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Legal Overview New Investment or Expansion

Legal Overview

Find out how to invest in Indonesia and learn more about applicable government regulations and policies

Download Indonesia Investment Guidebook

01

VISA AND IMMIGRATION

Different types of visas and stay permits allow different types of activities. As part of the
government’s goal to make Indonesia more investment friendly through the enactment of the
Job Creation Law, Government Regulation No. 48 Year 2021 (GR 48/2021) on Immigration
was issued.

1.1

Type of Visas

a. Visitor Visa (B211A, B211B, B211C)

This type of visa cannot be used to work in Indonesia. Foreigners with this visa can carry out activities including: Tourism; Family; Social; Arts and culture; Duties of government; Non-commercial sports; Comparative studies, short courses and short training; Preinvestment activities; Conduct business talks; Make purchases of goods; Giving lectures or attending seminars; Participate in international exhibitions; Participate in meetings held with the head office or representatives in Indonesia; Continuing to travel to other countries; and Join the transportation means in the Indonesian Territory. GR 48/2021 adds a new eligibility category for both single and multiple-entry visit visas which is the pre-investment activities. These are activities in conjunction with starting a business such as activities related to field surveys and feasibility studies.

b. Temporary Stay Visa/VITAS 

This type of visa can carry out activities including: a professional or expert; who joins to work on ships, on vessels, or installations operating in the Indonesian maritime zone, territorial sea, continental shelf, and Indonesian Exclusive Economic Zone; whose job is quality control of goods or products; who conducts workplace inspections and audit; whose work with an aftersales service; who installs and repairs machine; with a nonpermanent work in constructions; with a probationary period for skilled works; a foreign Investment; a family reunion; retirement travel.

GR 48/2021 adds 2 requirements for a VITAS application, namely: a. A statement letter of good standing from the relevant authorities or the embassy or consulate of the foreigner’s country of origin; and b. A health examination letter stating that the foreigner is free from any contagious disease that could endanger public health.

1.2

Stay Permits

The principal provisions relating to the presence of foreigners in Indonesia under the previous laws and regulations are remain in force, while GR 48/2021 introduces some significant changes.

Visit Stay Permits

  • A visit stay permit issued based on entry to Indonesia under a single-entry visit visa, such visit stay permit is valid for a maximum period of 180 days and is nonextendable. 
  • A visit stay permit issued based on entry under a multiple-entry visit visa is granted for a maximum period of 180 days and is extendable up to an aggregate stay of no more than 12 months in Indonesia. 
  • The validity period of stay permits issued based on entry under a visit visa on arrival is no more than 30 days and is non-extendable.
Limited Stay Permit (Izin Tinggal Terbatas/ITAS)
  • An ITAS is valid for a maximum of five years and can be extended under the condition
    that the aggregate stay of the foreigner in Indonesia does not exceed 10 years. 
  • An ITAS for work purposes that is valid for no more than 90 days can be extended
    under the condition that the aggregate stay of the foreigner in Indonesia does not
    exceed 180 days. 
  • Now, a foreigners can apply by themselves to the relevant head of immigration office
    or appointed immigration official for the conversion of a visit stay permit to an ITAS,
    or an ITAS to a permanent stay permit (ITAP), that previously only guarantors could
    submit these applications.
Conversion of Stay Permit
 
