Measures to Encourage Investments in IKN: Utilization of Foreign Workers and Income Tax Incentives

The Government of Indonesia enacted Government Regulation No. 12 of 2023 on the Granting of Business Licenses, Ease of Business, and Investment Incentives for Business Actors in the Capital City of Nusantara (“GR 12/2023”). GR 12/2023 aims at providing the certainty, opportunity, and more participation for the business actors and accelerates the development of the new capital of Indonesia or known as the Capital City of Nusantara (Ibu Kota Nusantara or in short, the “IKN”).

GR 12/2023 sets out further provisions on the granting of business licenses, ease of doing business, and provide various investment incentives and benefits available to business actors that conduct business activities within IKN and certain regions of Kalimantan as parts of the IKN economic superhub. A couple of measures in GR 12/2023 to attract investments in IKN are the provision on utilization of foreign workers and the granting of income tax incentives for employees working for certain companies within the IKN.

♦ Utilization of Foreign Workers in IKN

According to GR 12/2023, a business actor that conducts its business activities within the IKN may employ a foreign worker to work for a certain position as regulated under the prevailing laws and regulations on the utilization of foreign workers. As generally regulated under the prevailing laws and regulations, the utilization of foreign workers shall be based on an approved Foreign Worker Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing or an “RPTKA”).

In this regard, GR 12/2023 provides that an RPTKA for foreign workers who work in the IKN may be approved for 10 (ten) years and may be extended. As a comparison, an RPTKA is generally granted for a maximum of 2 (two) years, or 5 (five) years (for foreign workers who work in a special economic zone) and may be extended.

Further, GR 12/2023 provides an exemption from the obligation to pay the mandatory compensation funds for the utilization of foreign workers (Dana Kompensasi Penggunaan Tenaga Kerja Asing or the “DKP-TKA”) for companies that employ foreign workers within the IKN, including the foreign workers who work for national strategic projects in the IKN. This exemption will be for a certain period of time which will be further determined in a regulation to be issued by the Head of the IKN Authority.

With regard to the Temporary Stay Permit (Izin Tinggal Terbatas or an “ITAS”) for the foreign workers working in the IKN, the foreign workers may be granted an ITAS for a period of up to 10 (ten) years and may be extended for the period based on the period of the employment agreement between the company and the foreign worker. Normally, the prevailing laws and regulations on the immigration may only grant an ITAS for a maximum period of 5 (five) years and may be extended for as long as the total period of the foreign worker’s stay under the ITAS does not exceed 10 (ten) years in total.

♦ Income Tax Incentives

Pursuant to Article 50(1) of GR 12/2023, the income tax Article 21 (or known in Indonesian in short as PPh 21) will be borne by the Government for any income received by certain employees from certain employers in the IKN. The employees must have their tax registration numbers (each in Indonesian in short an “NPWP”) issued by the tax office in the IKN region.

Article 52(1) of GR 12/2023 provides that a ‘certain employer’ means an employer that fulfills the following:

a. the employer is domiciled, resides, or conducts its activities within the IKN;

b. the employer has an NPWP issued by the tax office in the IKN;

c. the employer has submitted a notification letter for the utilization of the “Income Tax Article 21 borne by Government incentive to the Directorate General of Taxes (the “DGT”) for validation; and

d. the employer must submit a realization report for the utilization of the “Income Tax Article 21 borne by Government incentive” to the DGT.

Pursuant to Article 53 of GR 12/2023, this income tax Article 21 incentive is valid until year 2035.

July 17, 2023

AKSET

 

Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com), Thomas P. Wijaya (twijaya@aksetlaw.com), or Rizky Rakhmadita (rrakhmadita@aksetlaw.com) for further information.

Disclaimer:

The foregoing material is the property of AKSET and may not be used by any other party without prior written consent.  The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance.  Specific legal advice should be sought by interested parties to address their particular circumstances.

Any links contained in this document are for informational purposes and are available and relevant at time this publication is made.  We provide no liability whatsoever in respect of any information or content in such links.

 

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Measures to Encourage Investments in IKN: Utilization of Foreign Workers and Income Tax Incentives

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by Pilanita Silaen

Recommendation for RPTKA Ratification is No Longer Required

Due to the decreasing covid cases in Indonesia and to accelerate the national economic recovery, the Minister of Manpower issued Circular Letter No. M/4/HK.04/IX/2022 on Ratification of Plans for Employment of Foreign Workers (Rencana Penggunaan Tenaga Kerja Asing or “RPTKA”) for Acceleration of National Economic Recovery (“CL 4/2022”) on September 30, 2022.  CL 4/2022 revokes the Minister of Manpower Circular Letter No. M/11/HK.04/IX/2021 dated September 24, 2021 on Ratification Service of RPTKA During the Period of Handling the Spread of Corona Virus Disease 2019 (“CL 11/2021”).

