The Expat's Guide to Doing Business in Semarang

THE EXPAT’S GUIDE TO DOING BUSINESS IN SEMARANG THE EXPAT’S GUIDE TO DOING BUSINESS TABLE OF CONTENTS IN SEMARANG

TOPIC PAGE Interesting Facts about Semarang (Infographic) 3 Why Invest in Semarang 4 Business Culture 5 Visas and Permits 6 Company Setup 12 Business & Import Licenses 15 Business Process Outsourcing 18 Of ce Solutions 21 Survival & Networking Guide 23 Cekindo Business International 24

CEKINDO BUSINESS INTERNATIONAL© 2020 3 THE EXPAT’S GUIDE TO DOING BUSINESS WHY INVEST IN SEMARANG IN SEMARANG 7 REASONS TO INVEST IN SEMARANG Semarang was awarded The Pro-Investment Area. Jakarta-Surabaya toll road in December 2018 and the 1 On November 26, 2018 Semarang received the Pro- expansion of Tanjung Mas Port (still ongoing). Investment Area Award at the 2018 Central Java Strategic location. Located between Jakarta and Investment Business Forum (CJIBF) held in Jakarta. 4 Surabaya, two of Indonesia’s largest domestic markets, the Semarang has built a conducive investment climate strategic location of Semarang enables foreign investors and signi cantly increased the amount of investment to reach any destination within the island conveniently. from the private sector. In 2017, the investment Furthermore, Semarang operates both international airport gure reached IDR 20.5 trillion in Semarang, which and port and is further connected with allmajor cities in was much higher than the IDR 1 trillion in 2011. Java. The implementation of investment-friendly system. Low labour cost. The minimum wage in Semarang is, 2 Investments in Semarang have never been easier than now 5 half-price of Jakarta, at IDR 2.13 million per month. with the implementation of an investment-friendly system Enticing incentives. Government Regulation (PP) No. through e-government. A total of 148 online service appli- 6 142/2015 states that tax incentives will be granted to cation systems were created and integrated to facilitate the investors building their factories in industrial parks. These evaluation system of investments. In addition, the elimina- incentives include easier licensing processes, advanced tion of nuisance permits, environmental permits and recog- infrastructure, tax deductions and exemptions. nition of digital signatures are the efforts of the government Growing digital landscape. According to startup to accelerate the processing of permits in Semarang. 7 ranking.com, among the 1000 startups in Indonesia in Well developed infrastructure. This includes the opening 2017, 31% of them were actually in Semarang. 3 of a new airport terminal in June 2018, the opening of

WhileWhile residing residing in inSemarang, Semarang, you you will stillwill havestill have the perfect the perfect access access to quali ed labour, thanks to several prestigious universities that ! to quali ed labour, thanks to several prestigious universities that areare situated situated within within the the proximity. proximity.

To run a successful business in Indonesia, it takes more than just market knowledge, capital and human resources. Indonesian business culture is always a focal point in doing business because of the country’s diverse and rich cultures and traditions. TIME MANAGEMENT Indonesian people have a different attitude towards time, which is called the “rubber time” or “jam karet” in Indonesian language. It means that Indonesians approach matters more slowly and believe that time is exible and everything needs time to be realised. Indonesians take pride in their hospitality and “relationship rst, business second” approach. Building relationship is more important to bring harmony. Therefore, this kind of attitude applies when it comes to showing up at appointments or meeting deadlines. THE PREVALENCE OF AUTHORITY, SENIORITY AND HIERARCHY The concept of authority, seniority and hierarchy is still commonly found in, especially in a long-established company with employees of older generations. During a meeting, for example, you are advised to greet the most senior or the highest position rst. They should be addressed with their names preceded with titles such as Mr/Mrs/Miss or the name of positions such as Chairman/Director/Manager. INDIRECT RESPONSE AS POLITENESS To reiterate, Indonesians place high importance on maintaining the harmony in every social and personal situation. Therefore, sometimes they will say something indirectly or opposite to express their thoughts and opinions to maintain a harmonious relationship. As an expat, you should not regard this as good or bad business culture. Instead, understand and embrace it for your business advantage.

