Indonesia

10 Chapter Q&A

    • Q&A1

       Q

      Please tell me the outline of the Investment Adjustment Agency Minister Order No. 5 in 2013.

       

      A

      As mentioned earlier, concerning the minimum investment amount for establishment of new company, since December 2011, the Investment Adjustment Agency regulates the foreign investment equivalent to  3 billion Rupiah and foreign currency equivalent to  10 billion Rupiah as required minimum investment..

      In 2013, the Director General of Investment Adjustment Ordinance No. 5 clarified the window regulation for the first time.  It was stipulated that for a foreign currency total capital investment equivalent to more than  10 billion Rupiah the required foreign currency paid-in capital must be more than the  equivalent of more than2.5 billion Rupiah. This provision also applies to the service industry.

      In addition, after the amendment of Decree No. 5, in the case of registration in  business consulting industry, a presentation on concrete business structure is required at the time of application, only the employee of the parent company or the law firm at the time of registration is invested. There was a big influence on the practical aspect, such as being unable to apply to the Adjustment Agency.

    • Q&A2

       Q

      After the revision of investment regulation, will trading companies not be able to enter 100% investment?

       

      A

      After ammending investment regulation, a briefing session was held at the Investment Adjustment Agency (May 19, 2014). There is no guarantee that the opinions at the briefing will continue to be practical in the future, but we will mention it for reference.

      At the briefing session, even after regulatory revision, we received a response indicating that import / export and sales through agents have basically no problem. As a result, it was confirmed that  trading company of such business type which  deals mainly with imports and exports will be able to make 100% investment as before.

      (In the past, with the provision stated in the articles of incorporation and permission from the Investment Adjustment Agency, it is possible for the companies mentioned above to do importation, exportation and distribution at the same time. However, due to amendment in the regulation, companies’ operation is limited to importation and exportation only.)

    • Q&A3

       Q

      Although  trading company  acquired the permission from the Investment Coordinating Agency (IzinPrinsip) prior to the start of regulation, the company is still subject toregulation if actions  such as capital increase / capital reduction, shareholder change, address change etc. are made after the amendment of regulation.

       

      A

      In Indonesia, from the viewpoint of protection of existing profits, there is a theory that pursuant to regulatory revision, the permission acquired before the change that brought disadvantage to the company is protected in the same way (Grandfather rule). The opinion of the Investment Adjustment Agency at the briefing sessions is whether the company that acquired the license in the regulated target area before the revision of the regulation will be subject to the new system (whether or not the Grandfather rule is applied before the new regulation Izin Prinsip), even when we changed company information such as capital increase / capital reduction / stock transfer, address change etc, we got a clear answer that the new regulation will not be applied .

    • Q&A1

       Q

      Will it be considered PMA if there is any investment from a foreign company?

       

       

      A

      If even only 1% foreign capital is invested, it is considered PMA and regulations on foreign investment (negative list and other regulations) are applied. Also, even if you make  new investment from the local PMA, it will be deemed  contribution from a foreign company, not from an existing local company.

      According to the 2013 Investment Adjustment Agency Director Ordinance No. 5 entered into effect on May 27, 2013,The minimum contribution amount that can be invested is  10 million Rupiah (considerable foreign currency).

    • Q&A2

       Q

      Is it possible to acquire multiple KBLI codes (for example, sales and wholesale business)?

       

       

      A

      For example, when selling machine parts, etc., it is obviously impossible to just sell goods. After-sales service such as repairing parts is also need to be considered. Also, in the case of wholesale business, it is usual to generate not only simple trading revenue but also commission (commission).

      For sales of parts with different KBLI and parts repair, it is a question whether it is necessary to acquire both codes. Since parts repair is a kind of construction industry, it corresponds to engineering and for foreign investment enterprises, they are only allowed to invest up to 67%. On the other hand, for commission generating business, as a rule foreign companies are not permitted to enter such business operation.

      But in reality, companies registered their companies as wholesale business. As part of the operation, they perform repair services and at the same time receive commissions.

    • Q&A3

       Q

      Please tell me about the transition and application of the 15 years rule.

       

      A

      Cabinet Order No. 20, Article 7, Paragraph 1 of 1994 states that part of the shares will be issued within a maximum period of 15 years from the commencement of "Commercial production (IUT: permanent operation permission) acquisition" or "IUI (business license) directly to Indonesian (including former Japanese who acquired Indonesian nationality after marrying Indonesian) and / or Indonesian corporation  (foreign investment not included) or (listed) via the domestic capital market. " This is the so - called 15 - year rule. In addition to that, the following penalties are stipulated in Article 25 of the Director General of Investment Adjustment Agency 1994 concerning the detailed rules of enforcement of Cabinet Order:

       

      · Interim suspension of business activities

      · Elimination of some or all of incentives for investment

      · Partial elimination of permission

      · Rescission of Presidential Investment Permit

       

      Thereafter, when the New Investment Act was regulated on April 26, 2007, the provision concerning the above stock transfer was abolished. Therefore, the 15-year rule does not apply to companies that established after the above period.

      Whether or not to apply the 15-year rule of companies established before April 26, 2007 is stated in Article 20 of the Investment Adjustment Agency Directive Ordinance No. 2013 of 2013. Companies corresponding to it need immediate response. For companies that are difficult to deal with, it is possible to apply a term extension of up to two years.

      Penalties for the 15-year rule have not been strictly applied so far, but due to the possibility of the application of penal provisions that was being strengthened in response to this writing, it is desirable to take early countermeasures.

      According to the 2013 Directorate General of Investment Coordinating Agency No. 5, the minimum capital was stated as 2.5 billion Rupiah but in comparison with the ASEAN countries, the investment amount tends to become larger, while withdrawing from viewpoint before the establishment. It is important to put in and clarify the risks during advancement.

    • Q&A4

       Q

      How will I decide on how to invest or capitalize?

