Q75. What is the difference between entering the construction industry and entering other corporations/representative offices (branch offices)? Unlike entering other corporations or branches, investment by individual shareholders is not permitted when entering the construction industry. Therefore, investment is only possible for corporations that hold a construction business license in their home country. Additionally, in order to establish a construction investment corporation, a local Indonesian corporation must become a partner and invest at least 33% of the equity.

In the case of entering a representative office in the construction industry, you must establish a representative office based on the headquarters' licensing documents, then partner with a 100% local-owned construction company and establish a JO (Joint Operation) to carry out the project.

Q76. What are the procedures and systems for entering the construction industry?

There are two ways for foreign construction companies to enter Indonesia: through a representative office of a foreign construction company or through joint ventures and local foreign investment. After establishing a construction representative office or construction corporation, you must join the Construction Association and obtain a construction business registration certificate to carry out the project.

Q77. What are the construction license approval procedures and application documents for foreign construction companies?

1. Establishment of a foreign construction company
   
   • required documents
     
     • Articles of Incorporation of Headquarters: English translation and notarization followed by Apostille from the Ministry of Foreign Affairs or the Ministry of Justice
     • Certificate of Business (English version) Diplomatic and Legal Apostille
     • Headquarters construction license notarized

1. Procedure for establishing a foreign construction company
   
   • Articles of incorporation of overseas investment construction corporation (headquarters share: 67%, local corporation: 33%)
   • Ministry of Justice registered copy (SK Kehakiman)
   • NPWP (Tax Registration Certificate)
   • NIB (Business Registration Certificate)
   • SPPL OSS (Short Form Environmental Impact Statement)
   • SERTIFIKAT STANDARD (standard certificate)

1. Required documents for obtaining a construction license
   
   • Join the Construction Association (KTA)
   • Construction major employment certificate (SKTK)

(CONSTRUCTION PERSONNEL COMPETENCY CERTIFICATE)

• Recruitment of a person in charge of the construction specialty of the corporation (PJSKBU): 1 person (Penanggung Jawab Sub-Klasifikasi Badan Usaha)
• Recruitment of corporate technical manager (PJTBU): 1 person (Penanggung jawab Teknik Badan Usaha)

• KITAS PJBU (Representative Office Director KITAS)
• NPWP Pribadi PJBU (personal tax registration certificate of the head of the representative office)
• Headquarters Financial Structure Table
  
  • Financial Statements: Last 2 years
  • accountant audit report
  • Corporate tax year-end settlement tax return
• Certificate of construction performance from head office
  
  • Specialty construction license: Large (B)
  • Construction performance: Construction performance for the past two years in Indonesia is at least 50 billion rupiah per industry (sub-qualifikasi)
  • Construction completion certificate
  • Tax bill
  • handover letter
• Professional construction equipment: At least 5 types per industry (purchased domestically in Indonesia)
• Quality-related ISO certification (ISO 9001 - 2015)
• ISO certification related to corruption eradication (Sertifikat ISO SMAP 37001)
• Obtain a construction license (SBU)

1. tax resident

Individuals who meet the following conditions are considered residents under Indonesian tax law and must pay personal income tax.

• Individuals domiciled in Indonesia
• Individuals who have stayed in Indonesia for more than 183 days within 12 months
• Individuals staying in Indonesia during the tax period and intending to reside in Indonesia

For reference, according to the Korean Income Tax Act, an individual who has an address in Korea or has resided in the country for more than 183 days is considered a resident, so in some cases, an individual may become a resident of both Korea and Indonesia. In this case, the status of the ultimate resident must be determined in accordance with the tax agreement. According to the Korea-Indonesia Tax Agreement, the status of the ultimate resident is in the following order: ① permanent residence, ② center of significant interests, ③ habitual residence, and ④ mutual agreement. Judge your status.

1. Annual income deduction amount (PTKP) - as of 2022

item	amount
Taxpayer's basic deduction	Rp 54,000,000
spousal deduction	Rp 4,500,000
Dependent deduction (up to 3 people)	Rp 4,500,000
Deduction of position allowance (5% of gross income, maximum Rp 500,000/month)	Rp 6,000,000
Social Security System (BPJS Ketenagakerjaan) Old Age Pension Savings contribution (2% of total income)	full amount
Social Security System (BPJS Ketenagakerjaan) Retirement Pension Out-of-pocket portion (1% of total income)	full amount

1. personal income tax rate

annual income	tariff
Below Rp 60,000,000	5%
Above Rp 60,000,000 but below Rp 250,000,000	15%
Above Rp 250,000,000 but below Rp 500,000,000	25%
Above Rp 500,000,000 ~ below Rp 5,000,000,000	30%
Exceeding Rp 5,000,000,000	full amount
Social Security System (BPJS Ketenagakerjaan) Retirement Pension Out-of-pocket portion (1% of total income)	full amount

1. pay

The person paying personal income tax must withhold and report monthly taxes. In the case of income paid by an employer to an employee, the tax base is calculated by deducting the annual income deduction from the total taxable salary, and the tax base is calculated by deducting the annual income deduction from the total taxable salary.

The tax amount calculated by applying the profit tax rate must be reported and paid as PPh 21. In the case of fees paid to individuals or professionals other than employees, 50% of the total payment amount is the tax base, and the tax amount calculated by applying the personal income tax rate to the tax base must be reported and paid as PPh 21.

Meanwhile, for income paid to non-residents, 20% of the total payment must be withheld and reported as PPh26. However, the tax rate may be reduced depending on the tax agreement.

1. Year-end tax settlement and final report

Similar to Korea's year-end tax settlement, employers must settle PPh21 based on annual salary when paying December salary. If an individual has income other than salary income, he or she must file a final personal income tax return (Form 1770) by the end of March of the following year. The final return must report all income, including salary income, investment income, capital income, overseas income, and other income, and must include asset and liability status.

The income of married women and minor lineal ascendants must be included in the husband's personal income tax return, but the married woman's income is not related to the income of the husband or other family members, and the payer has already withheld and paid PPh21 withholding tax and additional If there is no tax due, it will not be added up.

[Labor Management]