! When an Indonesian say “yes” to your proposal, it does not mean they have agreed with your proposal. Don’t take this the wrong way as hypocrisy. They just try to be nice and don’t want to hurt your feelings. To make sure it is a real “yes”, con rm a few more times and seal the deal with a proper agreement.

Visa and/or permit application in Semarang depends on your purpose of visit or stay. In this e-book, we provide you with the most common visas and permits available for foreigners. BUSINESS VISA You can opt for a business visa to participate in business activities that do not generate any income. These business activities can include meetings with suppliers, interviews with staff, seminars and conferences, etc. Business visa comes in two types: single- entry and multiple-entry, and both can be applied online. 1. Single-Entry Business Visa 2. Multiple-Entry Business Visa This visa is valid for 60 days and is not extendable. You must leave If you want to enter and leave Indonesia several times per Indonesia and apply for a new business visa to return to Semarang. year for the same purposes as a single-entry business visa, a multiple-entry business visa is the right choice. A multiple-entry business visa does not restrict the number of visits to Indonesia, but each visit is limited to only 60 days, and it is not extendable. The validity of the visa is one year. ! You should not confuse a business visa with a work visa because as mentioned earlier, a business visa does not allow foreigners to work and receive a salary.

SOCIAL VISA Social visa is granted to foreigners who would like to visit Semarang for short internship programs and courses, lectures, meetings, and other related social activities. This visa allows its holder to stay for a maximum of 60 days and is extendable up to four times, and the visa will gain a 30-day validity for each renewal. You need an Indonesian sponsor, such as Cekindo, for social visa. RETIREMENT VISA Retirement visa allows foreigners who are over 55 years to stay in Semarang. The validity of this type of visa is one year, and it can be extended. A local Indonesian sponsor is compulsory for the application of retirement visa. However, not any Indonesian national can be the sponsor. The retirement visa’s sponsor should be the owner of a travel agency license, like Cekindo. To be eligible for retirement visa application, you need to satisfy the following requirements: 55 years old or older In retired status Con rmation of hiring a maid in Semarang Suf cient savings of 1,500 USD per month Passport with at least 18-month validity Passport photos with a red background Pension, insurance and medical statements

WORK & STAY PERMITS Indonesia offers several types of visas that differ based on the purpose of stay in the territory. The frequently used ones are a Temporary Stay Permit called KITAS (ITAS) and a Work Permit known as IMTA. However, effective from June 2018, IMTA is no longer required. IMTA is simpli ed as it is combined with Expatriate Placement Plan (RPTKA). With regard to RPTKA, it is no longer mandatory for shareholders that are also directors or commissioners, diplomatic and consular of cers, and foreign workers that are needed by the Indonesian government.

CEKINDO BUSINESS INTERNATIONAL© 2020 8 THE EXPAT’S GUIDE TO DOING BUSINESS VISAS & PERMITS IN SEMARANG .Temporary Stay Permit (KITAS) Having a Temporary Stay Permit (KITAS), also known as Indonesian Investor KITAS can be categorised into two a Work visa or Work KITAS, is on of the necessities when types: working in Indonesia. A Work KITAS must be sponsored by .Index 313: 1-year KITAS an Indonesian company (an individual sponsorship is not .Index 314: 2-year KITAS allowed). The length of each working KITAS is based on job To qualify for an Investor KITAS, foreign investors are positions commonly ranging from six to 12 months, and required to have a minimum investment of IDR 1 billion in it goes hand in hand with a Multiple Exit Re-Entry Permit invested shares and the invested capital of the company (MERP). has to be over IDR 10 billion. Another type of KITAS that appeals to foreigners in Investor A newly established company will be able to sponsor the KITAS. Noteworthy bene ts of Indonesian Investor KITAS investors upon receiving the Business Identi cation Number include ease of application and waiver of work permit fee. (Nomor Induk Berusaha – NIB) and business license (Izin With an Investor KITAS, foreign investors will no longer be Usaha). required to pay a fee of USD 1,200 every year, provided that all the investment requirements are met. Furthermore, once the initial investment has been poured, foreign investors can immediately start working in Indonesia.

