Indonesia’s Special Economic Zone (SEZ) represents a unique and strategic opportunity for foreign investors. It is known locally as Kawasan Ekonomi Khusus (KEK).
The purpose of these zones is to accelerate investment by offering a range of advantages rarely available elsewhere in the country. The advantages include streamlined administrative procedures, significant tax reductions, and dedicated infrastructure.
By operating in strategic locations like Mandalika, Batam, and Bali‘s own Sanur and Kura Kura SEZs, foreign investors can gain priority government support. Furthermore, they can enjoy fiscal incentives that make their investment more profitable from day one.
This guide outlines the entire process for foreign investors. We’ll detail how to align your business with a zone’s purpose, the necessary steps to establish a legal entity (PT PMA), and the application process for securing an SEZ licence and valuable tax benefits.
Navigating the complexities of SEZs, from legal entity formation to securing all available incentives, requires deep expertise and local knowledge. This is why ILA Global Consulting, the ideal partner to ensure your venture succeeds, here. We have a proven track record of guiding hundreds of international clients through Indonesia’s legal and investment frameworks over 20 years.
Our team specializes in SEZ regulations and tax incentives, making the process seamless, compliant, and ultimately, more profitable for you.
What Are the Requirements for a Special Economic Zone (SEZ) Licence?
1. Aligning Your Business Plan with the SEZ’s Purpose
Before you begin the application process, it is important to understand that SEZ licences are for businesses whose activities match the government’s intended use for the zone.
A hospitality investment in Mandalika will be looked upon favourably because tourism is its primary focus, just as a logistics facility in Batam or a boutique eco-resort in Likupang would naturally align with the objectives of those zones.
The clearer the match between your business plan and the SEZ’s designated sector, the smoother your application will be. In other words, you cannot apply to a SEZ for any business, and it must align with the zone’s purpose.
2. Establishing Your Legal Entity (PT PMA)
Foreign investors are generally required to operate through a PMA company (Perseroan Terbatas Penanaman Modal Asing). This is a limited liability company with foreign ownership. This is the legal structure that allows you to own your business outright in most sectors within an SEZ.
Setting up a PMA company involves preparing your Articles of Association, reserving your company name, and choosing the director. The PT PMA is open to 100% foreign investment and doesn’t require a local Indonesian in most sectors.
Once approved, you will receive a Business Identification Number (NIB), which officially records your company as operating within a Special Economic Zone. Having this NIB with SEZ status is essential, as it is the key to applying for both operational licences and fiscal incentives.
Unsure About SEZ Licence Requirements?
Navigating the application process involves specific legal and administrative terms. Here are the key terms and its definitions:
| Term | Definition |
|---|---|
| SEZ | Special Economic Zone. Known locally as Kawasan Ekonomi Khusus (KEK),. |
| SEZ Licence | The official authorization granted to a business to operate within a Special Economic Zone. |
| PT PMA | Perseroan Terbatas Penanaman Modal Asing. This is a limited liability company with foreign ownership. |
| Articles of Association | The founding legal document of a PT PMA, outlining the company’s internal rules, objectives, and management structure. |
| Business Identification Number (NIB) | An official registration number that identifies a company and records it as operating within an SEZ. |
Registering a Company in Indonesia Has Never Been Easier
Setting up a business abroad can be challenging with so many documents, laws and regulations to consider. Luckily, the process will be a breeze, and we’ll give you expert advice on which business structure, and setup will fit your needs.
Reach out to the ILA team today to set up a free consultation or read more about the company registration process.
The SEZ Application Process: How to Get Your Licence and Incentives?
1. Applying for the SEZ License
Once you have established PT PMA, the next step is to submit your application to the SEZ Administrator’s Office in your chosen location. In most zones, this process is handled through a “one-stop service” centre that coordinates with multiple government agencies on your behalf.
The application typically includes your business plan (detailing investment amounts, project scope, and expected employment), proof of company registration (AKTA, SK, NIB), evidence of your right to the land (either through a purchase or long-term lease), and any required environmental or construction permits (PBG and SLF). The application takes a few weeks.
2. Securing the Tax Incentives
With your SEZ licence in hand, you can now move on to the part that most investors are eager to access: the tax and customs incentives. These range from corporate income tax holidays of up to 20 years to full exemptions on import duties and VAT for equipment and raw materials, and, in certain tourism projects, the removal of luxury goods tax.
The application for these benefits is either lodged through the Directorate General of Taxes or directly via the SEZ Administrator, depending on the type of incentive. The authorities will review your eligibility based on your investment size, industry, and compliance with SEZ sector priorities, with most approvals granted within one to two months.
3. Keeping Your Incentives in Place
It is worth noting that the granting of SEZ incentives comes with an expectation that the investor will follow through on the commitments made in their application. This means meeting agreed capital expenditure, creating the projected number of jobs, and adhering to all corporate, labour, and environmental regulations.
