In essence, business licenses are indispensable to conduct business in Indonesia-a country with an economy that poses different kinds of opportunities for entrepreneurs. This article provides an overview necessary for understanding business license and permits, the types of business licenses required, the application process involved, and the applicable legal framework governing such licenses.
What is a Business License?
A business license is an official document issued to allowed taking up commercial activity in Indonesia within a certain area. Every business entity, be it small and medium enterprise or large corporation, is required to have a business license in Indonesia. Penalties for not having these licenses on file can be so severe that the government can shut one’s business down.
Legal Framework
The main legislation currently governing business licenses in Indonesia is Government Regulation No. 24 of 2018, detailing the Electronically Integrated Business Licensing Service – OSS. The above legislation has been enacted to ease the process of company licensing in Indonesia and bring more transparency into the business activities in the country. Accordingly, the OSS system is a single-submission system through which many different licenses may be obtained, such as 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 general permissions applicable to most industries in general. They are important for the legality of the business enterprise to operate within the country:
Business Identification Number, NIB
The NIB is one of the essential identifications for a company and thus must be owned by every company. This is issued through the Online Single Submission system and can be considered as the “birth certificate” of the company.
Industrial Business License, IUI
Required for those companies involved in manufacturing and production activities, this license ensures that safety and quality meet the standards related to industrial activities.
Construction Business License (SBU)
This license is required for any company involved in building and construction, structural engineering, and construction services. This Indonesian license lays out safety protocols to reduce accident risks during on-site construction projects.
Non-Primary Licenses
This license caters to particular industries, which are also quite necessary in specific areas of businesses. The following are a few:
Trading Business License (SIUP)
The license pertaining to a specific industry or sector of business, which authorizes a company to operate a business. Generally, trading companies need this along with the NIB.
Restaurant License
A food and beverage selling establishment needs this license. A license that entails adherence to rules and regulations concerning hygiene for the protection of customers from health hazards.
Hotel License
Accommodation services are included in this category. It regulates a wide range of aspects, from cleanliness and safety to security features.
Transportation License
This is necessary for companies operating in transportation services. This regulates the maintenance of safety measures that pertain to vehicle upkeep and adherence to transportation laws.
Health and Spa Business License
Necessary for wellness centers, spas, and health-related services, this license is an assurance that businesses in such industries are adhering to health regulations and standards.
Food and Beverage Distribution License
Necessary for foodstuff distribution businesses. It is an assurance that food products distribution businesses put up with set food safety regulations by authorities.
Medical Device Distribution License
Required for businesses whose activities involve selling or distributing medical devices. This license is under the supervision of the BPOM or, in English, the National Agency of Drug and Food Control.
Licensing Categories Based on Commitments Required
Licenses in Indonesia can also be categorized based on commitments required for each license:
Type 1: Business Licenses Without Commitment Fulfilment:
Can be issued immediately through the use of 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 the payment of certain fees along with fulfilling the technical requirements.
Type 4: Business Licenses with Both Technical and Fee Requirements:
Require both technical documents and payment of certain fees.
Examples include construction firms and financial services
How to Get a Business License? Check Out These Application Process!
- The process to apply for business license application involves a few basic steps:
- Company Establishment: You can register your company at the Ministry of Law and Human Rights.
- Get NIB: You can apply for a Business Identification Number using the system provided for OSS.
- Licenses: According to your business area, you can apply for the respective license; it is either a trading or an industrial license depending on your business.
- Prepare Documents: The documents required shall include but not be limited to:
- Articles of Association
- Proof of company domicile
- Identity documents of directors.
- Review and Approval: OSS is going to review your application, ask for additional information if any, and thereafter grant you your license officially.
Business License Requirements Documents
Typically, to apply for a business license, you would need:
- A copy of the Articles of Association;
- Company Tax ID (NPWP);
- Proof of domicile – such as a lease agreement;
- Identity documents of directors/ shareholders;
- Industry-specific documents, if required.
- Importance of Getting Business License
First of all, having a license for business in Indonesia will make your business legal, adding to the credibility of the customers and the partners. Indirectly, this proves your compliance with local regulations, which would raise your credibility and trust factor as a business in the market.
Establish Your Business in Indonesia Now with Lets Move Indonesia!
Put differently, a business license and permit are both indistinguishable in running business ventures in Indonesia, but they differ in their purpose-a business license grants the right to conduct business generally in a sector, while a permit grants the power to conduct certain activities that may require special scrutiny. Being able to understand these differences will help entrepreneurs in sailing through the regulatory milieu of Indonesia with ease and in running successful businesses in compliance with the law.