       

      A

      Except for industries in which the investment ratio is restricted, the index that determines the shareholding ratio is not only the financial capital of the opponent but also whether to take a majority for stable management. In other words, if there is a capital contribution of 75% or more, it is possible to independently decide on  matters to be resolved at the general meeting of shareholders prescribed in the Companies Act. Therefore, in the case of majority, it is ideal to own more than 75% of the shares. In addition, for taxation purposes, local companies that have become minorities also do not want to fall below 25%  because corporate income tax is imposed on dividends received by companies holding shares less than 25%.

      The most avoidable thing is to conclude a joint venture agreement at 50:50. As stipulated under the Companies Act, conditions can be weighted by the articles of incorporation but cannot be alleviated. In other words, if you cannot acquire more than a majority of shares, unanimity will be the principle in all resolutions, which will have a major obstacle to business operations.

    • Q&A5

       Q

      There are confidential leaks when technology is provided to a joint venture partner and concerns that partners compete. What specific measures should be taken specifically?

       

      A

      When preparing a joint venture agreement, the items of confidentiality and prohibitions regarding competition shall be stated and stipulated for possible damages to be implied in case of violation. Specifically, conflict of interest is prohibited   , example of these conflicts are starting services of exactly the same kind as a joint venture company, soliciting staff from joint ventures, or interfering with trading activities of joint ventures for their own profit. Nonetheless, it may be inevitable for the company to violate this provision in conducting business activities, so it would be right to make a provisions regarding individual interests at specific events.

    • Q&A6

       Q

      Where should the director of the representative office reside?

       

      A

      Since the permission of the representative office is fundamentally granted to the official of the office manager, the office manager must stay in Indonesia as long as the office continues. Even if it is a foreign representative office, there is no problem for Indonesian to become the director. If a Japanese becomes the director, he will obtain a visa or work · permits and stay in Indonesia.

      In practice, if the Director is not permanently residing in Indonesia, there are cases in which problems are encountered in business compliance for the signature of the director is needed in filing the monthly tax return.

    • Q&A7

       Q

      Can the director of the representative office and the director of the foreign corporation be concurrently appointed?

       

      A

      It is forbidden to work in multiple companies under Indonesian labor law. However, if you are concurrently appointed as an officer, it is possible through a certain provision (however the DPKK $ 1.2 US dollar payment problem will remain). In this case, since the director of the representative office does not fall under the exception of that provision, in principle, it cannot be concurrently held.

      However, in practice, when switching from a representative office to an overseas affiliate, there is a case where there is a period of temporarily holding the director of the representative office as a director of the local corporation concurrently. In this case, there is no particular problem since closing the representative office is being held and a visa or work · permit for officers (EPO) is being returned.

      As for the process, first returning to the U.S. after returning the visa and leaving  Indonesia (if you do EPO, you have an obligation to leave within 14 days from that date), then issuing  invitation letter from the local corporation and receiving the same,lastly entering by multiple visa or entering at VOA (Visa on Arrival). The procedure for obtaining the subsequent visa is the same as when obtaining a new visa.

    • Q&A8

       Q

      Please tell me about the obligation to recruit Indonesians in adopting foreigners.

       

      A

      Labor Minister Regulation No. 16 of 2015 (enforced on June 29) Section 3 stipulates the obligation for employment of Indonesians for one foreigner as follows.

      (1) Foreign workers, hiring one foreign worker, employers must be able to hire at least 10 Indonesian workers for the company of foreign workers' employers.

      (2) The provision of paragraph (1) does not apply to the following persons:

      a. Members of the Board of Directors, members of the Commissary Association,members, and members of the Supervisory Board

      b. Foreign workers employed for emergency and imminent work

      c. Foreign workers employed for temporary work

      d. Foreign workers employed for industrial service industry

      According to this provision, conventionally, in Article 71 of the BKPM Directorate Ordinance No. 2013, it was obliged for one foreign national to employ more than three Indonesian people in the commercial representative office only this time, Companies (except executives) and all representative offices were obliged to employ more than 10 Indonesians for one foreigner. The problem in practical application is application of the Foreign Employment Plan (RPTKA). At this time, in addition to the reasons for the employment of foreigners, position and salary will indicate the number of Indonesians to be employed. In this case, the description of 10 people or more is required. However, because the description here is a recruitment plan, even if it is different from the actual situation, IMTA acquisition is possible. On the other hand, there still remains a fact that it is necessary to designate one Indonesian person and to transfer the technology.  In this case, a trail such as an employment contract with the appointee becomes necessary. In that sense, as an employment for foreigners and   recruitment for technology transfer, one Indonesian person will not need to change it as before.

    • Q&A9

       Q

      Please tell us the risks that would be assumed if the representative office was deemed to have done business activities.

       

      A

      There is no practical example that a certain sanction has been applied administratively, but there is risk with regards to taxation, only on taxation. The representative office may be imposed a deemed tax called PPh 15. In other words, in accordance with the exportation of goods from Indonesia, a representative office contributed to the sales is regarded as entity who do sales operation here and a certain tax is being imposed in Indonesia. In that case, 4% of export price is considered as sales in Indonesia and taxation will be done.

      There is no need to file  new tax declaration  as it is considered as source separation taxation in Indonesia . Since PPh 15 will be  taxed in Japan,  tax evidence (Bukuti Potong) is need to be attached to avoid double taxation by applying it as tax credits. 

    • Q&A10

       Q

      Please tell us the procedure and period of closing the representative office.

       

      A

      In principle, we will follow the same procedure as setting up a representative office. The procedure for closing a foreign representative office is as follows:

       

      ① Application for Investment Adjustment Agency

      ② Proof of residence

      ③ Taxpayer number (NPWP)

      ④ Registration of the Ministry of Commerce

      ⑤ Open bank account of corporation (if necessary)

       

      Therefore, in the case of closure, as a general rule, we will also do  all procedures.