The Ministry of Law and Human Rights provide ease of services and/or licensing on immigration facilities for foreign investment (PMA). Under BKPM Regulation No. 4 Year 2021, the ease of services and/or licensing are given for a conversion of stay permit after getting a letter recommendation from the Ministry of Investment/BKPM. Stay permit subjected to status conversion includes:
  • Visit Stay Permit converted to Limited Stay Permit; and 
  • Limited Stay Permit converted to Permanent Stay Permit
The recommendation for status conversion of a stay permit is given to 1) foreigners as shareholders and as directors or commissioners; and 2) foreigners as shareholders but are not in position as directors or commissioners. The shareholders must meet the following criteria:
  • If they are directors or commissioners, both status conversions require having a share ownership of at least IDR 1 billion or its equivalent in USD as stated in the deed; 
  • If they are not directors or commissioners, status conversion from Visit Stay Permit to Limited Stay Permit requires having a share ownership of at least IDR 1,125,000,000 or its equivalent in USD, while Limited Stay Permit to Permanent Stay Permit status conversion requires at least IDR 10 billion or its equivalent in USD, as stated in the deed.
The recommendation letter application is to be submitted to the Ministry of Investment/ BKPM through [email protected]. If a foreign shareholder, either as a director or a commissioner does not meet the criteria above, the application to use foreign workers shall be submitted to the MoM for:
  • Granting approval to change the status of a visit stay permit into a limited stay permit or extension of a limited stay permit; and 
  • Granting approval to change the status of a limited stay permit into a permanent residence permit or extension of a permanent residence permit

02

LAND AND ENVIRONMENT

2.1

Land Title

Land ownership in Indonesia is regulated under Law No. 5 Year 1960 on Basic Agrarian Law. The Job Creation Law and Government Regulation No. 18 Year 2021 (GR 18/2021) on Right to Manage, Right over Land, Stacked Units and Land Registration (Hak Pengelolaan, Hak atas Tanah, Satuan Rumah Susun dan Pendaftaran Tanah) has expanded some of its aspects e.g., the concept of right of management, space above and beneath the land, and electronic land-related documents. 

In general, the types of land title allowed are as follows:

  • Right of Ownership (Hak Milik/HM) Hak Milik is the right that gives the holder the fullest right a person can possess over a land in Indonesia. It allows an unlimited period of ownership, and it is transferrable, though it may be encumbered for security reasons. The title is available only to (i) Indonesian citizens, (ii) certain religious and social organizations, (iii) government bodies in Indonesia, and (iv) a very limited number of Indonesian legal entities allowed by the government. 
  • Right to Build (Hak Guna Bangunan/HGB) HGB title is the right to build and to own buildings on land which is not ones property. It can be given to (i) Indonesian citizens and (ii) legal entities (whether Indonesian or foreign owned) that are incorporated under Indonesian law and domiciled in Indonesia. The title can be granted over state land, Right of Management (Hak Pengelolaan) land, and Right to Own (Hak Milik) land. The maximum term of grant of HGB is 30 years, and may be extended for 20 years and renewal of a maximum for 30 years. Applications for extension of Right to Build can be submitted after the land has been utilized in accordance with the purpose or before the expiration date of the land title. While for the renewal of Right to Build can be submitted at the latest 2 years after the expiration date of the land title. 
  • Right to Cultivate (Hak Guna Usaha/HGU) HGU is a title granting the right to cultivate state land and the Right of Management land, or to use it for other agricultural purposes in a certain period of time. It can be given to (i) Indonesian citizens and (ii) legal entities (whether Indonesian or foreign owned) that are incorporated under Indonesian law and domiciled in Indonesia. The maximum term of grant of HGU is 35 years, with the option of extension for a maximum of 25 years and a renewal of a maximum of 35 years. The application for extension of a Right to Cultivate can be submitted after the business carried out on the land is effective. As for the renewal, the applications can be submitted at the latest 2 years after the expiration date of the land title.
  • Right to Use (Hak Pakai) Hak Pakai is the right to utilize land or to collect products from such land. The title can be granted for a definite or indefinite term, as long as the land is used for a specific purpose. GR 18/2021 divides Right to Use into two types: a. Right to Use for a certain period of time can be given to Indonesian citizens, legal entities established under Indonesian laws and domiciled in Indonesia, foreigners domiciled in Indonesia, and foreign legal entities having representatives in Indonesia. This Right to Use can be granted over state land, Right to Own land, and Right of Management land. The Right to Use over state land and Right of Management land can be granted for a maximum of 30 years, which can be extended by 20 years. After the term of the extension expires, the land title can be renewed for a maximum of 30 years. While the Right to Use over Right to Own land, can be granted for a maximum of 30 years and can be renewed with the granting Right to Use over Right to Own land deed. b. Right to Use for an unspecified period of time can be given to central government agencies, regional governments, local governments, religious and social institutions, representatives of foreign countries and representatives of international agencies. This land title can be granted over state land and Right of Management land.
  • Right of Management (Hak Pengelolaan) Hak Pengelolaan is a right to manage state land, including to use such state land, that may be granted by the central government to a government authority or agency, including a local government or state enterprise, which may in turn sub-grant the right to use the land to a third party. The application for extension and renewal of Right of Management land title granted over Right to Cultivate and Right to Build can be submitted after the land has been utilized in accordance with the purpose.
Priority for Ex-Land Title Holder
After the period of grant, extension or renewal ends, the Ministry of Agrarian Affairs and Spatial Planning (ATR)/National Land Agency (BPN) has the authority to reorganize the utilization and ownership of the land. Ex-holders of Right to Build, Right to Use and Right to Cultivate have a priority to utilize the land if the ex-land titleholder is still eligible to own and utilize the land.
 
