FAQ (Frequently Asked Questions)

What makes Batam stand out among other regions in Indonesia as an investment destination?

Batam as one of the main destinations for foreign investors provides many advantages, among others due to its quite strategic location which is only 20 km from Singapore and is relatively safe from natural disasters as it is located outside the ring of fire. Thus, it makes Batam less likely to experience earthquakes and tsunamis.

Several countries in this region, such as the Philippines, Malaysia, etc. provide income tax incentives for companies that transfer manufacturing to their country. Are there similar advantages to manufacturing investment to Batam?

The Indonesian government has implemented a tax incentive program called “Tax Holiday” with the following requirements:
CONDITIONS FOR REGISTERING THE TAX HOLIDAY FACILITY

  • Meets the category of industry pioneer*
  • Industry with wide interdependency
  • Provides added value and high externality
  • Introduces new technology
  • Posseses strategic value for the national economy
  • A minimum investment value of Rp 100 billion
  • Possesses Indonesian legal entity status
  • Investment that has not been issued a decision on granting or notification of tax holiday refusal
  • Complies with provisions based on the ratio between debt and capital in the context of calculating income tax.

TAX HOLIDAY FACILITIES*

  • 100% reduction from the amount of corporate income tax payable for new investments with a minimum of IDR 500 billion.
  • 50% reduction from the amount of corporate income tax payable for new investments of IDR 100 billion – < IDR 500 billion.
  • The tax reduction period of 5 years for new investments is IDR 500 billion – < IDR 1 trillion.
  • The tax reduction period of 7 years for new investments is IDR 1 trillion – < IDR 5 trillion.
  • The tax reduction period of 10 years for new investments is IDR 5 trillion – < IDR 15 trillion.
  • The tax reduction period of 15 years for new investments is IDR 15 trillion – < IDR 30 trillion.
  • The tax reduction period of 20 years for new investments is at least IDR 30 trillion.

* After the tax holiday period ends, Taxpayers are given additional Corporate Income Tax reductions: 50% of the income tax payable over the next 2 years for a Rp 500 billion minimum investment and 25% of the income tax payable over the next 2 years for a minimum of Rp 100 billion – <Rp 500 billion investment.

What are the requirements for companies engaged in manufacturing to obtain country of origin certification for their products when they are produced in Batam? (we have seen things like 30% of the value of the product is made in the host country, etc.)

The value of the product must be 40% local content
According to Minister of Trade Regulation No. 3 / M-DAG / PER / 8/2010, to obtain a Certificate of Origin (COO), the following documents must be submitted:

  • Deed of Establishment of the Company
  • Industrial License
  • Company registration number
  • Taxpayer Identification Number
  • Specimen signature
  • Cost Structure
  • Company Photos (10 pieces)
  • Company Domicile Letter
  • Owner or Director’s Identity Card (or passport)
  • Customs Identification Number
  • Import Identification Number
  • Business License from BP Batam
  • Raw material invoices and Import Declaration documents
Do you have an overview of the current cost of blue-collar labor, i.e. welder, electrical assembly worker, general labor, etc.?

The minimum wage for workers is based on the decision of the Governor of the Riau Islands to set a minimum wage. As for 2020 as stated in the Decree of the Governor of the Riau Islands Number 1047 of 2019 dated 21 November 2019, the Minimum Wage is Rp. 4,130,279/month (approximately USD 297).

What types of companies do Indonesia and Batam focus on bringing to Batam?

Batam currently focuses on 2 main industries, namely the manufacturing and service industries. Manufacturing industries including Electronics and Electrical; industrial machinery, construction, shipbuilding, and oil & gas equipment; ICT (Information and Communication Technology); semiconductors and other electronic equipment; motor vehicles and parts thereof. Service industries include tourism, healthcare, Maintenance Repair and Overhaul (MRO), offshore banking, Logistics, and Education.

Describe the government processes required to establish a company, set up a factory and receive authorization to manufacture products in Indonesia?

To support ease of doing business in Batam and after successful implementation of i23j (3 hours investment licensing service policy, the Central Government through Government Regulation Number 24 of 2018 concerning Integrated Electronic Business Services and Presidential Regulation Number 91 of 2017 concerning Acceleration of Business Implementation) has launched a new policy called Online Single Submission on 9 July 2018 to further improve the licensing process. All applications can be submitted via www.oss.go.id.

Applicants must submit the following documents:

  • Tax file number
  • Foreign worker recruitment permit
  • Social and healthcare security
  • Fiscal facility
  • Business License

Subsequently, the applicant must meet with authorized notary to issue Deed of shareholders. Use the Identification Number from KTP / Passport and within 1 hour OSS System will issue NIB (Business Identification Number) which includes TDP (Company Registration Certificate), API (Import Identification Number), and Custom Access.

Explain how free trade regulations work in Batam. For example, do you have to be in a designated zone to benefit from the free trade zone or is the whole of Batam covered?

Since the free trade zone in Batam applies to the entire island, there should be no issue where you establish your company, the incentives offered may be applied.

Do you have a reference company that we may bring to discussion that knows government processes and factory arrangements in Batam?

Batam Indonesia Free Zone Authority has a Directorate called “Directorate of Goods Traffic and Investment” to provide more details about the investment process in the government. For information on the establishment of factories and the licensing process, we also have the Mall of Public Service located in the Sumatra Promotion Center building.

Central government also has the Online Single Submission program that allows investors to apply for the establishment of factories through the website www.oss.go.id.

We have heard that there have been problems in the past with employment issues. Can you explain what are the main causes of those employment problems and what actions have been taken to resolve these issues?

The main employment issue is regarding the Annual Minimum Wage (UMK). To overcome this problem, we have formed a Tripartite organization consisting of the Government (Manower Office), Employers, and Laborers so that any problems can be resolved properly through negotiations.

What are the main reasons we should invest in Batam?
  • No fees imposed on export – import
  • No Value Added Tax (VAT) imposed
  • Exemption on luxury goods sales tax
  • GSP (Generalized System of Preferences) Facility
  • Tax allowance
  • Tax holiday
  • Agreement to avoid double taxation with 57 countries
  • Competitive investment with efficient operational costs
  • Super deductible tax
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