General Questions

What makes Batam outstanding in comparison to other regions in Indonesia as an investment destination?

Batam, as one of the main destinations for foreign investors, offers many advantages, partly due to its extremely strategic location which is only 20 km away from Singapore and relatively safe from natural disaster occurences due to its location outside the area of ring of fire. It makes little possibility of Batam experiencing earthquake and tsunami.

A few countries from this region, such as Philippine, Malaysia, and etc. offer income tax incentives towards companies which move manufacturing into their countries. Are similar benefits available for manufacturing investments to Batam?

Indonesia government has offered a tax incentive program called “Tax Holiday” with the following requirements:
TAX HOLIDAY FACILITY REGISTRATION PROVISIONS

Falls into the pioneer industry category*
Industry with wide interdependency
Provides added value and high externality
Introduces new technology
Posseses strategic value for national economy
A minimal investment value of Rp 100 billion
Indonesian legal entity status
An investment which has not been issued with the decision or notification of tax holiday approval or rejection
Meet the provisions based on the ratio between debt and equity with regard to income tax calculation

TAX HOLIDAY FACILITIES*

100% deduction from total corporate income tax payable for a Rp 500 billion minimum new investment.
50% deduction from total corporate income tax payable for a Rp 100 billion –
5 year tax deduction period for a Rp 500 billion –
7 year tax deduction period for a Rp 1 trillion –
10 year tax deduction period for a Rp 5 trillion –
15 year tax deduction period for a Rp 15 trillion –
20 year tax deduction period for a Rp 30 trillion minimum new investment.

* After the tax holiday period expires, Taxpayers are given additional Corporate Income Tax deductions: 50% of the income tax payable in the next 2 years for a Rp 500 billion minimum investment and 25% of the income tax payable in the next 2 years for a minimum of Rp 100 billion – <Rp500 billion investment.

What are the requirements for companies engaged in manufacturing to obtain certificate of origin for their products when they are produced in Batam? (We've seen cases such as 30% of the product value be manufactured in the host country, etc.)

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

Articles of Association
Industrial License
Company registration number
Taxpayer Identification Number
Signature specimen
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 of workers is based on Riau Islands Governor’s decision to set a minimum wage. As for year 2020, as stated in Riau Islands Governor Decree No. 1047 Year 2019 dated November 21, 2019, the Minimum Wage is Rp. 4,130,279 / month (around USD 297).

What types of companies became the focus of Indonesia and Batam to be brought into Batam?

Batam currently focuses on 2 main industries, the manufacturing and service industries. Included in manufacturing industries are Electronics and Electricity; industrial machinery, construction, shipbuilding, and oil & gas equipment; ICT; semiconductors and other electronic equipments; motor vehicles and parts. Service industries include tourism, health care, 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 all kinds of authorization to manufacture products in Indonesia?

To promote the ease of doing business in Batam and the successful implementation of i23j (3 hour investment licensing service) policy, the Central Government, through Government Regulation No. 24 Year 2018 concerning Integrated Electronic Business Services and Presidential Regulation No. 91 Year 2017 concerning Business Implementation Acceleration, 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

Afterwards, the applicant must meet a notary who is authorized to issue deeds to then take down the Identification Number from the ID Card / Passport of the established shareholder and within 1 hour the OSS System will issue an NIB (Business Identification Number) which includes TDP (Company Registration Certificate), API ( Importer Identification Number), and Customs Access.

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

Since Batam free trade zone applies to the whole island, so it doesn’t matter in which part of it you manage your company, the incentives offered apply.

Do you have a reference company we can talk to that understands government and factory set up processes in Batam?

Batam Indonesia Free Zone Authority has a Directorate called “Directorate of Goods Traffic and Investment” to find out more details about the investment process in government. For information on factory set up and licensing process, we also have a Mall of Public service which is located in Sumatera Promotion Center building.

The central government also has the Online Single Submission program that allows investors to submit factory establishment application through the website www.oss.go.id.

We have heard that there were labor related issues in the past, can you explain what was the main cause of these labor issues and what actions have been taken to solve these problems?

The main labor issue was related to the Annual Minimum Wage (UMK), but to solve this problem, there was already an organization called Tripartite consisting of the Government (Labor Office), Businesspeople, and Workers so every issue can be resolved properly through negotiation.

Can you point out the reasons why 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) Facilities
Tax allowance
Tax holiday
Double tax avoidance agreements with 57 countries
Competitive investment with efficient operational cost
Super deductible tax

General Questions

What makes Batam outstanding in comparison to other regions in Indonesia as an investment destination?

A few countries from this region, such as Philippine, Malaysia, and etc. offer income tax incentives towards companies which move manufacturing into their countries. Are similar benefits available for manufacturing investments to Batam?

What are the requirements for companies engaged in manufacturing to obtain certificate of origin for their products when they are produced in Batam? (We've seen cases such as 30% of the product value be manufactured in the host country, etc.)

Do you have an overview of the current cost of blue-collar labor, i.e. welder, electrical assembly worker, general labor, etc.?

What types of companies became the focus of Indonesia and Batam to be brought into Batam?

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

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

Do you have a reference company we can talk to that understands government and factory set up processes in Batam?

We have heard that there were labor related issues in the past, can you explain what was the main cause of these labor issues and what actions have been taken to solve these problems?

Can you point out the reasons why we should invest in Batam?

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