Business licenses are essential for operating legally in Indonesia, a country known for its economy and diverse business opportunities. This article provides a comprehensive overview of understanding business license and permits, the types of business licenses required, the application process, and the legal framework governing these licenses.
What is a Business License?
A business license is an official document that grants permission to operate a business in Indonesia within a specific jurisdiction. In Indonesia, obtaining a business license is mandatory for all business entities, including small and medium enterprises (SMEs) and large corporations. Operating without the necessary licenses can lead to severe penalties, including the closure of the business by government authorities.
Legal Framework
The primary regulation governing business licenses in Indonesia is Government Regulation No. 24 of 2018, which outlines the Electronically Integrated Business Licensing Service (OSS). This regulation aims to simplify the licensing process company in Indonesia and improve transparency in business operations. The OSS system serves as a one-stop platform for obtaining various licenses, including the Business Identification Number (NIB) and other operational permits.
Business Licenses vs Permits in Indonesia
| Aspect | Business License | Permit |
| Purpose | Grants permission to operate a business | Authorises specific activities within the business |
| Scope | Broad; applies to overall business operations | Narrow; applies to specific actions or functions |
| Issuing Authority | Generally issued by local government or OSS | Can be issued by various regulatory bodies depending on the activity |
| Duration | Often permanent or long-term | May be temporary or project-specific |
| Examples | NIB, SIUP, IUI | Environmental permits, construction permits |
Types of Business License in Indonesia
Primary Business Licenses
These licenses are foundational permits that apply broadly across different sectors. They are essential for businesses to operate legally within the country:
Business Identification Number (NIB)
The NIB serves as a company’s primary identification document and is mandatory for all businesses. It is obtained through the Online Single Submission (OSS) system and is often considered the “birth certificate” of the company.
Industrial Business License (IUI)
Required for entities engaged in manufacturing and production activities. Ensures compliance with safety and quality standards relevant to industrial operations.
Construction Business License (SBU)
Mandatory for businesses involved in construction, infrastructure development, and related activities. This Indonesian license outlines safety regulations to minimise risks associated with construction projects.
Non-Primary Licenses
Non-primary licenses cater to specific sectors and are essential for businesses operating in specialised fields:
Trading Business License (SIUP)
A sector-specific permit that allows businesses to conduct commercial activities. It often required alongside the NIB for trading companies.
Restaurant License
Necessary for establishments offering food and beverage services. Mandates adherence to hygiene standards and regulations to ensure consumer safety.
Hotel License
Required for businesses providing accommodation services. Governs various operational aspects, including cleanliness, safety, and security protocols.
Transportation License
Essential for businesses engaged in transportation services. Regulates safety measures, including vehicle maintenance and adherence to transportation laws.
Health and Spa Business License
Required for wellness centres, spas, and health-related services. Ensures compliance with health regulations and standards.
Food and Beverage Distribution License
Necessary for companies involved in the distribution of food products. Ensures compliance with food safety regulations set by authorities.
Medical Device Distribution License
Required for entities involved in the sale or distribution of medical devices. Governed by the National Agency of Drug and Food Control (BPOM).
Licensing Categories Based on Requirements
The licensing system in Indonesia can also be categorised based on the commitments required for each license:
Type 1: Business Licenses Without Commitment Fulfilment:
- Issued immediately via the OSS system.
- Examples include consulting firms.
Type 2: Business Licenses with Technical Requirements:
- Require additional technical documentation before issuance.
- Examples include hotels and medical device importers.
Type 3: Business Licenses with Fee Requirements:
- Involve payment of specific fees alongside technical requirements.
Type 4: Business Licenses with Both Technical and Fee Requirements:
- Necessitate both technical documentation and payment of fees.
- Examples include construction firms and financial services
How to Get a Business License? Check Out These Application Process!
The process for to apply for business license application involves several key steps:
- Company Establishment: Register your company with the Ministry of Law and Human Rights.
- Obtain NIB: Apply for a Business Identification Number through the OSS system.
- Specific License Application: Depending on your industry, apply for relevant licenses (e.g., trading or industrial licenses).
- Document Submission: Prepare necessary documents such as:
- Articles of Association
- Proof of company domicile
- Identity documents of directors.
- Review and Approval: The OSS will review your application, request any additional information if needed, and issue your official license upon approval.
Business License Requirements Documents
To successfully apply for a business license, you will typically need to provide:
- A copy of the Articles of Association
- Company Tax ID (NPWP)
- Proof of domicile (e.g., lease agreement)
- Identity documents of directors/shareholders
- Industry-specific documents as required.
Importance of Obtaining Business License
Securing a business license in Indonesia not only legalises your operations but also enhances your credibility among customers and partners. It demonstrates compliance with local regulations, which can significantly improve your company’s reputation and trustworthiness in the market.