      For items other than ③, they will be completed within one month, but it will take time to return the tax number for ③.

      Jurisdictional tax authorities usually judge the presence or absence of tax audit within six months after accepting applications for tax number revocation. If there is an audit, we will wait for the result but if there is no audit, we will assume that the revocation was successfully done.

      However, as there is  compliance problem, it is at least necessary to prepare the tax return form (SSP / SPT), vouchers related to calculation, contract documents (apartments, offices, employment contracts, etc.) as explanatory materials.

    • Q&A11

       Q

      Please tell me the expiration date of the company related documents.

       

      A

      The shortest time is the above mentioned Letter of Domicile. The expiration date of residence certificate is one year. So, you need to be careful to avoid the expiration of residence certificate, in case you have no idea about the matter. The expiration date or renewal deadline of other documents is as follows:

      Wajib Lapor, KITAS / IMTA Other visa related ... 1 year (Renewal)

      Investment Adjustment Agency Principle Permit ... 3 years

      Ministry of Commerce Permit, NPIK ... 5 years

      IUT, NPWP / PKP, API, NIK, the constitution and Ministry of Justice approval (SK - Kehakiman) are valid as long as the company survives. In addition, reports of the Central Bank when making parent / subsidiary loans, monthly report of NPIK, report every 3 months of importation record of API, semi-annual LKPM, annual shareholders meeting, compliance reporting obligation It is a point to list the application obligation and compile it.

    • Q&A12

       Q

      Please tell me about tax return declaration after acquiring taxpayer number.

       

      A

      Individual income withholding tax (PPh 21) and corporate income withholding tax (PPh 25) are obliged to declare each month from the month following tax payment number acquisition. The penalty due to delay is not as large as 200,000 rupiah per month for one withholding tax, but it is necessary to consider administrative work including tax processing in parallel with the procedure of company establishment.

    • Q&A13

       Q

      Is it possible to transfer capital of two companies from one investment company?

       

      A

      As Indonesia needs two shareholders (people) shareholders, we may receive such a question.

      When securing the Ministry of Justice approval (SK - Kehakiman), confirm the consistency of the contribution investment and the articles of incorporation.The amount of the contribution certificate must be equal to the paid - in capital. When transferring the capital of two companies from one company, the amount is not consistent so remittance is impossible.

    • Q&A14

       Q

      Is it possible to remit paid-in capital divided into multiple times?

       

      A

      Depending on the bank, it is also possible to transfer capital separately in multiple dates as long as the bank can issue proof of investment with the same amount as the paid-in capital of the articles of incorporation.

    • Q&A15

       Q

      When is the establishment date? Also, when is the timing of the establishment general meeting?

       

      A

      The establishment date is the date on which the acquisition of the Ministry of Justice approval (SK - Kehakiman) has ended. Within 60 days from this date, it is necessary to make the General Assembly in Indonesia or to prepare minutes (circulation method). In conjunction with the General Assembly, we also issue shareholder certificates to shareholders instead of issuing share certificates.

    • Q&A16

       Q

      What are the main reasons why company establishment procedures in Indonesia are significantly delayed?

       

      A

      In October 2013, there was a case that executive staff of the Ministry of Justice and Human Rights aimed for some notary public and was arrested for bribery. As a result of this unfortunate event, the establishment procedures involving the Ministry of Justice and Human Rights greatly delayed.

       

      In this way, there are many cases where there are external causes, and there are many cases where the procedure using the local agent has no progress at all.

      When any payment is accepted, it is better to request receipt or receipt seal called Tanda Terima, just in case.

    • Q&A17

       Q

      I heard that obtaining the IUT has  high degree of difficulty, but how about in actual scene?

       

      A

      Since IUT is under the jurisdiction of BKPM, application procedures may be interrupted due to incomplete documentation. In the case of the manufacturing industry, it is obligatory to acquire environmental reports, this process will requires days. In case of non-manufacturing industry, upon application, only the contract is required.

      The difficulty of obtaining IUT has large effect on  submitting an office rental agreement with one or more days before the deadline.

    • Q&A18

       Q

      Please tell us the problems you have encountered in establishing the base, which is predicted when you move into RUKO (Ruko).

       

      A

      Since the office supply of Indonesia cannot catch up with demand, in recent years more and more companies are considering moving into Indonesian commercial facilities called RUKO (Ruko). RUKO is a long sideway commercial facility (Refer to the photo). One of the biggest merit of moving to RUKO is cheaper rental fee compare to an office building, though there are some issues regarding security. For example, in the Sudilman area where many Japanese companies occupy, while the unit price of a m2 (meter square) is more than 30 US dollars, in Roku occupying the same space will costs a considerably less than US $ 10. However, if you move in to RUKO, you will be asked for additional document HO when obtaining permanent operation permission (IUT). This document can be omitted at the time of establishment of an office building.

      HO refers to  pollution prevention measure permit, not limited to office buildings, but for all commercial facilities including RUKO.

      Owner has the obligation to secure such document. In acquiring HO, consent from neighboring residents is necessary. If you do not acquire HO in advance, request with owner to obtain HO, the company who will occupy can ask the owner for acquisition as mandatory condition in lease contract.

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

    • Q&A19

       Q

      Is there any other way to account for VAT before acquiring PKP than to record it as necessary expenses?

       

      A

      Simultaneous with the acquisition of PKP, calculation of VAT and obligation to declare occurs, so VAT before acquisition of PKP is only recorded as necessary expenses. Inevitably, expenses in the rent of the office building and apartmentwill occur, in this case parent company from Japan can pay through remittance and treat it as their expense temporarily for few months.After the acquisition of PKP, the subsidiary can now start to receive the invoice for rent, record the rent expense in their own books and do all the necessary process.

    • Q&A20

       Q

      Can I start importing and exporting business before acquiring API-U / NIK?