Land Registration 
In line with the Government’s efforts to digitalize land administration throughout Indonesia, the land registration activities in Indonesia will be conducted electronically on a gradual basis. To provide certainty, the electronic data and information, or printouts thereof, are admissible as evidence in court, provided that they are validated by an authorized official. Deeds produced by a land conveyancer (Pejabat Pembuat Akta Tanah) may be created electronically. The requisite period for the announcement of land registration (to allow for objections) are 14 to 30 days. It also provides for the publication of land registration data on the Ministry of ATR/BPN website.

2.2

Spatial Conformity

The procedure for the Confirmation of KKPR to be issued through the OSS system consists of the following steps:

a. Registration, which includes some information on the location geographical coordinates, total land area, control/ownership over the land, the intended business, the planned number of floors, and planned area of the building; b. An assessment of the intended activities document to RDTR; and c. Issuance of the Confirmation of KKPR. The KKPR will be issued through the OSS system within 1 business day of registration or after payment of the non-tax state revenue and will be valid for 3 years.

If the RDTR for the intended location of the planned activity are not yet available, an Approval of KKPR will be given. These Approval of KKPR also applies in the coastal waters, territorial waters, and jurisdiction. The procedure for the Approval of KKPR consists of the following steps:

a. Registration; b. An assessment of the intended activities document to the Spatial Plan (Rencana Tata Ruang/RTR), National Strategic Areas Zoning Plan (Rencana Zonasi Kawasan Strategis Nasional Tertentu/RZ KSNT), and Interregional Zoning Plans (Rencana Zonasi Kawasan Antarwilayah/RZ KAW); and c. Issuance of the Approval of KKPR. Legal Overview for Foreign Investor

An Approval of KKPR in the industrial estates and tourism area which already has a business license in accordance with the provisions of the legislation; and Special Economic Zones which has been designated in accordance with the provisions of the legislation, do not require an assessment as point b above.

2.3

Building

Building Approval

The Job Creation Law replaces the building construction permit (Izin Mendirikan Bangunan/IMB) with building approval (Persetujuan Bangunan Gedung/PBG). Under Government Regulation No. 16 Year 2021 (GR 16/2021), PBG is a license granted to building owner to build new, change, expand, reduce, and/or maintain building in accordance with the technical standards of building. However, an IMB issued prior to the enactment of GR 16/2021 remain valid until it expires. PBG must be obtained before construction or alteration of a building begins. The procedure of PBG issuance includes:

Consultation on the construction plan, which consist the following steps:

a. Registration. The Owner of the Building or Applicant must submit registration through the Building Management Information System (Sistem Informasi Manajemen Bangunan Gedung/ SIMBG). Documents that need to be included for the registration are 1) Applicant data; 2) Building data; and 3) Technical plan document. b. Inspection of compliance with Technical Standards; and c. Statement of compliance with Technical Standards.

