Indonesia is one of the promising business centres in the world. Being a member of G20, it has been classified as a newly industrialized country. So, this provides an opportunity for people to incorporate company in Indonesia. In this article, we look into the recent business scenario in Indonesia.
Overview Of Tax System
Following are the taxes that investors and individuals need to pay to the government
- Corporate income tax
The corporate income tax rate is 25%.
- Individual income tax
Individual income tax applies from the range of 5%-30% and for non-resident individuals, it is 20%.
- Value-added tax
Standard VAT rate in Indonesia is 10%.
- Luxury –Goods sales tax
Current LGST is between 10-125%.
Business Sectors In Indonesia
- Agriculture
One of the major sectors that contribute 14.43% of GDP is agriculture. 41% of the total workforce are currently involved in agriculture which involves around 30% of the land area. Rice, rubber, peanuts, palm oil, cocoa, coffee, eggs, pork, beef are the main agricultural commodities.
- Mineral oil and mining
The oil and gas sector contributes 9% of GDP. US, Canadian, British firms operate mines like gold, nickel etc.
- Automobile industry
Motorbike companies like Honda, Yamaha are highly active in Indonesia. Car companies like Toyota, Mitsubishi are leading the market in terms of sales of cars. In 2017, Indonesia was ranked as the 18th largest producer of vehicles in the world.
- Business and real estate
In Indonesia, there are around 500 million small businesses. Internet-related activities have also contributed heavily to the GDP of the country.
Challenges
- Misappropriation and corruption
Corruption from local government and police is serving as a barrier to Indonesia’s economic development. Inefficient government policies and corruption are the most troublesome issues that affect the smooth running of business in the country.
- Labour unrest
Foreign-owned industries try to escape Indonesian labour law so that they can pay less to the workers working in their companies. In 2020, many workers protested against the controversial omnibus law on job creation.
- Inflation
3.61% was the inflation rate as of 2017, and it is one of the causes that hampers the flourish of business in Indonesia.
3E Accounting Indonesia can guide you in making business plans and prepare you to face the challenges. So, if one does a good feasibility study and prepares himself well, then he can open company in Indonesia.
