Indonesia
At a glance

About Indonesia 

Indonesia is Southeast Asia's largest economy and a manufacturing hub for the region. The country is viewed as an evolving local financial centre for the Southeast Asia markets. Foreign exchange controls in Indonesia make it advantageous for companies with significant operations there to have a base in the country. 

The Indonesian government has introduced a series of economic reforms that ease foreign ownership of businesses. Indonesia is also an important component of the One Belt One Road initiative, given its strategic location in Asia Pacific. 

Singapore is the largest investor in Indonesia, followed by China, which is looking to divert excess manufacturing capacity offshore to Indonesia, further reinforcing the island nation’s status as a manufacturing hub. 

Corporate Treasury in Indonesia 

Indonesia is Southeast Asia's largest economy and a manufacturing hub for the region. In this section, we highlight some of the key factors relevant to treasury and cash management in Indonesia. 

Financial Market Development 

  • Jakarta is ranked 93rd in the 2021 Global Competitiveness Report compiled by Z/Yen Group, 12 places lower than in 2020. 
  • The financial sector is developing, and the banking sector is crowded but offers significant opportunities due to low penetration levels. The country has one of the fastest rates for the take up of digital banking services in the region, according to McKinsey & Company, and a thriving financial technology (fintech) scene.  
  • Indonesia has a developing Islamic finance subsector, with 12 Islamic commercial banks that, along with the 20 Shariah business units of conventional banks, had assets of IDR 590,372 billion at the end March of 2021.   
  • BKPM, the Investment Coordinating Board of the Republic of Indonesia, is the primary interface between business and government, and aims to boost domestic and foreign direct investment through creating a conducive investment climate.

Sophistication of Banking Systems 

  • There are 107 banks in Indonesia, including four state-owned banks, as well as four branches of foreign banks. The four largest banks, three of which are state-controlled, dominate the sector.  
  • Indonesia's Financial Services Authority (OJK: Otoritas Jasa Keuangan) has introduced measures to accelerate consolidation in the sector, with the aim of reducing the number of banks to 60-70 within the next decade. It can also force small or struggling banks to consolidate in extraordinary circumstances.  
  • Indonesia has both government and corporate bonds. Outstanding local currency bonds totalled IRD3,304.3 billion at the end of March 2021.  

  Regulatory Bodies 

  • Indonesia's Financial Services Authority regulates the banking sector. It is committed to adopting international regulatory standards. Bank Indonesia (BI) is responsible for maintaining the stability of the rupiah. 
  • Bank Indonesia is the central bank. 

 Tax 

  • The corporate income tax (CIT) is 25%. 
  • Resident companies are taxed on worldwide income. Foreign companies with permanent establishments in Indonesia are generally taxed in the same manner as resident companies. 
  • Interest income received by a resident company (not a bank operating in Indonesia or government-approved pension fund) from  
  • time or saving deposits and on Bank of Indonesia certificates is subject to a final withholding tax of 20%; 
  • interest on bonds is subject to a final withholding tax of 15%, falling to 10% in August 2021.  
  • Income tax concessions of 100% of CIT for five to 20 years are available for companies in certain pioneer industries provided they meet certain criteria. CIT reductions are also available to companies operating in Special Economic Zones and Industrial Zones that meet the criteria set. 
  • The standard rate for Value Added Tax (VAT) is 10%, including for foreign intangible goods and services provided through the e-commerce system. The export of goods and some services is zero-rated. 
  • Stamp duty is payable as a fixed amount of IDR10,000 on certain documents. 
  • Interest expenses that are used for business purposes are generally tax deductible although a certain portion of interest arising from debt is non-tax deductible if the debt-to-equity ratio exceeds 4:1. Exceptions apply for certain industries. 
  • Capital gains are generally assessed with ordinary income and subject to CIT. 
  • Withholding tax of 20% (or a reduced rate as per the tax treaty if available) is charged on branch profits, regardless of whether they are remitted.  
  • Withholding tax of 15% is charged on dividends and interest for resident companies. 
  • Withholding tax on dividends and interest paid to non-resident companies are between 5% and 20% on dividends and between 5% and 15% on interest where a tax treaty is in place and if the non-resident can produce a Certificate of Residence. WHT is 20% for both interest and dividends if there is no tax treaty.  
  • Indonesia has tax treaties with more than 70 countries and territories. 
  • Indonesia is a signatory to the Organisation for Economic Co-operation and Development’s Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises. 