With the revocation of CL 11/2021 by CL 4/2022, recommendations from relevant ministries/institutions for an RPTKA ratification are no longer required. Further, the restriction for RPTKA ratification for employees from a certain country with high spread of covid-19 cases is also no longer applicable.

CL 4/2022 also stipulates that the process of RPTKA ratification will continue using the procedure as regulated under Government Regulation No. 34 of 2021 dated April 1, 2021 on the Use of Foreign Workers and its implementing regulation, the Minister of Manpower Regulation No. 8 of 2021 dated April 1, 2021 on the Implementing Regulation of Government Regulation No. 34 of 2021.

October 9, 2022

AKSET

Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com) or Ammarsyarif Ghazyandra Goenawan (agoenawan@aksetlaw.com) for further information.

 

Disclaimer:

The foregoing material is the property of AKSET and may not be used by any other party without prior written consent.  The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance.  Specific legal advice should be sought by interested parties to address their particular circumstances.

Any links contained in this document are for informational purposes and are available and relevant at time this publication is made.  We provide no liability whatsoever in respect of any information or content in such links.

 

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Recommendation for RPTKA Ratification is No Longer Required

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by Pilanita Silaen

Procedures of Employing Foreign Workers Under MOM Reg. 8/2021

On March 31, 2021, the Minister of Manpower issued Regulation No. 8 of 2021 on the Implementing Regulation of Government Regulation 34 of 2021 on the Employment of Foreign Workers (“MOM Reg. 8/2021”). As its name implies, MOM Reg. 8/2021 is an implementing regulation of Government Regulation 34 of 2021 on the Employment of Foreign Workers dated February 2, 2021 (“GR 34/2021”) which specifies in greater detail the mechanism and requirements that must be fulfilled to employ foreign workers. Please see our Newsflash on GR 34/2021 here.

Previously, the employment of foreign workers was regulated under Minister of Manpower Regulation No. 10 of 2018 dated July 11, 2018 on the Procedures on the Employment Workers (the “Previous Regulation”). MOM Reg. 8/2021 revokes and replaces the Previous Regulation.

The highlights of MOM Reg. 8/2021 are as follows.

  • Procedures on the Application and Issuance of Legalized Manpower Utilization Plans

In order to employ foreign workers, employers must first submit and obtain a legalized Manpower Utilization Plan (an “RPTKA”). An RPTKA also serves as the basis to grant visas and stay permits for foreign workers.  The steps to apply for an RPTKA are as follows:

  1. Creation of an account by the employer in the Online Foreign Worker Employment System;
  2. Filling out application data and uploading required documents to obtain a legalized RPTKA;
  3. Evaluation of the application for the legalized RPTKA;
  4. Filling out the data on the potential foreign worker(s) and uploading required documents for such foreign workers;
  5. Issuance of a Notification of Foreign Worker Employment Compensation Fee (“DKPTKA”); and
  6. Issuance of a Legalized RPKTA.

For an application for a Legalized RPTKA, an employer shall submit at least:

  1. The name, address and business activity of the employer;
  2. The name, sex, age and address of the foreign worker;
  3. The position or type of job of the foreign worker;
  4. The place of work;
  5. The amount of compensation and payment terms;
  6. The employment terms, including the rights and obligations of the Foreign Worker and the Employer;
  7. The validity period of the employment contract;
  8. The place and date the employment contract is made;
  9. The signatures of the parties in the employment contract.
  • Procedures on the Application and Issuance of Legalized Manpower Utilization Plans

There are four types of RPTKAs, namely: (i) an RPTKA for Temporary Jobs; (ii) an RPTKA for Jobs Lasting More than 6 Months; (iii) an RPTKA for non-DKPTKA Jobs; and (iv) an RPTKA for Work at Special Economic Regions (Kawasan Ekonomi Khusus or a “KEK”).

RPTKAs for Temporary Jobs

This RPTKA covers the following types of jobs:

  • Commercial filmmaking that is approved by relevant authorities;
  • Audit, production quality control or inspections on Indonesian branches for a duration of more than 1 (one) month;
  • Jobs related to installation of machinery, electricity, after sale service or products in the exploration/development stage of the business;
  • Impresario services; or
  • One-off jobs or jobs that have a duration of less than 6 months.

The Legalized RPTKA for these jobs are valid for a maximum of 6 months and may not be extended.

RPTKAs for Jobs Lasting More Than 6 Months

This RPTKA covers jobs that last more than 6 months that is to be filled by a foreign worker.  The Legalized RPTKA for these jobs is valid for up to 2 years and may be extended subject to the relevant immigration rules.

