What You Need To Know About The Expatriate Working Permit In Indonesia?
Article 1 (13) of Law No. 13 of 2003 on Manpower (“Manpower Law”) defines Foreign Workers (“Expatriates”) as visa holders of foreign citizenship who come to Indonesia with the intention to work within Indonesia’s territory. Expatriates are foreign workers who live outside their native country and settle abroad, e.g. in Indonesia. Employers looking to hire Expatriates to work with them in Indonesia must ensure that the Expatriates have acquired a complete set of Expatriate Work Permit as stipulated by the Ministry of Manpower in Indonesia.
In this article, we will elaborate on 4 (four) important things that all Employers hiring and/or in the process of hiring Expatriates must know and understand:
1. Who can be a Sponsor for a Work Visa?
Only the following entities are allowed to be a sponsor for the Expatriates in Indonesia:
• Government Institutions, International Bodies, Foreign State’s Representatives;
• Representative Offices of foreign chambers, foreign companies, or foreign news;
• Foreign Direct Investment Companies (Penanaman Modal Asing or PMA);
• Legal entities which are established based on Indonesia’s laws or foreign business entities which are registered in authorized institution in Indonesia (ie. Foreign Representative Office);
• Social, religious, educational, and cultural Institutions; and
• Entertainment organizer (impresariat) business services.
Entities in the form of civil association, firm, limited partnership, business partnerships, and individual persons are prohibited to employ and/or act as the sponsor for Expatriates unless stipulated otherwise by the Laws and Regulations.
DKP-TKA Payment Obligation for Employers / Sponsors
Employers or sponsors are required to pay Expertise and Skill Development Fund (“DKP-TKA”) in the amount of USD 100/month (USD 1200/year) for each Expatriate hired to work in Indonesia. DKP-TKA are paid in full at the beginning of the Working Permit application procedure in Indonesia Rupiah (IDR), for the employment period that has been approved by the Minister of Manpower.
The following employers or sponsors are not required to pay DKP-TKA:
• Government Agencies/Institutions;
• International Agencies (e.g. WHO, ILO, UNICEF, etc.);
• Representatives of Foreign Countries;
• Social Institutions; and
• Religious Institutions.
2. Prohibited Positions for Expatriates
The following are the reasons why Expatriates work in Indonesia:
• As the Owner of sponsor company (Investor/Shareholders) and/or to act as a member of the Board of Executives in the company (ie.: President Director/ Director);
• As Experts on certain skills, for the transfer of knowledge to Indonesians.
Please be informed that Indonesia Law regulates the Expatriates are not allowed to hold certain positions in Indonesia. These prohibited positions are mostly in the field of Human Resources Development (HRD), such as Personnel Director, Human Resources Manager, and HRD-related Supervisors. The full list of prohibited positions for expatriates is stipulated in the Minister of Manpower Decree No. 40 of 2012 (“Manpower Decree No. 40/2012”).
Other than the prohibited positions listed on Manpower Decree No. 40/2012, there are other positions prohibited for Expatriates who work in certain fields, such as in the Oil and Gas Industry.
Prohibition for Expatriates to hold Multiple Positions
According to article 41 of Minister of Manpower Decree No. 16 of 2015 (“Manpower Decree No. 16/2015”) Employers are not allowed to double post Expatriates in multiple positions, such as:
• Employ Expatriates for dual positions, whether both positions are within the same company, or in different companies;
• Employ Expatriates who are currently employed by other Employers.
Exempted from the double posting prohibtion are Expatriates who work as members of the Board of Directors, or the Board of Commisisoners.
3. The Procedures to Obtain the Work Permits
Every employer that employs Expatriates is under an obligation to obtain written permission from the Ministry of Manpower (“Work Permits”). The following are the Procedures to obtain the Work Permits in Indonesia:
Permits to be held by the Sponsor Company:
• Foreign Workers Recruitment Plan (Rencana Penggunaan Tenaga Kerja Asing or “RPTKA”);
• Telex Vitas;
• Foreign Worker Recruitment Permit (Izin Memperkerjakan Tenaga Kerja Asing or “IMTA”);
Permits to be held by the hired Expatriate:
• Limited Stay Visa (Kartu Izin Tinggal Terbatas or “KITAS”);
• Multiple Exit / Re-Entry Permit (“MERP”);
• Registration Letter (Surat Tanda Melapor or “STM”);
• Temporary Stay Registration Letter (Surat Keterangan Pendaftaran Penduduk Sementara or “SKKPM”);
• Arrivals Permit Card (Kartu Ijin Pendatang or “KIJ”); and
• Arrival Reporting Evidence Letter (Lapor Kedatangan or “LK”).
Data required from the sponsor company at the beginning of the procedure consists of the planned: (1) name of sponsor company; (2) business domicile of the company; (3) name of head of the company; (4) job of Expatriates; (5) job description of Expatriates; (6) number of Expatriates hired; (7) work location of hired Expatriates; (8) period of Expatriates employment; (9) wage of Expatriates; (10) start of employment; (11) number of Indonesian workers hired in the sponsor company; (12) the appointment of Indonesian workers as Expatriates companion; and (13) training program for the Indonesian workers.
4. Obligations to Obtain Other Licenses for Expatriates
After a certain period of time, Expatriates working in Indonesia are required to obtain other licenses in order to comply with their obligations as stipulated in the Manpower Decree No. 16 of 2015. The obligations are as follows:
• Tax Compliance
Article 36 of Manpower Decree No. 16 of 2015 requires Expatriates who have worked for more than 6 (six) months in Indonesia to obtain Taxpayer ID Number (Nomor Pokok Wajib Pajak or “NPWP”). NPWP functions as tax compliance for legal subjects in Indonesia.
• Local Insurance Policy
Article 36 of Manpower Decree No. 16 of 2015 requires Expatriates to have an insurance policy in an insurance company that is currently established in Indonesia as an Indonesian legal entity.
If you have decided to expand your business and profit from the huge Indonesian market, you will need help navigating the rules on how to register a company in Indonesia. MAM Corporate Solutions can help you to set a Direct Foreign Investment Company (PT PMA) in Indonesia.