The relevant Technical Agency in the area will issue a recommendation for the issuance of a written statement of compliance, if the document fulfills all technical requirements. The recommendation will also determine the mandatory costs to be paid by PBG applicant, in issuing the PBG.

The issuance of the PBG, consist the following process: a. Determination of the value of regional levy; b. Payment of regional levy; and c. PBG Issuance. DPMPTSP will issue a PBG if it has received proof of retribution payment by the applicant. Issued PBG consists of PBG documents and PBG attachments.

Certificate of Proper Building Functioning (Sertifikat Laik Fungsi)

A building can only be utilized after the issuance of certificate of proper building functioning (SLF) by the Technical Agency. After the Technical Agency receives a written statement of proper building functioning (surat pernyataan kelaikan fungsi) from the supervisory service provider/construction management service provider/overseer (penilik) upon completion of the final inspection and commissioning test of the building, the SLF will be issued through the SIMBG. An SLF consists of (i) SLF documents, (ii) attachments to the SLF documents, and (ii) the SLF label. Furthermore, if several buildings are constructed in one area under the same technical plan, then the SLF will be issued for each of the building. The SLF should be extended for a certain period of time as follows: (i) 20 years for single and row residential houses; and (ii) 5 years for other kinds of buildings.

2.3

Environmental

Environmental Approvals

Pursuant to Government Regulation No. 22 Year 2021, an environmental approval must be obtained prior to obtaining a business licence. Any plan of business and/or activity that has negative impact on the environment must obtain:
 
a. Environmental Impact Assesment (Analisis Mengenai Dampak Lingkungan/ AMDAL); • AMDAL is mandatory for any type of business plans and/or activities that may have a significant impact on the environment, in which: (1) its scale is mandatory for AMDAL; and/or (2) it is located within and/or directly adjacent to a protected area. • Business actors must prepare AMDAL documents which consists: (1) Terms of Reference Form (Formulir Kerangka Acuan); (2) AMDAL; (3) Environmental Management Plan and Environmental Monitoring Plan (RKL-RPL). These AMDAL documents will be reviewed by the Environmental Feasibility Assessment Team. The relevant Assessment Team will then issue a recommendation, which will be considered by the Minister of Environment and Forestry before issuing the Environmental Eligibility or Non-eligibility Decree.
 
b. Environment Management Efforts and Environment Monitoring Efforts (Upaya Pengelolaan Lingkungan Hidup dan Upaya Pemantauan Lingkungan Hidup/UKLUPL); or • UKL-UPL is mandatory for any type of business activities that: 
(1) has no significant impact on the environment; (2) is located outside and/or not directly adjacent to a protected area; and (3) is exempted from AMDAL obligation. • Business actors must prepare a UKL-UPL Form, which then will be reviewed and issued by the authorized Minister, governor, or regent/mayor.
 
c. Commitment Letter for Implementation of Environmental Management and Monitoring (Surat Pernyataan Kesanggupan Pengelolaan dan Pemantauan Lingkungan Hidup/SPPL), as a substitution of UKL-UPL document if the business has no significant impact or effect on the environment. • SPPL is mandatory for any type of business plans and/or activities that: (1) has no significant impact on the environment; (2) is a micro or small enterprise having no significant Impact on the environment; and/or is exempted from UKL-UPL obligation Business actors must prepare a UKL-UPL Form, which then will be reviewed and issued by the authorized Minister, governor, or regent/mayor. • The SPPL for businesses engaging in certain fields is now integrated into the company’s NIB. Consequently, businesses that are required to submit the SPPL can now start their business activities immediately once they obtain their NIB. All Environmental Approvals shall remain valid as long as the business and/or activity takes place and no changes are made.
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  • Ministry of Investment of the Republic Indonesia - Investment Coordinating Board (BKPM)
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