Current as of November 2013 | Download print version (in PDF)
Comments related to any information in this note should be addressed to Brittany Grabel.
Table of Contents
- Applicable Laws
- Relevant Legal Forms
- Specific Questions Regarding Local Law
- Tax Laws
- Knowledgeable Contacts
Indonesia has two primary forms of not-for-profit, non-governmental organizations (NPOs):
- associations, and
- societal organizations  without legal entity status.
Law No. 17 of 2013 regarding Societal Organizations (Organisasi Kemasyarakatan)regulates civil society organizations in general. Both foundations and associations fall under the category of “societal organizations with legal entity status,” while all other NPOs are categorized as “societal organizations without legal entity status.” Only foundations can be founded by foreign entities. There are three types of such foundations: (a) foreign foundations, (b) Indonesian foundations founded by foreign nationals or by foreign nationals together with Indonesian citizens, and (c) Indonesian foundations founded by a foreign legal entity.
This Note will not discuss several other forms of NPOs, including cooperatives and political parties (regulated by separate laws); organizations that operate under specific laws, such as the Educational Legal Entity (Badan Hukum Pendidikan, Article 53 Law No. 20 of 2003 on National Education System);  and NPOs structured as for-profit entities.
Indonesian NPOs are generally subject to income tax. Donations, including religious-based donations and grants are not taxed provided that there is no business or ownership relationship between the parties. In addition, the following types of income are tax exempt: (i) income that an NPO uses to provide scholarship funds and (ii) income (sisa lebih) of an NPO working in the area of education or research and development that is re-invested in its work as per the timing requirements of the income tax law (Article 4 Section (3) Law No.36 of 2008 on Income Tax).
Tax deductions for charitable contributions are available for natural disasters, research and development activities, development of the social infrastructure, education facilities, and sport.
Indonesia subjects the sale of most goods and services to a Value Added Tax (VAT), with some exemptions pertinent to NPOs. Certain goods are exempt from customs duties as well.
The prevailing Constitution of Indonesia is the 1945 Constitution which was enacted one day after the country's proclamation of independence. There were also the Constitutions of 1949 and of 1950. However, the 1945 Constitution was reenacted in 1959 and has been in effect since then. It was amended after the fall of Suharto’s administration (1966-1998) and in October 1999, August 2000, November 2001, and August 2002.
The second amendment to the 1945 Constitution guarantees the freedom of association (Article 28) and freedom of expression (Article 28E section (3)). In October 2005, the Indonesian House of Representatives ratified the International Covenant on Civil and Political Rights (ICCPR) by enacting of Law No. 12 of 2005 regarding the Ratification of ICCPR.
- Indonesian Civil Code (Article 1653), August 18, 1945 (originally from the Dutch civil code, it continues to apply under Clause II of the Transitional Provision of the 1945 Constitution) 
- Law No. 17 of 2013 regarding Societal Organizations (Organisasi Kemasyarakatan, replacing Law No. 8 of 1985), July 22, 2013
- Law No. 12 of 2005 regarding the Ratification of the International Covenant on Civil and Political Rights (ICCPR), October 28, 2005
- Law No. 16 of 2001 on Foundations (Yayasan), August 6, 2001
- Law No. 28 of 2004 regarding the Amendment to Law No. 16 of 2001 on Foundations, October 6, 2004
- Staatsblad (State Gazette) 1870-64 on Associations with Legal Person Status, March 28, 1870
- Law No. 36 of 2008 on the Fourth Amendment of Income Tax Law 1984, August 2, 2008
- Law No. 28 of 2007 on the Third Amendment of Law No. 6 of 1983 of General Rules of Taxation Procedure, July 17, 2007
- Law No. 18 of 2000 on the Second Amendment of Value Added Tax 1984, August 2, 2000
- Law No. 17 of 2006 regarding the Amendment to Law No. 10 of 1995 on Customs, November 15, 2006
- Law No. 39 of 2007 regarding the Amendment to Law No. 11 of 1995 on Duties, August 15, 2007
- Law No. 11 of 2009 on Social Welfare (Kesejahteraan Sosial), January 16, 2009
- Government Regulation No. 63 of 2008 on the Implementation of Law on Foundations, September 23, 2008
- Government Regulation No. 18 of 1986 on the Implementation of Law No. 8 of 1985 regarding Societal Organizations, April 4, 1986
- Presidential Regulation No. 80 of 2011 on Trust Funds, November 10, 2011
- Ministry of Finance Regulation No. 80 of 2009 on Income Received by a Not-for-Profit Organization in Education and/or the Research and Development Sector which are Exempted from Income Tax
- General Directorate of Taxation Regulation No. 44 of 2009 on Implementation of the Acknowledgement of Income Received by a Not-for-Profit Organization in Education and/or the Research and Development Sector which are Exempted from Income Tax
- Law No. 20 of 2003 on Principles on Conducting Education (Prinsip Penyelenggaraan Pendidikan)
A. General Legal Forms
The Indonesian Government enacted Law No. 17 of 2013 on Societal Organizations to replace Law No. 8 of 1985 on Societal Organizations. Law No. 17 of 2013 regulates “all organizations founded and formed by the society voluntarily on the basis of shared aspiration, will, needs, interest, activity and purposes in order to participate in the development with the intention to achieve the objective of the Unitary State of the Republic of Indonesia based on the Pancasila (Article 1). 
Both foundations and associations fall under the category of “societal organizations with legal entity status,” while all other NPOs are categorized as societal organizations without legal entity status.
Articles 5 and 6 of Law No. 17 of 2013 on “the goals and functions of Societal Organizations” allow for the Ministry of Home Affairs to have control over the activities of all forms of NPOs. For foundations, regulations are provided in the Law on Foundations, but associations and other societal organizations without legal entity status do not have a detailed regulatory framework.