       

      A

      As mentioned above, it is necessary to acquire API-U for importing finished products and API-P for importing raw materials. However, it usually takes about six months from the establishment of a local corporation to complete acquisition of import / export license. In the meantime, you can see the case where the establishment of a local corporation (TDP and IUT acquisition) is completed and business operation can be started. In the case of a trading company, it is necessary to pay attention inthe importation of goods, acquisition of orders from customers and delivering the goods to them.

      Since importing procedures cannot be carried out by the company before acquisition of import license, it is necessary to have them imported using import agency etc. and process them as domestic purchase. This is also the case for exports. If you need to export goods before obtaining export license, you will be asked to export by using exporters etc.

    • Q&A1

       Q

      Please tell us the points of composition of the officers of the company.

       

       A

      A commonly used private company consists of one or more directors and one or more corporate auditors. What is different from Japan is that all the directors are authorized to represent the company. Therefore, in general, items to be resolved at the general shareholders meeting are listed in the articles of incorporation, so that each director cannot conduct transactions independently. For example, in a joint venture agreement, it is common to include provisions on resolution matters at the general shareholders meeting which are not prescribed by the Company Law as described below.

       

      · Exceptional transactions exceeding 100 million rupiah

      · Loan agreement with outside parties (including shareholders)

      · Establish or maintain liabilities, collateral that were not anticipated in the annual plan or annual budget

      In case of obligation of proof

      · Disposal of assets not approved by annual plan and budget

      · Donation activities such as donation and gift

       

      Also, directors and corporate auditors are appointed according to the equity stake. However, since the resolutions of the Board of Directors and the Board of Corporate Auditors are based on a majority in principle, it can be said that it is preferable to appoint a majority.

    • Q&A2

       Q

      Please tell me the necessary documents for the annual general meeting of shareholders.

       

        A

      The minimum necessary documents as the annual settlement report prescribed in Article 66 paragraph 2 of the Companies Act are as follows.

       

      · Audit report

      · Business activity report (report on sales activities and business plans during the period)

      · Activity Report on Corporate Social Responsibility (CSR)

      · Detailed report on problems that occurred during the fiscal year and affected the company's business activities

      · Supervisory duties report of the Board of Corporate Auditors within the fiscal year

       

      In addition, the audit report needs to be notified to the Ministry of Commerce within the same period.

    • Q&A3

       Q

      Please tell me the specific method to add restrictions to the representation rights of the directors.

       

      A

      In Indonesia, all directors are granted representation rights. Therefore, in actual management, from the viewpoint of governance, it is common to add restrictions on representation rights in the articles of incorporation or to make resolutions of the Board of Directors.

      Regarding important resolutions, we will state mandatory provision in the articles of incorporation that the approval of the corporate auditors is necessary.

      Points are to be stipulated in the articles of incorporation for the following acts.

       

      · Act that each director alone can exercise the representation right

      · Act requiring approval by the Board of Directors

      · Act requiring approval by the Board of Corporate Auditors

       

      Particularly in the case of joint venture with a local company in Indonesia, it can be said that building the foundation for doing such internal check becomes important.

      In violation of the Articles of Incorporation, Article 49, one will be subject to a fine of 2.5-5 billion Rupiah or imprisonment of not more than 5 months. In advance, it is necessary to confirm the business entities and the share of services between companies that are concurrently occuring.

    • Q&A4

       Q

      Regarding officers (directors / corporate auditors), I interpret that the concurrent post is possible, but is there any problem?

       

      A

      In Article 7 of Ministerial Order of Labor Migration relating to foreign workers (Circular, 2004 No. 20), concurrent positions other than officers are currently stipulated. Article 7 (1) stipulates that employers should not hire workers hired by other employers.

      If the above is found, it is stipulated that the worker will be detained as an illegal worker and will be deported from overseas or it will be impossible to enter Indonesia as a criminal offender. However, as stated in Article 2, Paragraph 2, it is not applicable when one becomes a director or a corporate auditor of another company, so concurrent directors can be concluded. In this case, you will be obtaining labor permission from the two companies, so the company will pay the Technical Capacity Development Fund (DPKK) of 1,200 US dollars x 2 each year to the Bank designated by the Department of Labor.

       

      On the other hand, there are special laws prohibiting concurrent posts of officers besides to the Minister of Labor Migration. That is, under Article 26 of the Indonesian Unfair Competition Prevention Act, prohibiting concurrent positions of officers of companies falling under any of the following three categories:

       

      · Same market segment

      · Same business activities or business areas

      · It is recognized that several companies control the market for specific goods and services

       

      In other words, concurrent post of officers in two or more companies is impossible in the companies under the same industry.

    • Q&A5

       Q

      Is issuance of ticket common in Indonesia? Please tell me along with the problem of Indonesian compliance.

       

      A

      Issuance of stock certificates is optional according to the Indonesian company law. However, according to the Company Law, in addition to share certificates and/or stock certificates, the company is obliged to to provide a certificate stating the name of shareholders, the number of shares subscribed by each shareholder and other information necessary as a document certifying the shareholding. The company needs to issue such certificate. Although it is not a formal requirement, it seems that many companies keep the  the shareholder certificate in public document or let it the notarized by a notary public.

      Regarding compliance, it will be necessary to verify again whether it is possible to operate the business according to the Company Law, including the provision of shareholder certificates.

      For example, we do not have a general assembly meeting, the term of office has not yet expired, we have not taken a general meeting resolution for re-appointment, we have not opened an annual shareholders meeting, etc., such compliance violations remained unexpectedly overlooked. There seem to be many cases like the same situation.

      It is important to check fraud and compliance in regular business audit and internal audit.

    • Q&A6

       Q

      From the perspective of the Corporate Law, please tell me the schemes and cautionary points for returning profits to my parent company.

       

      A

      One of the purposes of setting up a subsidiary is to return the profit from Indonesia to the parent company. As for the scheme, it is cited as an issue from the time of establishment.