Benefits for Local Treasury

  • Foreign-exchange controls in Indonesia make it advantageous for companies with significant operations there to have a base in the country.
  • Jakarta is viewed as an evolving local financial centre, with the potential to become a regional hub for Southeast Asia.
  • Macroeconomic stability is improving but Indonesia continues to experience significant currency volatility.
  • For resident companies, cash concentration, particularly through zero balancing, is offered by a number of cash management banks in Indonesia. Cross-border sweeping and notional pooling is also available to resident companies.
  • Non-resident companies cannot borrow funds in Indonesia, so cannot participate in a cash concentration or cash pooling structure.
Banking

Bank Accounts

  • Residents may hold foreign-exchange accounts domestically and overseas. However, they are not permitted to hold domestic currency (IDR) accounts overseas, although local IDR accounts can be converted to foreign exchange.
  • Non-residents may hold foreign-exchange and IDR accounts, and foreign currency is freely convertible. Non-residents may only hold current, savings and time deposit accounts. A non-resident is only permitted to receive a transfer in IDR for an economic transaction and must have supporting paperwork. Overdraft facilities are not available to non-residents.

Legal and Regulatory

  • The Financial Service Authority, OJK, supervises the banking sector.
  • A company incorporated or domiciled in Indonesia is considered a resident company.
  • Indonesia has anti-money laundering and counter-terrorism legislation in place, is a member of the Asia/Pacific Group on Money Laundering (APG) and has a financial intelligence unit, the Indonesian Financial Transaction Reports and Analysis Centre (PPATK), which is a member of the Egmont Group.
  • Indonesia is a member of the Association of Southeast Asian Nations (ASEAN)
Payments

Payments
The Indonesia Payment Systems Blueprint 2025 (BSPI 2025) is a roadmap for innovation in five key areas: Open Banking, Retail Payment System, Large-Value (Wholesale) Payment System and Financial Market Infrastructure, Data and Digitisation, and Regulatory, Licensing and Supervisory Reforms. BSPI 2025 began in 2019 and is scheduled to roll out 23 key deliverables by 2025.

Payment Systems 

BI–RTGS

Indonesia's national interbank real-time gross settlement (RTGS) system 

Used for high-value (more than IDR100 million) and urgent IDR-denominated interbank transfers. 

Operated by Bank Indonesia. 

Final settlement done in real time across participant banks' accounts with Bank Indonesia. 

Effects final settlement of net balances originating from the BI-RTGS. 

Sistem Kliring Nasional Bank Indonesia (SKNBI) 

Indonesia's national automated clearing system 
  • Used for low-value (less than IDR 500 million), non-urgent and bulk interbank transfers and paper-based transactions. 
  • Operated by Bank Indonesia. 
  • Divided into Credit Clearing (low-value credit transfers) and Debit Clearing (paper-based payments; e.g. direct debits and cheques). 
  • Final settlement done via BI–SKNBI across participant banks’ accounts with Bank Indonesia on the same or next working day. 

National Payment Gateway (NPG)  

(Gerbang Pembayaran Nasional (GPN)) 
  • Indonesia’s national electronic payment system 
  • Regulated by Bank Indonesia. 
  • NPG policy includes payment instruments interconnection and interoperability (e.g. ATM/Debit card, credit card, e-money and others). 


Payment Instruments 
  

Credit Transfers 

  • High-value (more than IDR100 million) and urgent credit transfers are settled via BI–RTGS within the same day. Larger sums (but less than IDR500 million) may be settled via SKNBI Credit Clearing. 
  • Low-value (less than IDR500 million) and bulk credit transfers are settled via SKNBI Credit Clearing on the same working day (5 batches a day). 

  Direct Debits (auto debits) 

  • Available when the sender and receiver have accounts with the same bank. 
  • For interbank transactions, BI has launched a direct debit service that allows transactions across participant banks. 

