployment contributions: All employees in Indonesia, including expatriates and their families, are required to participate in the National Social Security System (SJSN). Contributions include accident protection (AP), death insurance (DI), unemployment insurance (UI), old age saving (OAS), health insurance (HI) and pension (P). Contribution rates are as follows:

Ending employment: Indonesia’s Omnibus Law has relaxed regulations around employee termination. Employers can now terminate an employment contract with 14 days’ notice by notifying the employee in writing, outlining the reasons for termination and any termination payments and entitlements.

Severance pay: Severance pay is based on an employee’s length of employment. Rates range from one month salary for less than one year service to nine months’ salary for more than eight years of service.

Recruiting staff

Online advertising: Online job advertisements are an effective way to access talent. There are several useful websites in Indonesia for online advertising:

• Jobstreet is a popular Jakarta-based generalist online jobs board and part of the SEEK Ltd group jobstreet.co.id
• Indeed Indonesia is part of the Recruit Holdings group with a database of over 175 million resumes id.indeed.com
• Kalibrr has around 2.5 million active job seekers and partnerships with 18,000 companies kalibrr.id
• Jobindo is a popular jobs board used by over 6,000 companies and 150,000 job seekers jobindo.com.

Executive search: Executive search firms can provide tailored searches for more senior roles. International firms such as Robert Walters, Keller, Monroe and BTI have offices in Indonesia.

Work permits: Indonesian entities can recruit foreign workers by preparing a Foreign Worker Utilisation Plan (RPTKA) and submitting it to the Ministry of Manpower (MoM). This document must provide details of employment, including the nature of the work, position and length of employment. The company must prove that the foreign applicant is required to fill the role. Work permits are granted for between six months and five years, with the possibility of extension.

Foreign companies establishing a presence in Indonesia will need a local bank account to conduct business. To open a bank account in Indonesia, companies will need to visit a branch and present certain legal documents, including a deed of establishment, a decree from the Ministry of Law and Human Rights, Business Identification Number, tax card and BKPM approval.

Most banks offer both rupiah and foreign currency saving accounts for USD, Singapore Dollar, Japanese Yen, Euro, Hong Kong Dollar, Swiss Franc and AUD. The most common foreign currency used by businesses in Indonesia is USD.

There are three common bank accounts available in Indonesia:

• Savings account. The most common account that allows for real-time transfers.
• Deposit account. Offers higher interest rates and withdrawals require an agreement with the bank.
• Checking account. Payments can be made through cheques or demand deposit (GIRO).

Australian banks in Indonesia

ANZ operates in Indonesia as PT Bank ANZ Indonesia. It offers a range of products and services for corporate clients, including corporate and commercial banking, trade finance and cash management services. It has an established presence in Jakarta.

Foreign exchange controls

The IDR is freely convertible. However, Bank Indonesia (BI) prohibits the purchase of foreign exchange against the rupiah for amounts greater than USD 25,000 (AUD 38,000) per month without evidence of an underlying transaction.

All domestic financial transactions must be conducted in IDR, but regulatory exemptions have moderated the effect on foreign businesses operating in Indonesia. Among others, these exemptions include:

• Transactions for the purpose of international trade
• Bank deposits in foreign currencies
• International transactions where either the provider or receiver of the financing is domiciled overseas.

BI can issue exemptions from the mandatory use of rupiah for non-cash transactions based on the maturity of the businesses, the continuity of the business activity, any investment activity and the broader interests of national economic development.

In March 2025, the government tightened rules on the use of export earnings from natural resources. Under the revised framework, exporters (excluding oil and gas) must deposit 100% of their foreign exchange proceeds into the domestic banking system for a minimum of one year. This replaces the earlier requirement of 30% for three months. The policy is designed to strengthen Indonesia’s foreign exchange reserves, stabilise the rupiah and ensure greater circulation of export revenues in the domestic economy. Exporters are permitted to use these retained funds for purposes such as loan repayments, dividend payments, tax obligations and procurement of raw materials.

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