      As with other countries, the method of returning profits from Indonesia is limited to royalties and dividends. In the case of royalties, there is a constraint that withholding tax is applied, while in the case of dividends it can only be used in the case of surplus. So it is important to consider schemes on how to return profit, together with the question of which is better.

      With regard to dividends, according to Article 70, Paragraph 3 of the Indonesian Company Law, a company is required to fund statutory reserves of 20% of paid-in capital, and a fixed amount of funding is prescribed every year in Article 1 of that Article.

      There is no provision that, for example, 10% of taxable profit must be accumulated. So if you decide at the general shareholders meeting, it will be 10 thousand rupiah, (about 85 Yen, as of January 2016) even if it is minimal in amount, it will be legally satisfactory. In that sense, caution is required for practical handling.

    • Q&A7

       Q

      Please tell me specific points to keep in mind when dissolving the company.

       

      A

       In the dissolution of the company, debt consolidation is necessary. However, in the case of a company that was forced to dissolve because of incurring excessive liabilities and parent to subsidiary loan exists, the said loan may be striked out through waiver. Thus, if the parent company relinquished the loan of the subsidiary, it is recorded as miscellaneous income at the subsidiary side, so there is a risk of additional tax on the income recorded.

      Next, I will consider the dismissal of employees. According to Article 164 (3) of the Labor Law (2003 No. 13, 2003), dismissal of employees can be done if the company has to be closed due to force majeure.The employees is entitledto be paid provisional payment allowance (retirement allowance, contribution money, loss compensation fee) on the dissolution of the company.. By doing so, we stipulate that workers can be dismissed. However, this is the minimum amount on the regulation to the last, and it takes time in addition to further expenses to settle at the stage of negotiation with labor and management as a whole. It is also important for companies to take a position to show sincerity at the stage of negotiations, taking account of the labor unrest in the labor side.

       

      Implementation of dismissal has  strong impact on both the company side and the worker side. Therefore, for labor management, it is advisable to make use of labor procurement sources, such as contract employees and temporary staffs in combination, to make a plan up to one or two years so that liquidation can be made in a direction that can reduce dismissal.

       

      At the time of establishment of the company, it is necessary to point out the dissolution of the company as one of the grounds of dismissal and to mention the compensation amount in that case based on the provisions of the labor law as described above.

       

      Finally, we will discuss about returning the tax ID number. After completion of the deletion procedures (registration, investment adjustment agency, Ministry of Commerce) of the company under the above regulations, the company applies to the tax office to return the tax ID number owned by the company. This procedure involves a tax investigation, which will take a lot of time in addition to the risk of surprise.

      According to Article 2, Paragraph 7 of the National Tax Code (Act No. 28 of 2007), in response to an application for refund of a taxpayer number, in the case of a personal taxpayer, return will be made six months from the date of receipt of a "complete application". While for a corporate taxpayer, there is a criterion that you have to make a decision within 12 months in case of. However, there is an unclear point about relevant "complete application" is, and it is the fact that it takes more time than that. Also, since this procedure will be done after the company is dissolved, in that sense, there is a secondary problem that will burden the people in charge (traffic on business trips, visa acquisition). Since this will be a relationship with the taxation office, measures to prevent it in advance are difficult, but you should anticipate the tax risks and take daily countermeasures. Regarding tax investigation, there are points to be targeted, so in that sense it can be said that routine compliance measures are necessary from the establishment stage.

      In conclusion, it is important to consider dissolution in the middle term planning of the survey of pre-risk and the dissolution.

      This is the risk associated with dissolution. It is important to consider dissolution, legal and tax issues around it as one factor in deciding whether to invest or not in a certain country..

      There is no dormant company as institution in Indonesia. Therefore, it is necessary that even if the Company Law, monthly tax return necessary for tax law, annual tax return, general shareholders' meeting etc. are not practiced as a dormant company, still it still need to pay attention to the expenses incurred in it’s operation.

    • Q&A1

       Q

      I heard that regular reports are required when borrowing from overseas residents, but what kind of procedure is required specifically?

       

      A

      As a reporting obligation, initial registration and monthly reporting is required. This is applicable even in the case of borrowing from a Japanese parent company, so-called parent-subsidiary loan.

      . The reporting destination is the Central Bank of Indonesia, and monthly reporting is required.

    • Q&A2

       Q

      In carrying out bookkeeping in Indonesia, we are considering introducing accounting software at our company. What type of accounting software is common in Indonesia?

       

      A

      In Indonesia, it is common to use accounting software such as Accurate, Tally etc. Especially, Accurate is mainstream. It corresponds to Japanese magistrate service and Yayo salary, you can enter daily journal entry, generate general, ledger, tabulation table and etc.

      In addition, companies that are expanding overseas to multiple countries has cases where ERP is introduced.

    • Q&A3

       Q

      Are there standards for recording fixed assets in Indonesia? Is it possible to make an investment in kind at the time of establishment?

       

      A

      In Indonesia, not only cash but also in kind can be invested. In the case of a joint venture, there are cases where the local company invests land, machinery, etc. in kind.

      In addition, most of the cases where Japanese companies establish foreign investment enterprises (PMA) with 100% investment are all funded by cash.

    • Q&A4

       Q

      Please tell me how to obtain the financial statements of listed companies.

       

      A

      Even in Indonesia, listed companies have accountability to shareholders and creditors, just like in Japan. Financial statements are being released on company’s own websites and other sites. Therefore, you can download financial statements from each company's website. In addition, many of the websites of listed companies in Indonesia are also relatively easy to check out because there are English versions.

      For example, we   joint ventured to the companies like  Toyota and Honda in Japan and Financial Report (financial report), Shareholders Information (shareholder information), Annual Report (annual report, business report) can be easily checked out through Astra International website in Indonesia.

    • Q&A5

       Q

      Do I need to attach a stamp to the signature of the audit report?

