23 Nov 2023
Indonesian Introduces New ‘Golden Visa’ Scheme But Faces Tight Competition from Regional Rivals

The Indonesian government has recently introduced a new investment-based “golden visa” scheme. The nuts and bolts of the scheme are set out in Government Regulation No. 40 of 2023 on Immigration (“GR 40/2023”, effective 4 August 2023)[1] and Minister of Law and Human Rights Regulation No. 22 of 2023 on Visas and Residence Permits (“MOLHR Reg. 22/2023”, effective 24 August 2023),[2] which revokes MOLHR Regulation No. 29 of 2021.

While GR 40/2023 and MOLHR Reg. 22/2023 deal with a wide range of immigration-related issues, given limitations of space we will confine our analysis in this legal update to the following three topics:

1. the golden visa scheme for investors;
2. merging of temporary residence visa (VITAS) and temporary residence permit (ITAS); and
3. the introduction of an immigration bond scheme as an alternative to sponsorship for foreign residents of Indonesia.

Note: The Directorate General of Immigration recently launched a very helpful new website (accessible at https://evisa.imigrasi.go.id/web/visa-selection) that allows intending visitors to Indonesia to easily apply online for all types of visa, including golden visas. The site provides a series of dropdown boxes featuring a list of nationalities, purposes of visit, and the different types of visa that may be available to a particular applicant. All the applicant has to do is to select the visa they require and submit their application via the site.

1. What is a golden visa and how does Indonesia’s scheme work for investors?

A so-called golden visa or “residence by investment” scheme may be broadly defined as a process through which qualified persons are granted residence (and sometimes citizenship) rights in exchange for an economic contribution to the host country. These schemes have proved to be extremely popular, and it is estimated that they are currently offered by some 100 countries around the world.

Under MOLHR Reg. 22/2023, a golden visa may be granted by Indonesia for the following purposes:

i)   investment;
ii) family reunification;
iii) repatriation (for former Indonesian nationals and their descendants); and
iv) Indonesia as a second home.

It should be noted that none of these golden visa arrangements confer a general right to work in Indonesia, only the right of residence. However, those holding an investment-based visa may undertake work related to the investment, such as serving as a director or commissioner of a relevant company. It is this that makes this type of visa particularly attractive.

For investors, a golden visa can be issued for either 5 or 10 years, depending on the type of investor and investment, and how much is invested:

1. Investment in new business in Indonesia

• 5-year residence permit for investor putting at least USD 2.5 million (approx. Rp 38 billion) into a new business in Indonesia
• 10-year permit for those investing USD 5 million in a new business in Indonesia

2. Investment in Indonesian capital markets

• 5-year residence permit for investor putting at least USD 350,000 (IDR 5.3 billion) into Indonesian government bonds, shares of Indonesian public companies or units of Indonesian mutual funds
• 10-year permit for those investing USD 700,000

3. Directors and commissioners of foreign-owned businesses in Indonesia

• 5-year residence permit for directors and/or commissioners of the Indonesian branch or subsidiary of a foreign company that invests at least USD 25 million in that branch or subsidiary
• 10-year permit where the investment by the foreign company in its Indonesian branch or subsidiary amounts to at least USD 50 million.

Only 10 directors and/or commissioners are eligible per company.

Besides their residence entitlements, holders of golden visas are also entitled to:

1. priority inspection lanes at immigration checkpoints;
2. priority services at immigration offices; and
3. priority services from relevant government ministries and agencies.

All of the above three visa categories are categorized as class E28 visas in the recently updated official classification of Indonesian visas.[3]

2. VITAS Now Doubles Up as ITAS

Everyone intending to reside in Indonesia is required to enter the country on a temporary residence visa (Visa Tinggal Terbatas / “VITAS”) and obtain a temporary residence permit (Izin Tinggal Terbatas / “ITAS”, also often rather confusingly referred to as a “KITAS”, which allows a foreigner to reside in Indonesia for a period up to 10 years, depending on the type of ITAS that is issued). The ITAS may be obtained before traveling to Indonesia or on arrival at the airport. Prior to GR 40/2023, for a VITAS holder intending to work in Indonesia, the entry stamp that they received upon arriving in Indonesia automatically doubled up as their ITAS. However, all other VITAS holders were required to subsequently report to the Immigration Office to have their VITAS converted into an ITAS. GR 40/2023 has now eliminated this additional bureaucratic requirement by providing that the entry stamp that a VITAS holder receives upon arriving in Indonesia automatically serves as their ITAS in all cases, thus essentially combining the VITAS and ITAS permits.  

3. Immigration Bond as Alternative to Sponsorship

MOLHR Reg. 22/2023 provides that a foreign investor no longer needs an Indonesian individual or company to sponsor them and take responsibility for their compliance with Indonesian law. Instead, they now have the option of posting an immigration bond or guarantee (Jaminan Keimigrasian), which can take any of the following forms:

• the deposit of a sum of money with a state bank; or
• a commitment to establish a business; invest in government bonds; invest in shares of public companies or units of mutual funds; engage in collaboration with a government body; or to establish a branch or subsidiary in Indonesia (in the case of a foreign company).

The bond or guarantee should be deposited or commitment fulfilled after the person concerned arrives in Indonesia and must be reported to the MOLHR within 90 days (with non-compliance risking permit revocation) from the date of issuance of the visa or permit. The regulation is silent as to the precise monetary amounts that are involved. No doubt this issue will be dealt with subsequently by subsidiary legislation.

ABNR Commentary

Whether Indonesia’s new investment-based golden visa scheme will eventually turn into a golden goose is debatable, given that it faces stiff competition from other, longer established schemes, such as those operated by Thailand, Malaysia and Singapore.

For example, according to information widely published on the Internet, Thailand offers five-year visas for THB 900,000 (approx. USD 25,000), 10-year visas for THB 1.5 million (approx. USD 42,000), and 15-year visas for THB 2.5 million (approx. USD 69,000). These visas are marketed extensively and professionally online in English to high-net-worth individuals around the world, and there are currently some 31,500 visa holders. The visas also offer a wide range of complimentary perks, including shopping discounts and a membership rewards scheme. Crucially, while the holders of such visas are not permitted to earn income from Thailand-based employers, they are permitted to earn income as employees of foreign companies working in Thailand.

By contrast with the Thai visas, Indonesia’s ones are significantly more expensive, with the lowest “price” for a 5-year Indonesian investment-based visa being USD 350,000 (for an investment in the local capital markets).

Notwithstanding the higher thresholds, however, we believe that the country’s new golden visa scheme will certainly be attractive to corporations and individuals intending to invest here, and will go a long way towards making people’s lives easier by eliminating much of the hassle they face in organizing their residence documents. However, if the government really wants to cash in on the demand for long-term visas from high net worth individuals, then it might consider lowering Indonesia’s thresholds so as to make them more competitive regionally.

ABNR is a leading Indonesian law firm for immigration and manpower matters. Should you require further information on Indonesia’s golden visa scheme, please do not hesitate to contact partner Mr. Indra Setiawan (isetiawan@abnrlaw.com), partner Ridzky Amin (tamin@abnrlaw.com), counsel James Boyd (jboyd@abnrlaw.com), or associate Abdurachman Sidik (aalatas@abnrlaw.com).