SEZ administrators conduct regular monitoring, and failure to meet your obligations can result in the withdrawal of incentives. In practice, this is not a significant concern for serious investors, but it does underline the importance of accurate planning and realistic projections at the outset.
Unsure About Terms in the SEZ Application Process?
Navigating the application process involves specific administrative and legal terms. Here are the key ones and its definitions:
| Term | Definition |
|---|---|
| AKTA, SK, NIB | Key documents for company registration: AKTA (deed of establishment), SK (legal entity certificate), and NIB (Business Identification Number). These serve as proof of your company’s legal existence. |
| PBG & SLF | Mandatory construction permits: PBG (Building Approval/Permit) and SLF (Certificate of Feasibility). These ensure your project complies with building and safety standards. |
| Corporate Income Tax Holiday | A key tax incentive that exempts a company from paying corporate income tax for a specified period (e.g., up to 20 years). |
| Import Duties & VAT Exemptions | Tax incentives that waive import tariffs and Value Added Tax on specific items, such as equipment and raw materials, for businesses operating within an SEZ. |
| Directorate General of Taxes | The national tax authority in Indonesia you might interact with when applying for specific tax incentives. |
What Does a Successful SEZ Investment Look Like in Practice? A Case Study
Consider the case of an overseas investor establishing a luxury beachfront resort in Mandalika. After setting up their PMA company and securing land within the zone, they obtained their SEZ licence in under three weeks.
Within two months, they were granted a 15-year corporate income tax holiday and full import duty exemption for all construction materials and equipment. It reduces their initial project costs by a substantial margin.
Spotlight on Bali’s SEZs: Sanur & Kura Kura
In Bali, there are two Special Economic Zones: Sanur SEZ and Kura Kura (Serangan Island) SEZ. These zones are reshaping the island’s investment landscape with targeted sector development, world-class facilities, and incentives designed especially for foreign investors.
1. Sanur SEZ: Health, Wellness & Medical Tourism
Established under Government Regulation No. 41 of 2022, the Sanur SEZ is Indonesia’s first SEZ dedicated to health and wellness tourism and spans approximately 41.26 hectares in Denpasar’s coastal area.
Anchored by the Bali International Hospital in collaboration with Mayo Clinic and including a 6.5-hectare ethnomedicinal botanical garden, its ecosystem is tailored for investors who want to develop integrated wellbeing offerings, beachfront medical facilities, spas, botanical garden resorts, and MICE venues.
By 2030, the Sanur SEZ aims to serve 140,000 local and international patients annually. It will create over 43,000 jobs, thereby significantly boosting Bali’s medical tourism capabilities.
2. Kura Kura SEZ: Innovation, Culture & Sustainable Tourism
The Kura Kura SEZ, established in April 2023 (via Government Regulation No. 23/2023), covers 498 hectares on Serangan Island. Designed as Bali’s innovation hub, this SEZ is set to host a high-end marina, resort clusters, wellness centers, educational campuses, tech parks, and cultural spaces.
With infrastructure for sustainable living, the Kura Kura SEZ is envisioned as a long-term economic driver. It will attract investments worth over Rp 104.4 trillion, generate nearly 100,000 direct and indirect jobs, and yield US$31.8 billion in foreign exchange by full maturity in 2052.
Both SEZs offer a compelling value proposition:
- Tax incentives, including income tax holidays (up to 20 years depending on project scale), VAT and luxury goods tax exemptions, and customs duty relief
- 100% foreign ownership in approved sectors.
- Streamlined licensing, facilitated by one-stop service centres and focused SEZ administrators.
- Infrastructure and location benefits, such as proximity to Bali’s transportation arteries (airport and ports)
Unsure About Terms in Bali’s Special Economic Zones?
Bali’s SEZs offer unique opportunities, but understanding their specific terminology is key to successful investment. Here are the essential terms and their definitions:
| Term | Definition |
|---|---|
| Ethnomedicinal Botanical Garden | A specialized botanical garden (like the one in Sanur SEZ) that focuses on plants traditionally used for medicinal purposes. |
| MICE Venues | An acronym for Meetings, Incentives, Conferences, and Exhibitions. These are facilities and services designed to host large-scale business events. |
Investing in Indonesia’s Special Economic Zones offers a clear path to securing significant tax incentives and streamlined operations. The process, while structured, is designed to support foreign investors from legal entity formation to securing long-term benefits.
By aligning your project with a zone’s specific purpose and following through on your commitments, you can leverage these opportunities for a profitable and compliant venture.
Don’t navigate the complexities of SEZs alone. Contact ILA Global Consulting today for expert guidance on establishing your business and securing incentives in Indonesia. Our team will ensure a seamless and strategic investment journey.