RPTKAs for Non-DKPTKA Jobs

RPTKA for Non-DKPTKA Jobs may be further divided into Non-DKPTKA jobs in: (i) social, religious, and educational institutions, or (ii) government institutions or foreign country/international organization representatives. The Legalized RPTKA for these jobs is valid for up to 2 years and may be extended subject to the relevant immigration rules.

RPTKA for Work at KEKs

These RPTKA covers jobs held by foreign workers in KEKs. The Legalized RPTKA for these jobs is valid for up to 5 years and may be extended subject to the relevant immigration rules. For a Director/Commissioner position in a KEK, the validity of the Legalized RPTKA is valid for the duration of the term of the Director/Commissioner subject to the relevant immigration rules. Furthermore, a Legalized RPTKA for work in a KEK is valid for work locations within the same KEK and other KEKs.

Once an application for the legalized RPTKA is submitted, it will be evaluated by the Directorate General of Manpower Placement Development and Work Opportunity Expansion.

  • Exemptions from Having RPTKAs

A legalized RPTKA is not required for: (i) directors/commissioners who have certain share ownership in the company (i.e., the employer); (ii) Diplomatic or consular officers at foreign countries’ representative offices; or (iii) foreign workers employed by employers for production activities that were stopped due to emergencies, vocational, technology-based start-ups, business visits and limited period research.

For foreign workers in technology-based start-ups or vocational business activities, the exemption from having a legalized RPTKA is only valid if the job/business activity lasts for up to 3 (three) months. During this time, the employer for these businesses is only required to submit the data of the potential foreign worker. If the job/business activity exceeds 3 (three) months and the employer intends to employ the foreign worker, then an application for a legalized RPTKA is required.

***

 

June 3, 2021

Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com), Thomas P. Wijaya (twijaya@aksetlaw.com), or Caleb Sitorus (csitorus@aksetlaw.com) for further information.

 

Disclaimer:

The foregoing material is the property of AKSET and may not be used by any other party without prior written consent.  The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance.  Specific legal advice should be sought by interested parties to address their particular circumstances.

Any links contained in this document are for informational purposes and are available and relevant at time this publication is made.  We provide no liability whatsoever in respect of any information or content in such links.

 

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Procedures of Employing Foreign Workers Under MOM Reg. 8/2021

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by Adho Fadillah Putera

New Regulation on Employment of Foreign Workers

Following the issuance of Law No. 11 of 2020 dated November 2, 2020 on Job Creation (the “Job Creation Law”), the Government issued Government Regulation No. 34 of 2021 dated February 2, 2021 on the Employment of Foreign Workers (“GR 34”) to further regulate obligations and requirements of employing foreign workers in Indonesia.

GR 34 introduces new provisions as well as amends certain stipulations under the Presidential Regulation No. 20 of 2018 dated March 26, 2018 on Employment of Foreign Workers (the “Previous Regulation”). The Previous Regulation is revoked by GR 34.

The major changes under GR 34 compared to the Previous Regulation are as follows:

  • Employers’ Criteria

Under GR 34, employers of foreign workers shall be the following:

  1. Government agencies, countries’ representatives, international agencies, and international organizations;
  2. Trade representative offices, foreign company representative offices, and foreign news agencies that carry out activities in Indonesia;
  3. Private foreign companies doing business in Indonesia;
  4. Legal entities established under the laws of Indonesia in the form of a limited liability company or a foundation or a foreign legal entity registered in the relevant agency;
  5. Social, religious, or cultural agencies;
  6. Promotors; and
  7. Other business entities so long it is not prohibited under Indonesian laws.

GR 34 further states that legal entities as mentioned in the letter (d) above would exclude limited liability companies in the form of individual limited liability companies.  Please see our Newsflash on individual limited liability companies under the Job Creation Law [here].

  • Employers’ Obligation

In addition to appointing an Indonesian employee as a counterpart (in Indonesian, Tenaga Kerja Pendamping) and conducting training sessions for such counterpart, GR 34 requires an employer to return the foreign workers to his/her home country when his/her employment agreement expires.

A counterpart and the training sessions for such counterpart would not be necessary for the following positions:

  1. Directors and commissioners;
  2. Head of a representative office;
  3. Members of a Board of Trustees, a Board of Management, or a Board of Supervisors of a foundation; and
  4. Foreign workers employed for temporary works.

Prohibitions

Consistent with the Previous Regulation, GR 34 prohibits an individual employer from hiring foreign workers. Further, foreign workers are not permitted to have a position that handles human resources matter.

GR 34 restricts an employer from hiring a foreign worker for multiple positions at the same company.

