Indonesia Expat
Business/Property

The Law in These Parts: Hadromi & Partners

Hadromi & Partners is a general practice law firm, established in 1999 during the Indonesian financial crisis. We discuss Indonesia’s ever-changing legal landscape and advice for expatriates living and working in Indonesia with the company’s managing partner, M. Iqbal Hadromi.

What is your firm’s area of expertise?

We are a general practice law firm but with much experience on foreign direct investment, setting up of businesses, manpower law, litigation, property, immigration, tax, as well as mixed marriage family matters.

What interested you to study and practice law?

When I was young I always had a deep interest in law and that is why I studied law at University. After graduating and working several years in a prominent Indonesian law firm, opportunities in the legal business bloomed in Indonesia around 1998. It was then I decided to set up my own law firm. With dedication, consistent hard work and focus, the firm was able to grow into one of the prominent law firms in Indonesia.

Have you ever worked on any high profile cases that you can share with us?

For corporate work, we have acted as legal counsel for a financing project involving a multinational company and its various subsidiaries around the world with transaction value almost reaching US$1 billion. For litigation work, we are currently acting on behalf of a PMA company in the oil and gas business against one of Indonesia’s largest state-owned banks in a civil claim valuing almost US$20 million.

What is it like being a lawyer in a country with an ever-changing legal landscape? It must be good for business!

The ever changing legal landscape makes is sometimes difficult, but also challenging and exciting for us lawyers. This also presents opportunities for us to help our clients in dealing with their legal issues.

Is it true that in March 2016, there will be a new law that requires foreigners wishing to obtain a KITAP to pay a [refundable] deposit of 500 million rupiah?

As you know, Indonesian legislation frequently changes, so at this point there is no certainty on such a new law in the future.

When setting up a new company in Indonesia, what is often the biggest hurdle that clients face?

One of the biggest challenges is facing the government’s bureaucratic system, which can be time-consuming when processing approvals and licenses. However, recently we are seeing positive improvements in the system, and hopefully these improvements will continue.

Many foreigners would agree that the president is saying one thing by asking them to invest in the country, while the legalities involved make it much too difficult to do so, thus many interested parties look elsewhere. Where do you think the problem stems from and what can be done to reassure interested investors to invest in Indonesia?

The president, we believe, has genuinely good intentions and has laid out a good vision and programmes for reform, however, implementing them through the existing government civil servants is a challenge and would need time to be realized. However, we have seen some new positive breakthroughs since the instalment of the new president and cabinet. We believe the best way to reassure interested investors would be to continue to show progress and improvement in government policies and its implementation.

You also work with expatriate work permits. Do you know what has caused such a tightening on expat working regulations in 2015?

Yes, we frequently assist expats on work and stay permit matters. The tightening on expats is basically the policy of the Ministry of Manpower to give more opportunities for locals to be employed. The tightening is also due to cases where certain expatriates have misused their work and visas.

Do you advise expatriates married to Indonesian men/women to obtain a pre-nuptial agreement, and if so, why?

We advise expats intending to marry Indonesians to put in place a pre-nuptial agreement prior to the marriage. One important reason for this is that Indonesian marriage law stipulates joint property ownership in all marriages registered in Indonesia, whereas Indonesian land law stipulates that foreigners are not allowed to own property in Indonesia. Consequently, if an Indonesian marries a foreigner, he/she will not be able to legally own property in Indonesia. The pre-nuptial agreement will then provide a legal basis for property separation in the mixed marriage and as a result maintains the rights of the Indonesian spouse to own property in Indonesia.

Have the current tax laws changed for expatriates? What is the average percentage at now?

The tax laws for expatriates have not changed, and the applicable tax rates are:

Taxable IncomeRupiah Rate
Rp.1-50 million5 percent
Rp.50-250 million15 percent
Rp.250 -500 million25 percent
over Rp.500 million30 percent

 

What advice would you give to foreign companies wishing to set up in Indonesia?

The Indonesian legal system is complex. Particularly with foreign investment, Indonesian laws and regulations differ from one business field to the other. It is highly recommended that foreign companies seek good legal advice and assistance to set up their companies in Indonesia. The processing of the various government approvals and licenses must also be done properly and correctly, so as to not create future problems.

The revision from Permenakertrans No. 16 year 2015 released by the Indonesian Ministry of Manpower dated 23 October 2015 states the following changes: foreign visitors who will visit Indonesia do not have to process the RPTKA and IMTA and there is no longer the 1:10 ratio of foreign to local employees. Is this information correct?

Please be advised that basically such permits are still required for foreign employees who will work and stay in Indonesia. In this matter, the new Regulation of the Minister of Manpower Number: 35 Year 2015 (“New Regulation”) regarding the Amendment of Ministry of Manpower Regulation Number: 16 Year 2015 concerning the Procedure on Utilization of Foreign Employees, eliminated the following works and positions which were obliged to apply for RPTKA and IMTA previously:

 

  1. Providing guidance, counseling, and training for the application of industrial and technological innovation to improve the quality and design of products, as well as marketing the industrial cooperation overseas for Indonesia
  2. Prelecting (lecturer)
  3. Attending a meeting held with principal or representative office in Indonesia
  4. Conducting audits, quality control and inspections of Indonesian branches (for a period of less than one month)
  5. Other works which are finished in one period of time
  6. Foreign employee in work training
  7. Foreign Directors and/or Commissioners who are domiciled overseas

 

By such New Regulation, the temporary RPTKA and IMTA are only required for the following temporary works:

  1. Making commercial films with a permit from the authorized institution
  2. Conducting audits, quality control and inspections of Indonesian branches (for a period of more than one month)
  3. Work related to machinery and electric power installations, after sales service, products in test markets

As for the 1:10 ratio of foreign employees to local employees, we confirm that such provision has been deleted by the New Regulation.

 

Is there a particular aspect working in law that excites you the most?

From the very start, we have been very much involved in matters pertaining to foreign direct investment in Indonesia and have assisted many foreign clients on this. In recent years, there have been many changes on regulations pertaining to foreign direct investment, and we continue to be passionate in this subject and assisting foreign clients on such issues.

Thank you, Bapak Iqbal. To get in touch, please email: iqbal@hadromi.com or visit www.hadromi.com

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