       

      A

      Attachment of a stamp is unnecessary, but an original and 5 duplicate copies are necessary. Both shall be submitted within six months from the end of the accounting period. Usually, you only need to attach the original, accounting office etc.

      The audit report with the signature will be submitted to the Ministry of Commerce.

    • Q&A1

       Q

      What kind of qualified pension fund is eligible for income tax deduction?

       

      A

      Qualified pension funds are subject to payment to private insurance companies. Procedures on deductions will vary depending on whether you are paying insurance premiums via the company or on your own.

      If you pay insurance premiums via the company, the company deducts the contribution to be paid  from the monthly salary and pays the insurance fee. A certificate will be issued from the insurance company at the end of the year. In this case, since the insurance premium paid was being deducted when calculating the monthly income tax, it is not necessary for the employee himself / herself to attach a certificate etc. when declaring the individual's final return.

      On the other hand, if the employee himself joins insurance and pays insurance premium, a certificate will be issued to him / her from the insurance company. Employee himself must calculate the deductible amount when filing a final return and attach a certificate.

    • Q&A2

       Q

      Is the personal income tax rate associated with retirement allowances and pensions received the same as the tax rate on salary?

       

      A

      The tax rate on retirement allowance is stipulated separately. The highest tax rate is 25%, progressive taxation for retirement of more than 500 million rupiah. The retirement income tax rate is applicable only when retirement payment is paid within two years after retirement. It is better to pay within 2 years as the normal income tax rate applies than to be paid later. Such way of thinking is similar to royalties and interest rates, so if you will be receiving royalties or interest even once a year, you will pay corresponding withholding tax for the amount you received, applicable for the whole 12 months. It will be less tedious to pay and post once than several times.

    • Q&A3

       Q

      Although PPh 21 is obliged to be paid on the 10th of the following month from the  date date of payment,  date of accrual or due date whichever comes earliest, is there any tax problem caused by this?

       

      A

      Bonuses and levallan allowances are posted on the management account, apportioned monthly and accrued. It is pointed out that PPh 21 should be paid on a monthly basis, and there is a risk that interest and others will be incurred when being pointed out at the time of tax investigation. As a countermeasure, it is better to accrue it on a payment basis also in accounting.

    • Q&A4

       Q

      As can be seen in other countries, is it necessary to apply for bank deposit interest etc. at the time of filing the personal income tax return?

       

      A

      In Indonesia, interest on deposits of banks, interest on bonds of central banks, transferable income of listed stocks and rental income of real estate are subject to source separation taxation, so there is no need to include these income as taxable income when declaring personal income tax. Tax rate on withholding tax on deposit interest is 20% for both resident and non-resident.

    • Q&A5

       Q

      It seems that there is a possibility that the personal income tax rate will be 120% if you do not have a taxpayer number, but is it true?

       

      A

      Personal income tax when taxpayer number is not acquired is 120% taxed. In practice, you will be required to obtain your tax ID after obtaining your stay visa and work · permits. Since it takes 3 to 4 weeks to obtain the taxpayer number, attention is required because there is a risk that the tax payment number cannot be acquired at the time of the first payment and there is a risk of 120% taxation.

      Also, there are times when it is impossible to open an individual bank account without a taxpayer number, it should also be noted.

    • Q&A6

       Q

      The import tax and export tax have different tax rates depending on the classification, but how should each classification be confirmed?

       

      A

      Classification is specified by HS code. The Indonesian code is ten digits, but the first six digits are common to all over the world.

      If there are tax concerns regarding handling of import tariffs on specific goods, we will obtain a confirmation of HS codes from the tax authorities in advance.

      In addition, the HS code is also required when applying the Japan Indonesia preferential rate (EPA).

      The procedure for confirming the HS code is roughly as follows.

       

      ① Check the HS code of the applicable product

      ② Check preferential rate (EPA) against concession chart and confirm

      ③ Confirm the applicable qualification (Rules of Origin and shipping standards) and obtain a certificate of origin

       

      For details, please refer to the website of the Directorate General of Customs (      http://www.beacukai.go.id/).

    • Q&A7

       Q

      What is the anticipated tax issue when doing trilateral transactions? Please tell me how to deal with it.

       

      A

      If the invoice amount from S company and the invoice price from J company paid at a later date are the same, it will not be a problem under the customs law, but if there is a difference, the invoice amount used at the customs clearance must prevail. It may be pointed out that it does not reflect the problem. If it is discovered in the tax investigation that there are different invoices, there is a possibility that the transfer price problem may be pointed out despite the fact that there is no capital relationship between J and I.

      As a workaround, at the time of import customs clearance, use packing list of company I, obtain invoice from J company in advance and secure import clearance at that invoice. In that case, it is necessary to discard the invoice from S company so that it can be seen that it is not official and material document.

    • Q&A8

       Q

      Is it true that Indonesia is particularly corrupt in Asian countries?

       

      A

      There are cases where procedures are delayed,unless they asked for bribes when processing various declaration procedures or tax reductions or tax payments, or if they do not pass bribes. It is also said that there is a possibility that the Indonesian staff of the overseas affiliate and tax officials are engaged in closure.

      Immediately after the establishment of the Corruption Eradication Commission under the Yudhoyono administration in October 2004, we have tried to eradicate corruption as a national policy, but recently we are returning to the former situation.

    • Q&A9

       Q

      What should I do when the objections made under domestic remedial measures are rejected?

       

      A

      In Indonesia, when filing an objection, it seems that it is almost rejected because it is against the tax authorities themselves who made the tax determination, not an independent third party organization.

      If the opposition is dismissed, you can file a lawsuit against the tax court. It seems that a relatively fair judgment is made in the tax trial, but since it takes more than one year before the judgment, personnel expenses during that time and lawyer's expenses etc. are required, which may be a burden.

    • Q&A10

       Q

      The pre-payment system has been adopted in Indonesia, but is there any merit?

