A&C - BUSINESS ADVISORY & LEGAL SERVICES

Capital investment refers to all forms of investment activities, whether by domestic or foreign investors, conducted to engage in business within the territory of the Republic of Indonesia.Capital in the context of investment refers to assets in the form of money or other non-monetary forms owned by investors that have economic value.

Types of Capital in Indonesia

There are two main types of capital recognized in Indonesia:

1. Foreign Capital
   Capital owned by foreign countries, foreign individuals, foreign business entities, foreign legal entities, and/or Indonesian legal entities partially or wholly owned by foreign parties.
2. Domestic Capital
   Capital owned by the Republic of Indonesia, individual Indonesian citizens, or business entities in the form of either legal or non-legal entities.

Provisions on Capital Investment

For Foreign Capital Investment, the investment must take the form of a Limited Liability Company (PT) established under Indonesian law and domiciled within the territory of the Republic of Indonesia.For Domestic Capital Investment, the investment may be made in the form of a legal entity, a non-legal entity, or an individual business.

Foreign and domestic capital investment in the form of a Limited Liability Company (PT) can be conducted by subscribing to shares at the time of the company's establishment, purchasing shares, or through other methods as stipulated by the applicable laws and regulations.

Business Sectors for Investment Activities

Investment activities may involve several types of business sectors, categorized as follows:

1. Open business sectors;
2. Closed business sectors;
3. Open business sectors with specific requirements.

All business sectors are generally open for investment activities, except for those that are explicitly declared closed or open with specific conditions.

Types of Closed Business Sectors:

1. Production of weapons, ammunition, explosives, and military equipment;
2. Business sectors explicitly declared closed under applicable laws and regulations.

Investment Facilities

Investment activities may be eligible for various incentives, including:

1. Income Tax Incentives: In the form of net income reduction up to a certain percentage of the investment value within a specified timeframe. 

2. Exemption or Reduction of Import Duties on Capital Goods: For imported capital goods, machinery, or equipment used in production that cannot yet be produced domestically. 

3. Exemption or Reduction of Import Duties on Raw Materials or Auxiliary Materials: For production purposes, provided within a specific period and subject to certain conditions. 

4. Exemption or Deferral of VAT on Imports: For capital goods, machinery, or equipment used in production that cannot yet be produced domestically, valid for a certain period. 

5. Accelerated Depreciation or Amortization and Land and Building Tax (PBB) Reductions: Applicable particularly for certain business sectors located in specific regions or zones.

Note: The facilities outlined in Article 18 do not apply to Foreign Investment (PMA) entities that are not in the form of a Limited Liability Company (Perseroan Terbatas), in accordance with Article 20 of Law No. 25 of 2007.

*Disclaimer: This article is for general information only and does not constitute legal advice. We accept no liability for any consequences arising from its use. Unauthorized use or reproduction is prohibited and may result in legal action.

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Source: Law Number 25 of 2007 concerning Investment