CEKINDO BUSINESS INTERNATIONAL© 2020 9 THE EXPAT’S GUIDE TO DOING BUSINESS VISAS & PERMITS IN SEMARANG .Permanent Stay Permit (KITAP) KITAP is the highest goal for foreigners wanting to reside in Not everyone can apply for a KITAP. The only eligible Indonesia. Unlike any other visas or permits, KITAP is valid for candidates to get a KITAP are: ve years, and if after ve years there are no changes to the Foreigners with an Indonesian spouse status of the expat, the visa is extended automatically. Foreigners legally married to an Indonesian can convert their You can only apply for a KITAP once you have gone through KITAS into a KITAP after two years of marriage. Your spouse the process of getting a KITAS (limited stay permit) and having will be the sponsor. If your marriage has lasted ten years or extended it multiple times. more, your KITAP will be for life, also in case of divorce.

Foreign investors, directors or commissioners in an Indonesian Company (PT PMA) The candidates mentioned above can apply for the KITAP once they have been working with the same Indonesian company for four years in a row in the same position.

Foreigners wanting to retire in Indonesia Retirees can apply for a KITAP once they reach 55 years of age, after four extensions of their KITAS.

Indonesians regaining their citizenship There are no special restrictions or obligations for Indonesians retaining their citizenship.

The government of Indonesia has proved that they welcome foreign investments by issuing new regulations to create a more open business environment for foreign investors. These new set of regulations came into force on August 27, 2019. The new law will no longer restrict various positions that foreigners are able to hold in Indonesia in every business classi cation.

There are three major changes on the new positions available for foreign workers in Indonesia: 1. Foreigners can now hold the commissioner and director positions in all business classi cation. 2. With only the exception of HR, currently all foreigners can become the general manager. 3. The government has removed many previous restrictions on foreign workers and expanded the working de nitions. 4. The list of positions for foreign roles gets longer as well with new management and advisory level roles, namely marketing manager, general manager, operation manager, tour manager, tourism facility manager and cruise manager. The approved impresario business classi cation list expands as well, from the 17 approved roles to 49.

! Probably not the best news for most foreigners, but starting from May 3, 2019, the daily ne of overstaying visas for foreigners in Indonesia has been raised to IDR 1,000,000. Previously, the Indonesian government would hold foreigners who overstayed their visas in detention. They were not allowed to leave the country until foreigners settled a daily ne of IDR 300,000.

Before you can run a business in Semarang, you need to rst In short, the process of setting up a PT PMA is as follows: incorporate a company. In Semarang, or anywhere in Indonesia, 1. Approval of company name by Ministry of Law and there are 3 types of companies that you can establish: a foreign Human Rights -owned company (PT PMA), a local company (PT) and a 2. Approval of Principal License by Indonesia Investment representative of ce. Coordinating Board (BKPM) 1 FOREIGN-OWNED COMPANY (PT PMA) 3. Preparation of Articles of Association by Notary PT PMA is foreign investors favourite choice. Although it can 4. Obtaining Deed of Establishment at Ministry of Law be 100% owned by foreigners, ownership restriction must be and Human Rights investigated because certain business sectors are partially or 5. Obtaining Certi cate of Domicile at local government fully closed to foreign investment. Refer to Indonesia's of ce (except for Jakarta) Negative Investment List. 6. Obtain taxpayer’s registration number (NPWP) at local tax of ce The requirements to establish a foreign owned company are 7. Obtain Environmental Monitoring Letter (SPPL) stricter than those for a local company. Moreover, it also 8. Obtain Company Registration Certi cate at local requires more capital (at least IDR 10 billion - subject to government of ce industry, with a paid-up capital of more than IDR 2.5 billion). But, foreigners who set up foreign owned companies in Indonesia are entitled to many bene ts. The most noteworthy ones are: 1. Can be fully owned by foreigners 2. Can employ foreign workers 3. Can sponsor business visas for international partners