Card Payments 

  • Debit cards are becoming increasingly common, although payment cards have low usage, limited by low adoption of card readers by retailers. Debit cards are issued by 75 banks, credit cards by 26 banks and ATM cards by 113 banks. 
  • Visa, MasterCard and JCB International are the main brands of credit cards used, and all are Europay, Mastercard and Visa (EMV)-compliant. 
  • There are three domestic ATM networks (Bersama, Prima and ALTO) and two international ATM networks (Cirrus and Plus). It is common to make online payments through bank transfers using ATMs. 
  • There are four point-of-sale (POS) networks in use: Visa, MasterCard, Debit BCA network and Kartuku. 
  • Banks are the primary issuers of prepaid or e-money cards, with Mandiri Bank and Bank Central Asia as two of the major players. Prepaid cards are popular throughout Indonesia and are used for public transport, tolls and at retail merchants. 

Online Payments 

  • As part of BSPI 2025, the government instituted a single integrated payment platform—the QRIS (Quick Response Code Indonesian Standard)—for all mobile wallet payments. The interoperability of the system allows Indonesia’s myriad payment platforms, such as local providers GoPay, Doku and OVO, to communicate with each other. The cost-efficiency of QR code technology has also encouraged merchants, especially small- to medium-sized retailers, to offer the payment platform. 
  • Part of the 2025 vision is the development of real-time 24/7 retail payment system infrastructure (BI-FAST) and standardising Open Application Programming Interface (Open API) payments. 
  • While local e-wallet providers have been at the forefront of digital payment uptake, China’s Alipay and WeChat Pay have recently entered the market by partnering with local banks. 
  • ATM transfers and online banking are the most common forms of digital payments. However, payments are not necessarily instantaneous and technical problems result in a high card abandonment rate by payees. 
  • Mobile banking is available through seven digital banks, with seven more banks waiting for licenses from OJK, as of July 2021. With high smartphone penetration and a large, unbanked population, digital banking is forecast for steady growth in the country. OJK is scheduled to issue new regulatory guidance for digital banks as part of BSPI 2025. 

Digital Currencies  

  • Although cryptocurrencies are not legal tender in Indonesia, the country has a thriving bitcoin market.  
  • The Trade Ministry’s Futures Exchange Supervisory Board (Bappebti) has declared that cryptocurrencies can be considered commodities, and the government is now in the process of formulating regulations regarding exchanges, taxation and crime prevention. 

Cash, Cheques and Money Orders 

  • Cheques and money orders are holding steady as cashless payment options, especially in commercial transactions. 
  • A bilyet giro (BG), which is like a standard bank giro and doesn’t require a physical cheque, can be processed by banks more quickly than a standard cheque. 
  • Bilyet giros and cheques are cleared via SKNBI Debit Clearing with maximum limit of IDR500 million (per bilyet giros / cheques) and final settlement via BI–RTGS the next working day. 
  • Cash is still a common mode of payment for retail and low-value transactions. Nearly two-thirds (65%) of digital purchases were paid in cash on delivery (eMarketer). 

Foreign Exchange (FX)  

Indonesia has a number of controls in place governing foreign currency transactions. Despite these controls, foreign exchange trading volumes are on an upward trajectory.  

FX Landscape 

  • The official currency of Indonesia is the Indonesian rupiah (IDR). It is a restricted currency and cannot be freely traded outside of Indonesia.  
  • Indonesia’s monetary policy is set and managed by its central bank, Bank Indonesia (BI), which also sets interest rates.  
  • BI uses an inflation targeting framework to maintain the stability of the IDR, while adhering to a free-floating exchange rate system. Exchange rate stability is a key aspect of monetary policy and BI will use monetary controls to achieve this objective if necessary.  
  • Only authorised banks may carry out FX transactions.  
  • Commercial banks cannot conduct overseas transfers in IDR. The money must be converted into a foreign currency first.  

  FX Management 

  • Resident companies can have accounts denominated in both local and foreign currencies onshore. They may also have foreign exchange accounts offshore, but they cannot hold IDR accounts offshore. Local IDR accounts can be converted into foreign exchange.  
  • Non-resident companies may also hold accounts in both local and foreign currencies in Indonesia. IDR can be freely converted into other currencies. They cannot hold IDR accounts offshore.  
  • All cash and non-cash transactions carried out within Indonesia must be conducted in IDR, with the exception of certain transactions, such as international trade and offshore loan transactions.  
  • Resident companies can take out IDR loans onshore and FX loans offshore, but the latter are subject to hedging, liquidity and credit requirements. Non-resident companies cannot borrow IDR or FX onshore. Those taking out foreign FX loans of more than USD100,000 offshore for use onshore must meet reporting requirements set by BI. 
  • A range of products to help companies manage FX risk are available in Indonesia, including FX options, FX spot and FX forward, non-deliverable forward, and cross currency swap.  

