doing business in batam

Batam Island which is located some 20 kilometres south of Singapore, since 16 January 2009 has been determined by the Indonesian Government as a Free Trade Zone Area. A Free Area is an area which is under the Law of the Republic of Indonesia but outside the customs area, therefore it is exempted of import duties, Value Added Tax and Luxury Goods Sales Tax.

With its lower labor cost, special government incentives and its location which is so close to Singapore, Batam Island has attracted many companies to set up their operation in Batam Island, majority in the business of electronics and shipbuilding industries.

Like the other areas of Indonesia, Batam Free Trade Zone Area is covered by the Indonesian Income Tax regulation except for the Value Added Tax regulation. Being outside of customs area, the regulations for the Value Added Tax in the Free Trade Zone of Batam Area are as follows:

  • Deliveries of taxable goods and taxable services inside the Free Trade Zone Area and from Free Trade Zone Area to another Free Trade Zone Area are exempted of Value Added Tax and Luxury Goods Sale Tax.
  • Import of tangible taxable goods from outside customs area to the Free Trade Zone Area are exempted Value Added Tax and Luxury Goods Sale Tax and Withholding Tax Article 22 are not collected.
  • Utilization of intangible taxable goods and taxable services from outside customs area in the Free Trade Zone Area are exempted of Value Added Tax.
  • Import of taxable goods from other customs area or from Bonded Warehouse to the Free Trade Zone Area through the appointed harbor or airport, Value Added Tax and Luxury Goods Sale Tax are not collected.
  • Deliveries of taxable services and/or intangible taxable goods from other customs area to the Free Trade Zone Area, Value Added Tax are not collected.
  • Deliveries of taxable goods from Free Trade Zone Area to the Bonded Warehouse as far as the goods are from outside customs area are exempted of Value Added tax and Withholding Tax Article 22 are not collected.

For inquiry about our services in Batam, please contact Bodhiyanto Angwyn.