2 LOCAL COMPANY (PT) PT is the most widely used form of business entity in In short, the process of setting up a PT is as follows: Indonesia. Unlike a PT PMA, a PT is not restricted when it 1. Approval of company name by Ministry of Law and comes to business ownership in Indonesia. However, since a Human Rights PT allows only 100% local ownership, foreign investors who 2. Preparation of Articles of Association by Notary wish to establish a PT should partner with an Indonesian 3. Obtaining Deed of Establishment at Ministry of Law and entity or individual through what is called local nominee Human Rights arrangement (Cekindo can be your local nominee - talk to 4. Obtaining Certi cate of Domicile at local government us to know more). of ce (except for Jakarta) With regard to capital, PT’s paid-up capital based on 5. Obtain taxpayer’s registration number (NPWP) and VAT company size can be categorised into the following: number at local tax of ce 6. Obtain Environmental Monitoring Letter (SPPL) 1. Small: IDR 50 million – IDR 500 million 7. Obtain Trading Business License (SIUP) 2. Medium: IDR 500 million – IDR 10 billion 8. Obtain Company Registration Certi cate at local 3. Large: more than IDR 10 billion government of ce *Only medium and large companies can sponsor Work Permit for foreigners.

3 REPRESENTATIVE OFFICE There is no better way to check the business potential of your eld in Indonesia than starting a representative of ce. Commonly considered as a branch of an overseas parent company, representative of ce is the perfect legal entity to test the water in Indonesia before deciding to incorporate either a PT PMA or a PT. With a representative of ce, you can conduct marketing activities and research-related activities. Business activities that generate income are strictly prohibited. To be able to set up a representative of ce, the existence of the parent company abroad is required.

! You can penetrate the Indonesian market as fast as one week and this can be done hassle-free. Purchase a shelf company, also known as a Ready-Made Company. A shelf company has been registered and left to age, and now it waits for investors to purchase it. It can boost business credibility, increase client base, build relationships with larger corporate and win projects, among others.

In Indonesia, if you want to expand your business or distribute your product, you are required to obtain particular licenses and register your products (apply to certain products - contact Cekindo for details). LICENSES APPLICATION THROUGH ONLINE SINGLE SUBMISSION (OSS) SYSTEM Before going any further into the business and import licenses, it is worth knowing to know that every business that requires licenses for operations must apply for the necessary licenses through the OSS system, which has been effective since July 2018. OSS is an integrated web-based business permit application, allowing business license application in Indonesia to happen as fast as two hours. Business owners and investors from anywhere across the world can access the OSS system online anywhere and anytime. After the completion of registration at OSS, each business will automatically get a Business Identication Number (Nomor Induk Berusaha – NIB) one day after the registration, provided that all required documents are complete. A Business License (Surat Izin Usaha Perdagangan – SIUP) will also be granted alongside the NIB if your business does not require other licenses, which depends on the business sector your company is engaged in.

Classication of business licenses Business licenses in Indonesia can be categorised into three types, namely: 1. Business license for companies engaged in general trading, goods or other services. 2. Industrial business license for companies engaged in the manufacturing industry outside of oil, gas and geothermal energy, should have an industrial business license. 3. Construction business license for companies engaged in other industries, such as construction. Good news for investors and importers, with OSS, you no longer need to obtain General Import License (Angka Pengenal Impor Umum), Producer Import License (Angka Pengenal Impor Produsen) and Customs Registration (Nomor Induk Kepabeanan - NIK) as basic import licenses. NIB is the basic import license: As mentioned, after completion of registration at the OSS, each business will get the NIB that will not expire as long as the company is in operation. This NIB number makes all processes much easier as it replaces the Company Registration Certi cate, Importer Identi cation Number (for import license), and Customs Registration NIK (Nomor Induk Kepabeanan). As such, import companies or companies engage in import activities do not have to go through the process of acquiring API and NIK anymore. However, importers need to make sure that they still comply with technical import requirements with relevant authorities.

