Being one of the most celebrated holiday destinations in Indonesia, Lombok emerges as one of foreign investment prima donna. As the tourism sector shows increasing growth, the island has become a magnet for not only local but also foreign investors. This article provides new-to-Lombok foreign investor practical guide to starting a business in Lombok to help them being compliance to the laws.
Investing in Lombok is very lucrative indeed, but understanding the legal landscape before starting a business is critical. Below is the recommendation of must-know lists for absolute newcomers to Lombok business.
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Property Investor
Entering Indonesia: Visa Option
There are several recommended visa options to enter Indonesia in preparation for your business in Lombok, but the most suitable one is the Single Entry Visa listed under Index B211A.
Index B211A Visa validity is 60 days and extendable for 2 x 60 days. So the holder can stay in Indonesia under Index B211A Visa for 180 days in total. The purposes of Index B211A Visa covers pre-investment activities, business, business meeting, seminar, sport, leisure, social cultural and humanitarian.
Establish A Legitimate Business Entity
Regardless of Lombok business sector foreign investors are planning to invest in, to stay compliance to the laws, the investors must establish a legit Foreign Investment Company, which is also known as PMA company. Under PMA company, foreign investor can buy land in Lombok under HGB Title.
Requirement to Establish Foreign Investment Company
- At least two founders/shareholders. It can be individual or legal entity or combination of both.
- Shareholders address and contacts detail
- Founders/shareholders passport copies
- Minimum paid up capital is IDR 10 billion+
- Temporary/preparation office address in Lombok
- Company’s name, consists of 3 words
- Business sector
Obtain Company's Tax Identification Number (NPWP)
After the PMA company is established, the process must be proceeded to obtaining obtain Company’s Tax Identification Number (NPWP). It must be done online through Tax Directorate General official website.
Obtain Business Licenses
Once the PMA company is ready, it can start acquire properties immediately, but to make it fully lawful for operational, there are multiple business licenses are required. Please note that different business sector requires different business licenses. To apply for most of the licenses, it is done online through Online Single Submission (OSS).
Online Single Submission (OSS) Account
To access and to apply for business licenses on OSS website, foreign investors must create an account. Once the account isready, the investors can explore Business License Application menu and find the license your company requires. The license requirement is defined based on the business sector, scale and risk, which ranges from low to high risk.
Regular Business Report
PMA company is obliged to submit business reports.
Land Ownership
There are multiple type of land title available with different characters and benefits. However, not all titles fit foreign (individual) ownership. The most common and most suitable land title for foreign company is Hak Guna Bangunan (HGB).
HGB provides the title holder rights to erect building and run business on the land. The title last for 30 years, extendable for 20 years and renewable for 30 years. The holder can pass it to the next of kin, bequeath it, transfer it, mortgage it or sell it.
The PMA company can also lease a land and do any business activities on it, but it cannot sell it. However, depending on the mutual agreement, the PMA can sublease the land to other parties.
Corporate Income Tax
Corporate operating in Indonesia is subject to 22% Corporate Income Tax according to the tax policy in 2024 fiscal year. This may be revised in the coming years, depending on the tax policy of the new elected government. However, company listed in the stock market with at least 40% listing is entitled to exemption of 3% discount.
Cultural Understanding and Community Relationship
Favoring local culture and tradition and building warm relationship with locals can substantially contribute to the achievement and sustainability of your business. Assign proportionally enough job positions for the locals whenever feasible and suitable.
Engage Local Partner
Depending on your situation, partnering with local may be beneficial. He/she can help you navigate the local issues and building community and government relations. In this case, partner doesn’t always mean shareholder, he/she might be just a director, manager or other assigments.
Consult Lombok Lawyer
As there area various information accessible online regrading foreign company, consult a Lombok business lawyer for practical guidelines throughout the preparation, establishing, licensing and operational of your business. Professional advice and guidance may save you from confusions and incorrect decisions.