       

      A

      If you are overpaid by the prepayment system, you can request a refund, but will pay the monthly amount for the month based on the amount of the tax paid in the previous fiscal year and adjust it in the last month. If the performance worsens considerably compared with the previous year and you become overpaid because of such situation, you can make a refund request. However, if you make a refund request you may be subject to tax examination and will cause  company burden to increase. Therefore, it is hard to say that there are actually merits.

    • Q&A11

       Q

      Even Indonesia is in a situation where it is possible to request refund for corporate income tax rate, but what is the difference with Japan?

       

      A

      According to the Indonesian tax law, tax authorities will make a review within one year from the date of receipt of the refund request to the corporation that makes a request for refund of corporate income tax or value added tax,

      It supposed make the refund of excess payment after the examination. If the examination is not carried out within one year (for example, when the refund amount is small), tax authorities will automatically make a refund.

      There are many requests from companies for improvement, such as refunds not being accepted without justifiable reasons, waiting until refund was made even for nearly a year. In addition, there are cases where refunds are not made even if one year or more has elapsed after the refund request, only partial refunds will be made.

    • Q&A12

       Q

      How should we handle depreciation of office furniture, computers, and etc purchased at the establishment of a local subsidiary?

       

      A

      In office furniture, the lowest amount of money is usually deducted in the first year and not depreciated. Depreciation of tangible fixed assets such as computers that are expensive and have a useful life of more than 1 year by the straight-line method or declining-balance method is permitted, while for buildings, the only method allowed is straight line. The classification of tangible fixed assets is divided into groups of 1 to 4, and the useful life is classified into 4 to 20 years. OA equipment such as computers normally falls under Group 1 and is generally amortized within 4 years.

    • Q&A13

       Q

      Final return and other documents are written in Indonesian language only, do they have English version written for each documents?

       

      A

      In Indonesia, based on Act No. 24 of 2009, it is obliged that contract documents, · memoranda with government agencies, private organizations and individuals in Indonesia must be prepared in Indonesian language. All documents concerning tax payment must also be prepared in Indonesian, and the taxpayer's signature is also required.

      Unless you are well acquainted with Indonesian, it is practically difficult to fully understand the content and therefore sign the document. For that reason, we will leave it to the Indonesian accounting / finance personnel or tax consultant at the local corporation, but with the process of filing, we will  properly assist them.

    • Q&A14

       Q

      Who needs to sign a tax return or the like?

       

      A

      Normally, a director becomes a signatory, but under the condition that he must be residing in Indonesia (possesses a stay visa, work permit and taxpayer number). If all the directors are non-residents, one will be delegated. For delegates, conditions such as acquiring a taxpayer number, filing  tax return, filing declaration, tax qualification, a predetermined power of attorney that has been created are required. However, personnel-related documents must not be signed by the directors, they need to be delegated to Indonesians.It is necessary to pay attention to signatures such as surveys by the Ministry of Labor.

      The signature related to the signatory requirements and made into a tax return form prior to acquiring visa etc will be invalid.

    • Q&A1

       Q

      What is the school district in Indonesia? Also, when adopting it is better to choose a school based on what criteria?

      A

      The classification of schools in Indonesia is as follows.

       

       

       

       

       

       

      When adopting English talent with white color, adopting from S1 (4th grade university) or higher or D1 ~ D3 (junior college) makes it easy to obtain good talent. As to Indonesia's excellent universities, there are many institutions such as University of Indonesia, Gajah Mada University, Bandung Institute of Technology and others.

      On the other hand, if it is a worker's layer, it is common to adopt it with less academic background.

    • Q&A2

       Q

      Despite having busy period in the company, because there were some employees who repeated late work and absenteeism due to participation in labor union activities, we handled a change, a dismissal etc, and was sued as a disposition complaint. What are the points to keep in mind when managing union activities?

       

      A

      It is necessary to pay attention as the following three points will be pointed out.

      ① It is disadvantageous if the company side was obviously grasping the reasons such as being late, absenteeism etc, including dispute with language, or not having been grasping late arrival, absentee reason etc. sufficiently.

      ② Whether participation in union activities

      In case of doubt, we should ask the employees to submit proof of participation in union activities.

      ③ Validity of disposition to workers

      In the case of late arrival, absence, etc. due to labor union activities, even if some false reports or the like are made, it is being contested whether it is a part of the presentation of the first warning letter (see P.365 Q & A).

      Labor laws in Indonesia are complicated and are regarded as laws favorable to workers. Having understanding of minimum labor laws and religious understanding is a shortcut for smooth local labor management.

    • Q&A3

       Q

      How about dealing with strikes when there is doubt about illegal strikes? When we suspended and dismissed workers who caused labor disputes (illegal strike) without prior notice given by law, we were sued by them and labor union.

       

      A

      Instead of deciding immediately as an illegal strike, keep the following points in mind.

      ① Whether it was really an illegal strike

      Instead of immediately striking rather than striking, it is not an immediate action to seek opportunities for dialogue with management, but it is necessary to conduct hearings first.

      ② Proof of illegal strikes, impact

      The burden of proof that the strike is illegal or a serious mistake is on the management side. It is necessary to confirm the illegality of the strike and its influence and to manage the evidence and the minutes of the proceedings.

      ③ Validity of disposition

      In view of the illegality of the strike, the effect, etc., if the disposition is found to be invalid, a cancellation will be made by the labor relations court. It is necessary to decide the disposition based on the evidence gathered, not emotionally.

    • Q&A4

       Q

      We know that religious consideration is necessary in Indonesia where there are many Muslims, but we believe that we can give consideration to the extent that it is not an obstacle in business. Please tell me about specific measures.

       

      A

      Muslim people has five worships a day. For men, it is a custom to do special worship every Friday afternoon. Especially during daytime worship, it can be a cause of big trouble in business in the case of eating and drinking shops, overlapping with preparation time or in the case of manufacturing line. Depending on the type of industry, it is also possible to clarify the time of worship in collective agreements and employment contracts so that there is no obstacle to work.