  Exchange Controls 

  • If the transfer of foreign currency exceeds USD10,000, banks must report the transaction to BI.  
  • Companies that purchase foreign currency in excess of USD100,000 per month must supply information on the underlying transaction, which must relate to the domestic or overseas trading of goods and services, direct investment, portfolio investment or loan or capital investment, the extension of credit or financing by a bank in a foreign currency or in IDR for trading or investment purposes. 
  • Transactions between residents and non-residents must be reported to BI on a monthly basis. Resident companies must also report transactions for accounts held offshore.  
  • Non-resident companies may buy or sell FX derivatives against the IDR with a value of up to USD1 million per transaction. Derivative transactions for investment activity must have a minimum tenor of one week and a maximum tenor equal to the investment tenor.  
  • There are no restrictions on capital flows in and out of Indonesia, but banks must report such transfers to BI. 
  • Domestic and cross-border intercompany lending is allowed subject to transfer pricing rules and minimum hedging, liquidity and credit requirements.  

Trade  

Indonesia is the manufacturing hub for Southeast Asia and its government is pursuing trade liberalisation policies. The country’s largest trading partners are China, the US, and Japan in terms of exports in US dollars. 

Trading Landscape  

  • Indonesia is a member of the ASEAN Trade in Goods Agreement. 
  • Indonesia has three free trade zones, which offer exemptions from import duties and/or VAT. There are also 18 special economic zones which cater to specific industries.  
  • Indonesia has been a member of the World Trade Organisation since 1995, and a member of General Agreement Tariffs and Trade since 1950.  

Import Regulations  

  • Importers can now apply for an import licence online through the Online Single Submission system. This replaces the previous requirements for an Importer Identification Number (API). 
  • Import duty is charged at rates ranging from 0% to 150% based on the customs value of the goods being imported. The customs value is based on the cost, insurance and freight level of the goods. As part of its policy to liberalise trade, the Indonesian government is progressively lowering import duty rates on most products.  
  • A wide range of duty reliefs, exemptions and deferrals are available to both foreign and domestic companies as part of government efforts to promote local and export industries. The concessions are generally available to companies operating in free trade zones, bonded zones or bonded warehouses.  
  • Value added tax (VAT) of 10% is charged on the import of goods. Import duty and import taxes must be paid before goods are released from the customs area.  
  • There are no financing or risk mitigation requirements for imports into Indonesia. Import financing is widely available, with options including letters of credit, import loans, inward bill collections, and accounts receivables. The Ministry of Trade publishes a list of approved insurers for import insurance.  

Export Regulations 

  • In order to export, companies must have a taxpayer identification number (NPWP) and an export licence in the form of a trade licence (SIUP) from the Ministry of Trade, a manufacturing licence from the Ministry of Industry, a PMA licence from the Investment Coordinating Bureau or an Export identification number (APE).  
  • VAT is zero-rated on the export of goods and there are no export tariffs.  
  • There are no export financing or risk mitigation requirements in Indonesia. Export credit insurance and finance solutions are widely available, with options including letters of credit, export documentary collections, export receivables, forfaiting and export factoring.   
  • The Indonesian government has set up two state-owned companies to provide export financial services, namely Lembaga Pembiayaan Ekspor Indonesia, also known as Indonesia Eximbank, for financing, and Asuransi Ekspor Indonesia for risk management.  
  • Proceeds from the export of natural resources must be kept onshore and deposited in a special Proceeds Account with a foreign exchange bank. The proceeds may only be used for certain specific purposes, such as paying export duties, repaying loans, acquiring imported goods, investment or dividend payments.  

Sources (Intro & Corporate Treasury)
Investment Coordinating Board (BKPM), World Economic Forum, Financial Services Authority (OJK), Asian Development Bank, Bank Indonesia, PwC, World Bank, CIA World Factbook, Trading Economics, IMF, CEIC  

 Sources (Banking & Payments)
Bank Indonesia, Financial Services Authority (OJK), J.P. Morgan, About-Payments 

 Sources (Foreign Exchange)
Bank Indonesia, Bank for International Settlements, PwC, Deloitte  

Sources (Trade)
Ministry of Trade, WTO, Deloitte, PwC, Baker McKenzie  

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