Indonesia Issues Implementing Rules of Investment Law Reform

Bookmark

Indonesia has released the specifics of its investment law overhaul, with changes that include lower taxes on bond earnings and new permit requirements for plantations.

The 51 implementing rules, including two that were issued in 2020, cover land management, foreign worker regulations and a new framework for deciding which sectors are open or closed to overseas investors. The omnibus law passed last year is meant to spur investments and create jobs, part of a major push by President Joko Widodo to bring the pandemic-hit economy out of its first recession since the Asian financial crisis.

Key Points

  • Non-resident taxpayers are now subject to 10% tax rate on earnings from debt securities, instead of 20%, or another level aligned with treaties to avoid double taxation. The change is valid six months from the rule’s issuance.
  • Palm oil plantations in areas designated as forests must get a state permit within three years or face administrative sanction. The plantations must have been started and operated in line with previous regulations.
  • Business permits are simplified, with those deemed as low-risk only needing an identity number to operate, while high-risk ones must get a full license. The rule refers to risk as possible impact to health, safety and the environment.
  • Companies don’t need to apply for a new permit when hiring foreign workers already holding a valid visa from another company, as long as the employee works as a director, commissioner, or in roles linked to vocational training, digital economy or oil and gas.

References

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.