Doing business in Indonesia in 2016? Vinod Kumar, TMF Indonesia Managing Director, outlines some key changes that are likely to affect the way business is done in 2016.
Key changes in 2015
In July last year, the Indonesian government ruled out the use of foreign currencies in domestic transactions. According to Bank Indonesia, the change will support macroeconomic stability and enforce Rupiah sovereignty by reducing the reliance on foreign currencies and mitigating against capital outflows, as transactions within the country in non-Rupiah currencies equated to $73 billion a year. There are certain exemptions, but companies have found there is a lack of clarity on when it applies.
In the same month, the Indonesian government introduced a more stringent set of work permit rules, which required offshore directors of local companies and foreign professionals going to Indonesia for business meetings to apply for temporary work permits. The policy was revoked just three months after the announcement.
Work permits for most positions (other than director and commissioner positions) are granted for a maximum period of six months. This remains a huge stumbling block for foreign direct investment (FDI) inflows.
Along with continuous difficulties in obtaining approval for the principal license from the Indonesia Investments Coordination Board (BKPM), many industry watchers believe that frequent changes in regulations have made the country’s labour environment complicated and harder for investors to conduct business.
Opportunities this year
In September 2015, the Indonesian government unveiled seven economic stimulus packages since to promote economic growth and attract investments.
- Simplifying conducting business by enhancing law enforcement and certainty.
- Cutting interest rate tax for exporters and energy tariffs for labour-intensive industries.
- Providing soft micro loans for small and medium businesses.
- Helping the disadvantaged by providing assistance in local programmes.
- Improving the foreign exchange flows management.
- Introducing tax holidays for certain industries.
How TMF Group can help
TMF Group Indonesia provides clients with a wide range of services from company set up to ongoing management such as payroll, accounting, tax, company secretarial and process agent services. We know the local rules and regulations to keep your business compliant.
Get in touch with our experts in Indonesia.
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