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Legal Status of a Foundation Established by Foreigners in Indonesia

3 April 2019

The establishment of a foundation, as mentioned in Article 9 (1) of Law No. 16/2001 juncto Law No. 28/2004, that a foundation can be established by one or more founders by separating founder's assets as initial foundation’s wealth.

What if there are foreigners or foreign legal entities who intend to establish foundations in Indonesia? Does the foundation's legal status change to a foreign foundation like a foreign limited liability company?

In this regard, Article 9 (5) of Law No. 28/2004 states that the establishment of a foundation by a foreigner can be established by foreigners or together with foreigners. This means that the foreigner can act as the sole founder or the foreigner can cooperate with Indonesian citizens to establish a foundation in Indonesia.

The terms and procedures for establishing a Foundation by foreigners further regulated in Government Regulation No. 63/2008 concerning the Implementation of the Foundation Law. The terms and procedures are regulated in Chapter V, Article 10, Article 11, Article 12, Article 13 and Article 14. It states that Foreigners or foreigners who cooperate with Indonesian citizens can establish a Foundation in accordance with the provisions of this Law and Government Regulation (Article 10 (1)). Therefore the foundation, besides being subject to Government Regulation No. 63/2008, it also being subject to other statutory provisions. Referring to the provisions of the aforementioned article, those who can establish foreign are foreign individuals and foreign legal entities.

The requirements that must be fulfilled in establishing a foundation by foreign individuals are:

  1. The identity of the founder, evidenced by a valid passport;
  2. The separation of the founder's personal assets as the Foundation's initial wealth, at least Rp100,000,000.00 (one hundred million rupiah), evidenced by founder's statement regarding the validity of the assets; and
  3. Statement of the founder that the activities of the Foundation to be established will not harm the community, the nation and the country of Indonesia.

The requirements that must be fulfilled in establishing a foundation by foreign legal entities are:

  1. The identity of a foreign legal entity as founder of the Foundation, evidenced by the validity of the legal entity;
  2. The separation of the legal entity’s assets as the Foundation's initial wealth, at least Rp100,000,000.00 (one hundred million rupiah), evidenced by legal entity’s management statement regarding the validity of the assets; and
  3. Statement of the legal entity’s management that the activities of the Foundation to be established will not harm the community, the nation and the country of Indonesia.

The provision related to the Board of Management of the Foundation established by foreigners or foreigners who cooperate with Indonesian Citizens: (Article 12)

  1. Members of the Board of Management who serve as a chairperson, secretary, or treasury must be Indonesian Citizens.
  2. Members of the Board of Management must be reside in Indonesia.
  3. Members of the Board of Management who are foreign citizens must be holders of permits to carry out activities or businesses in the territory of Indonesia and holders of Temporary Stay Permits (KITAS).
  4. Members of the Board of Management who are foreign citizens who do not comply with paragraph (3) above, by law, dismissed from their position.
  5. In the event of a vacancy in chairperson, secretary, or treasurer position, the successor must have been appointed within a maximum period of 30 (thirty) days from the date of the vacancy.

The provision related to the Board of Trustees of the Foundation established by foreigners or foreigners who cooperate with Indonesian Citizens: (Article 13)

  1. Members of the Board of Trustees and members of the Booard of Supervisory, who are foreign citizens, if they reside in Indonesia, must be holders of permits to carry out activities or businesses in the territory of Indonesia and holders of Temporary Stay Permits (KITAS).
  2. Members of the Board of Trustees and members of the Booard of Supervisory, who are foreign citizens who do not comply with paragraph (1) above, by law, must leave the territory of the Republic of Indonesia.

However, the provisions in Article 12 (3) and Article 13 (1) do not apply to officials of the diplomatic corps and their families placed in Indonesia. (Article 14)

In order to be able to carry out their activities in Indonesia, foreign foundations must comply with the terms and procedures as stated in Article 26 of Government Regulation No. 63/2008:

  1. The foreign foundations may engage in Indonesia only in the social, religious, and humanitarian fields.
  2. The foreign foundation as referred to in paragraph (1), to carry out its activities in Indonesia must cooperate with a local foundation who has the same purpose and objectives as the foreign foundation.
  3. The cooperation as referred to in paragraph (2) must be free from political, juridical, technical and security aspects.
  4. The Cooperation between foreign foundations and local foundations are carried out in accordance with statutory provisions.

The philosophy of allowing foreigners as founders of foundations in Indonesia is because of the nature of the foundation as a social organization. The founders of the foundation are forbidden to receive profit sharing from the foundation they established. Therefore, even though the foreigner is the founder of the foundation, the foreigner cannot take advantage of the foundation's income.