CEKINDO BUSINESS INTERNATIONAL© 2020 16 THE EXPAT’S GUIDE TO DOING BUSINESS BUSINESS & IMPORT LICENSES IN SEMARANG .Exporting to Indonesia without import license Exporting to Indonesia without an import license is indeed possible with what is called Undername Importer. Undername Importer, also known as Importer of Record (IOR), is a registered legal entity responsible for all documents and entry requirements for importing goods to Indonesia. The cooperation between Undername Importer and Exporter is straightforward. You, as an exporter, have the products, whereas an undername importer such as Cekindo has an import license to do it.

Undername Importer is an excellent solution for you under these circumstances: .You cannot wait for ve months or longer to export goods to Indonesia. .You have a legal entity in Indonesia but it is not allowed to apply for or does not have an import license. .You are not interested in understanding the Indonesian customs. .You know you will not export goods all the time.

! To encourage more investments, in September 2019 the government of Indonesia added 45 business elds that can start operations once they have obtained the NIB through OSS without having to apply for additional licenses such as tourism license. Contact Cekindo to know more.

Outsourcing business operations to a location like Semarang can bring signi cant cost savings to your operational costs when running a business in Indonesia. Before making a decision to outsource, it is necessary to come up with a proper plan and nd a suitable business process outsourcing partner. Semarang is perceived to be a good location to start your Business Process Outsourcing (BPO), mainly because of the lower labour costs in comparison to other Indonesian regions, like the capital city Jakarta or a highly popular tourist destination Bali. Despite the lower labour costs, it would not be dif cult to nd skilled human resources. By outsourcing your business operations, you can have more time to focus on the core activities that will support the growth of your business in Indonesia.

Some of the most time-consuming business tasks that you can outsource in Indonesia include: 1 TAX PREPARATION, FILING AND REPORTING Tax ling and reporting is time-consuming and requires special skill sets that usually only tax consultants possess. By outsourcing tax preparation and ling, you can take away the signi cant tax burden from you, as well as realising the signi cant cost savings. Furthermore, your in-house employees to focus on other higher value activities. 2 ACCOUNTING AND BOOKKEEPING It is always best to keep your accounts organised from the very beginning than try to sort everything out at the end of the nancial year. If you do not watch your accounting and bookkeeping tasks carefully, those mistakes that accumulated overtime can be costly to your business. Accounting and bookkeeping outsourcing puts every nancial transaction in order with the highest accuracy and ensures the more practical accounting and bookkeeping activities for your business. 3 RECRUITMENT AND HIRING Many well-known businesses in Semarang will agree that hiring the right employees is an essential factor in running a successful business. Thus, the importance of having a skilled team is not to be underestimated. When your company has a team consisting of only talented and skillful people, they can support your overall business strategy and provide advice and suggestions when you are to set up functional expertise and strategic capabilities. In Indonesia, particularly in Semarang, nding suitable channels and networks to recruit highly-skilled and quali ed people requires special attention and knowledge, not to mention the dedicated time and effort, especially when you team starts to grow. The process involves sourcing, interviewing, shortlisting, background checking, salary negotiations, employment contract, etc., and the tasks could be endless.

4 PAYROLL PROCESSING In-house payroll management is not a problem when you only have a small team, provided that your HR team is also quali ed. However, once your business starts expanding, your monthly payroll processing can be extremely taxing. Furthermore, many changes in the regulations complicate the payroll processes in Indonesia. Managing payroll requires a speci c time investment and knowledge of local regulations, labour laws. It is also important to understand regulations related to tax and manpower in Indonesia because payroll computation will affect your reporting of tax and social security. It is always best to keep your accounts organised from the very beginning than try to sort everything out at the end of the nancial year. If you do not watch your accounting and bookkeeping tasks carefully, those mistakes that accumulated overtime can be costly to your business.

! The statement saying only big companies need outsourcing services is downright inaccurate. Nowadays, many small and medium-sized businesses are outsourcing their business activities to professionals to maximise their full potential, cut down expenses and ensure compliance with regulations, among others.