Manpower Utilization Plans

As stipulated in the Previous Regulation, employers who will hire foreign workers must apply submit a Manpower Utilization Plan (in Indonesian, Rencana Penggunaan Tenaga Kerja Asing or an “RPTKA”) for approval. In the process of submission, the employer is required to attach documents relating to the proposed foreign workers. According to GR 34, the documents are as follows:

  1. education diplomas;
  2. competency or work experience certifications;
  3. an employment agreement or any other agreement;
  4. a letter of counterpart appointment;
  5. a statement letter as guarantor for the foreign worker; and
  6. checking/savings account of the foreign worker or the employer.

Letters (c) and (f) above were not mentioned under the Previous Regulation.

RPTKAs for government agencies, countries’ representatives, international agencies, and international organizations

The Previous Regulation does not require government agencies, countries’ representatives, international agencies, and international organizations to submit an RPTKA for approval. However, GR 34 now requires the foregoing agencies and organizations to submit an RPTKA for approval.  But GR 34 exempts such agencies organizations from the obligation to have a feasibility study after the RPTKA submission.

The submission must be submitted by attaching:

  1. an application letter and reasons to employ foreign workers;
  2. a draft employment agreement or any other agreement; and/or
  3. an approval letter from the relevant agency.

Types of RPTKA Approvals

GR 34 presents different types of RPTKA approvals, as follows:

  1. an RPTKA for temporary jobs
  2. This type of RPTKA legalization is valid for 6 (six) months and may not be extended.
  3. an RPTKA for jobs more than 6 (six) months
  4. This type of RPTKA legalization is valid for 2 (two) years and may be extended.
  5. an RPTKA for positions without the obligation to pay compensation funds on the employment of foreign workers (in Indonesian, Dana Kompensasi Penggunaan Tenaga Kerja Asing or “DKPTKA”)
  6. This type of RPTKA approval is valid for 2 (two) years and may be extended.
  7. This type of RPTKA approval is granted for government agencies, countries’ representatives, international agencies, and international organizations.
  8. an RPTKA for a Special Economy Area (in Indonesian, Kawasan Ekonomi Khusus)
  9. This type of RPTKA approval is valid for 5 (five) years and may be extended.
  10. For directors or commissioners, this type of RPTKA approval may only be given once and will be valid as long as the foreign workers serve as the directors or commissioners.

The abovementioned types of RPTKA approvals are not mandatory for:

  1. Directors or commissioners who have certain share ownership in the company (i.e., the employer);
  2. Diplomatic or consular officers at foreign countries’ representative offices; or
  3. Foreign workers employed by employers for production activities that were stopped due to emergencies, vocational, technology-based start-ups, business visits, and research for a certain period.

RPTKA Approvals Extensions

An extension of an RPTKA approval shall be submitted online at least 30 (thirty) days before it expires. As mentioned above, an extension of an RPTKA legalization may be granted for no more than 2 (two) years. Whereas for an RPTKA for Special Economy Area, the extension may be granted for a maximum of 5 (five) years.

DKPTKA

DKPTKA is not required for:

  1. government agencies;
  2. countries’ representatives;
  3. international organizations;
  4. social agencies;
  5. religious agencies; and
  6. certain positions at education institutions.
  • Stay Permits

Every foreign worker who works in Indonesia must have a stay permit.

  • Social Security

Pursuant to the Previous Regulation, employers were only required to provide the Employment Social Security for foreign workers who would work for more than 6 (six) months in Indonesia. However, GR 34 mandates that the employer is also obliged to register its foreign workers who work less than 6 (six) months in Indonesia for at least the work accident insurance program.

  • Reporting

Pursuant to GR 34, employers who employ foreign workers shall submit an annual report to the Minister of Manpower regarding the implementation of foreign workers’ employment, education and job training for counterparts, and technology and knowledge transfer from the foreign workers to the counterparts.

  • Sanction

Unlike the Previous Regulation, GR 34 details a list of administrative sanctions for violations of some provisions in GR 34. The administrative sanctions are as follows:

  1. fines;
  2. temporary suspension of the RPTKA approval process; and/or
  3. revocation of the RPTKA approval.
  • Effective Date

GR 34 will be effective as of April 1, 2021. Any relevant licenses for foreign workers’ employment issued prior to the effective date will be valid until such licenses expire. As for submissions that are recently submitted will be processed in accordance with provisions under GR 34.

***

 

March 15, 2021

Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com) or Thomas P. Wijaya (twijaya@aksetlaw.com) for further information.

 

Disclaimer:

The foregoing material is the property of AKSET and may not be used by any other party without prior written consent.  The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance.  Specific legal advice should be sought by interested parties to address their particular circumstances.

Any links contained in this document are for informational purposes and are available and relevant at time this publication is made.  We provide no liability whatsoever in respect of any information or content in such links.

 

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New Regulation on Employment of Foreign Workers

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by Adho Fadillah Putera