      In the case of a factory where the mosque is not in the vicinity, care should be taken to ensure that it is located on the premises. The problem of religion is very delicate, so do not scold Indonesians for this reason.

      Be aware that Japanese managers who cautioned that returning from worship was late were caught by the Department of Religion and forcibly repatriated to Japan.

    • Q&A5

       Q

      What should be noted in payroll accounting management in Indonesia?

       

      A

      In payroll calculation it is necessary to determine advance rule and grasp customs unique to Indonesia.

      The closing date and payment date of salary can be determined arbitrarily. In the case of payment for the current month, we have to adjust the closing date in consideration of the calculation of extra wage etc.

      In Indonesia, there are also cases where the company burden is the personal income tax at the time of salary payment and the person's share of social insurance. The amount that employees are hoping to receive at the employment interview is often the so-called commission amount. If the company is responsible for personal income tax or social insurance, these are treated as welfare benefits in the favor of the employees and taxed, so pay attention to calculations.

    • Q&A6

       Q

      I am in trouble at the time because it is temperament of the Indonesian people. Not only is there trouble in business but there are indications that employees in the purchasing department are doing sidewalking of their products. Is there a way to discover problematic employees at an early stage, or to risk hedge before becoming a problem?

       

      A

      In Indonesia, some the disciplinary actions imposed on employees are warning disposition, reduction in salary and dismissal. Warning disposal is divided into three stages, you can change the content of disposal according to the weight of the problem. The company can decide arbitrarily either way.

      ① In the case of the first warning letter (optional description): Mild breach or nuisance

      · Private business language

      · Do not obey the superior’s order

      · Late arrival at least three times a month

      ② In case of second warning letter (optional statement): Severe breach or nuisance

      · Sleeping while working

      · Shouting, nuisance on the site by making noises

      · Do the action of the 1st warning letter within 6 months

      ③ In the case of the third warning letter (optional description): Specific damage to severe nuisance or company / other workers

      · Graffiti acts

      · The act of instigating other workers and confusing the site

      · Acts of causing damages to the company due to act of slander to the superior

       

      The Labor Law enumerates the acts of employees subject to dismissal. The important thing is to make employees aware of the actions subject to warning disposal (dismissal). Employees who have crossed the product fall under category 158 (1)of the Labor Law can be dismissed with approval at the local office of the Ministry of Labor.

      ④ In the case of disciplinary dismissal under Article 158 (1): acts that cause damage to a severe company

      · Fraud, theft, or embezzlement of goods and / or money owned by the company

      · Reporting false information or damaging the company by counterfeiting data

      · Drunkenness and using narcotics, psychotropics and other toxic chemicals by alcoholic beverages at or around the company

    • Q&A7

       

      Q

      No matter how many warning dispositions are issued, I would like to dismiss employees who do not have any signs of improvement. Please tell me specific process and points to keep in mind.

       

      A

      The criteria for judging whether or not disciplinary dismissal is possible are mainly violations that correspond to new warning letters within half a year after receiving the 3rd warning letter and do violation corresponding to Article 158 of the Labor Law. It depends on that. If you violate this standard, you can dismiss with permission from the local office of the Ministry of Labor. However, it is necessary to pay dismissal allowance according to the provisions of the Labor Law.

      The sequence of flow relating to dismissal is summarized as shown in the figure below.

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

    • Q&A8

       Q

      I have a working visa and I am assigned in Indonesia, continue employment contract with Japanese company and is being paid, so we continue to join welfare pension insurance and health insurance. According to the previous provision, due to the qualification certificate as an insured person in Japan, the participation in the worker social security system (JAMSOSTEK) in Indonesia was exempted,unless, you join BPJS as a result of this amendment Why you don’t

       

      A

      There is an obligation to join a new social security system also for foreigners by law.

      If you work for more than six months after your assignment to Indonesia you must join BPJS. Even before January 1, 2014 when the law was revised, if you worked for more than 6 months after your assignment you will be eligible to join BPJS.

      When joining, you will need the name of the subscriber, resident registration number, date of birth, information on the primary health facility affiliated with the selected BPJS.

      Meanwhile, in the JAMSOSTEK era, foreign companies' social insurance was obliged to join, and there was also a circumstance that it was exempted. So the provisions on foreigners' participation obligation to BPJS can be changed in future. In practice, when management receives a letter from the authorities upon perceiving the non-participation of foreigners in BPJS, it is the time to judge whether or not to join.

    • Q&A9

       Q

      Please tell us the actual circumstances of Indonesia's audit including immigration.

       

      A

      Authority audits are tax, labor, and immigration. Tax and labor audit fundamentally has advance notice, it is possible to correspond if preparation has to be done to some extent, such as preparation for writing.

    • Q&A10

       Q

      Which stage should I decide my residence?

       

      A

      Since you need an address at the time of applying for RPTKA, when registration in the Ministry of Commerce is over,it is necessary to decide the residence right before entering the visa application.

    • Q&A11

       Q

      Which country is easier for procedures at a foreign diplomatic mission?

       

      A

      Procedures at overseas diplomatic establishments in Singapore end within a half day, so many cases are handled in Singapore.

      When using procedures in Japan, it takes a lot of time when processing through agents, so overwhelmingly there are cases where you need to process yourself. If you do the procedure yourself, you will go to the embassy in Tokyo or consular office in Osaka twice in total for application and receipt. It is necessary to decide at the stage when RPTKA is over.

    • Q&A12

       Q

      (Re) Please tell me the points to keep in mind after entering Japan.

       

      A

      (Re) After entering the country, of course, You will go to immigration within 7 days, but after that, you will deposit the original passport within 7 days (about 2 weeks after entering the country). Because you will not be able to go out of the country, attention is needed when you organize a schedule for business trip etc.