Furthermore, many changes in the regulations complicate the payroll processes in Indonesia. Managing payroll requires a speci c time investment and knowledge of local regulations, labour laws. It is also important to understand regulations related to tax and manpower in Indonesia because payroll computation will affect your reporting of tax and social security.

In this modern era supported with the rapid development of technology, a business no longer has to be conducted inside a permanent of ce space or a traditional of ce building. Instead, exible of ce solutions are here to accommodate your business needs. Equipped with advanced technology and necessary facilities and amenities, of ce solutions such as Virtual Of ce, coworking space, and Serviced Of ce are what you need. The concepts of the Virtual Of ce, coworking space, and Serviced Of ce have gained popularity in recent years and they do not show any sign of stopping anytime soon. Remote work and exible working hours are necessary to achieve the work and life balance, something that has been desired by many, particularly the millennial generation.

11 VIRTUAL OFFICE Virtual Of ce is an of ce building located in a business area, the only difference is the "virtual" part. In other words, it does not have a physical space like that of a traditional of ce. As such, Virtual Of ce provides exibility and you and your team can work at home or anywhere you want. Depending on the provider, a Virtual Of ce may be equipped with facilities and amenities to support your business needs, such as a professional business address in a premium location, a mailing address, calls handling services, and meeting room. 2 COWORKING SPACE Coworking is the rede nition of the way work is done in this modern era. The concept of coworking promises an elevated work experience through bringing together creative-minded people and bright ideas in one place called a coworking space. Perks of working in a coworking space include exibility and freedom (you decide when and where to work), increased productivity (no home distractions), cost ef ciency (affordable with no overhead costs) and networking. 3 SERVICED OFFICE Serviced Of ce is an of ce whose equipment and maintenance are fully managed by a management company or a provider. Unlike a traditional of ce space, a Serviced Of ce is fully furnished with of ce facilities and amenities to support modern business needs. The bene ts offered by Serviced Of ce include the ability for your company to go straight to business as you are not required to incorporate a company, no overhead costs and high exibility in lease agreement and of ce size.

! At Cekindo When you subscribe to one of its Virtual Of ce packages, rent a Serviced Of ce or book a coworking space, you can enjoy free market-entry consultation with experts that are available on-site.

OTHER NUMBERS TO CALL Most expats in Semarang live in IN CASE OF EMERGENCY rented houses or apartments. National Alert 122 Recommended neighborhoods: Police 110 Vibrant neighborhood: Candi Ambulance 118 or 119 area (known as Semarang Atas) Fire 113 HOUSING such as Jl. Sultan Agung, Jl. Jl. Siliwangi No.514, Natural Disaster 129 SERVICES Kawi, Jl. Sumbing, Jl. Papan Kembangarum, Kec. Semarang Bar., Quieter neighborhood: Bukit Kota Semarang Sari, Griya Bukit Mas, Srondol Tel. +6224 7623144 Bumi Indah and Candi Golf. Hospitals with the best IMMIGRATION Adjacent to seaside: Puri facilities include: Anjasmoro, Grand Marina, and OFFICE Telogorejo Hospital Graha Padma Jl. KH. Achmad Dahlan Tel. 024-844 6000 Colombia Asia Hospital Jl. Siliwangi No.143 Expats usually go to JKI Injil Semarang, 50145, MEDICAL CARE Kerajaan (Holy Stadium, Central Java & EMERGENCIES Jl Arteri Utara, kompleks Tel. +6224 762 9999 Marina) as they offer English CHURCHCHURCH 24 Hour Emergency Call translation (available at SERVICES SERVICES +6224 762 7676 information desk). On a regular basis, foreign St Elizabeth Hospital pastors are invited to preach. Jl. Kawi 1 For youth service on Saturday Tel. +6224 831 0076 at 5pm, their American Youth Pastor will lead the mass.

Having been in the industry for almost 10 years, Cekindo as a part of InCorp Group is the trusted consellor, advisor, and business partner to many business leaders and organisations across all industries. As a leading consulting company in Indonesia, Cekindo provides a full range of market-entry and corporate services to worldwide clients who intend to operate in or expand to Indonesia and further to Asia Paci c.

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