Under Law No. 16 of 2001, a foundation is defined as a non-membership legal entity, established based on the separation of assets, and intended as a vehicle for attaining certain purposes in the social, religious, or humanitarian fields (Article 1 section (1) Law on Foundations (2001)). 
The law stipulates that the organizational structure of a foundation must consist of three organs: the Governing Board (Badan Pembina), Supervisory Board (Badan Pengawas), and Executive Board (Badan Pengurus). The Governing Board delegates some functions, powers, and duties to the other organs. 
There are two types of associations in Indonesia: (i) incorporated associations, which possess legal personality; and (2) ordinary associations, which do not. Both are membership-based organizations. Associations can be public-benefit organizations or mutual-benefit ones.
Incorporated associations are based on the Staatsblad 1870-64 (Dutch Colonial State Gazette) on Associations with Legal Person Status.  There is no specific rule about membership requirements for associations, but Law No. 17 of 2013, which regulates societal organizations, including associations, requires that they be set up by a minimum of three Indonesian citizens. Individuals wishing to create an incorporated association submit the Articles of Association containing the statutory purposes to the Minister of Law and Human Rights. Approval by the Minister confers legal personality.
As for the ordinary association, Staatsblad 1870-64 acknowledges the existence of an association without legal personality (Articles 8 and 9). The ordinary association is commonly known by various titles in Indonesian language such as Perhimpunan, Ikatan, and Paguyuban. An ordinary association is prohibited from conducting activities as a legal entity; any action taken will be considered the action of an individual member of the association. Even though such associations are not considered legal entities, they are still regulated by Articles 1663 and 1664 of the Indonesian Civil Code. 
At present, there are initiatives from various entities, including the government, NGOs and scholars, to draft a new law concerning associations. However, as of the writing of this Note, the House of Representatives has not put it on the schedule.
Societal Organizations without Legal Entity Status
Societal Organizations without legal entity status shall be established by a minimum of three Indonesian citizens. They are formally recognized upon the issuance of a Registration Certificate (Surat Keterangan Terdaftar or SKT) from the Ministry of Home Affairs for a national-level organization, or governor for a provincial-level organization, or mayor/bupati for a city/regency-level organization.  The Law further stipulates that national level organizations are organizations that have organizational structure in a minimum of 25 percent of the total number of provinces in Indonesia; provincial level organizations are organizations that have organizational structure in a minimum of 25 percent of the total number of cities/regencies in a province; and city/regency level organizations are organizations that have organizational structure in a minimum of one district.
There are also more simple types of societal organizations, i.e., ones without formal documents, such as a Deed of establishment, organizational work plan, and Tax ID. The data of such organizations is collected by the Camat (District Head) (Article 18).
B. Public Benefit Status
Foundations may be public-benefit organizations, although, as noted above, "social" foundations might operate to benefit only their stakeholders, which would be inconsistent with public benefit status. Associations can be public-benefit or mutual-benefit organizations.
Public benefit status does not entail any tax or other benefits.
A foundation’s assets (cash, goods or other types of assets) must not be transferred or distributed directly or indirectly among the members of the Governing Board, Supervisory Board, or Executive Board, the foundation's employees, or any other parties having an interest in the foundation (Article 5 Law on Foundations (2001)). A foundation must not divide the income of its commercial enterprises among the members of the Governing Board, Supervisory Board, or Executive Board (Article 3 Law on Foundations (2001)).
Moreover, the Elucidation section of the law  states that members of the Governing Board, Supervisory Board, or Executive Board must be volunteers who do not receive a salary, wages, or honoraria (beyond reimbursement for expenses). Law No. 28 of 2004 introduces an exception to this prohibition: members of the Executive Board can be compensated if they: (i) work directly and full-time for the foundation, (ii) are not the founders of the foundation, and (iii) are not affiliated with the founders, the Governing Board, or the Supervisory Board.
The Executive Board is also prohibited from entering into “self-dealing” transactions (Article 38 Law on Foundations (2001)). It may not enter into agreements with any organization affiliated with the foundation, the members of the Governing Board, Supervisory Board, or Executive Board of the foundation, or an employee of the foundation. However, the prohibition is not applicable when the agreement seeks to help the foundation to attain its objectives.
There is no law restricting a member from receiving a direct or indirect benefit from an association.
3. Societal Organizations without Legal Entity Status
There is no law restricting a member from receiving a direct or indirect benefit from a societal organization without legal entity status.
The Governing Board, Supervisory Board, and Executive Board are all prohibited from receiving a direct or indirect benefit from a foundation. No party is allowed to receive a proprietary interest in the assets or income of a foundation. No party (including founders and donors) is allowed to revoke a contribution and receive property back.
Staatsblad 1870-64 does not regulate proprietary interests in the assets or income of associations. However, members are allowed to receive their contributions back from remaining assets after the association's liquidation (Article 7 Staatsblad 1870-64).
3. Societal Organizations without Legal Entity Status
The Law on Societal Organizations does not have any provisions regarding proprietary interests in the assets or income of associations. The Law also does not provide any guidance regarding liquidation of societal organizations.
The Law on Societal Organizations provides a detailed set of rules on the dissolution of societal organizations. Societal organizations of all types can be dissolved if they violate Articles 21 and 59 of the Law on Societal Organizations on “Obligations” and “Prohibitions”, respectively.
Included in Article 21 on Obligations are obligations to conduct activities according to the organization’s purposes; to guard the unity and integrity as well as integral nature of Indonesia; to maintain religious, cultural, moral, ethical, and decency values as well as to provide benefit for the society; to maintain public order and peace in the society; to manage finance in transparent and accountable ways; and to participate in pursuing the goal of the country.
Included in Article 50 on Prohibitions are prohibitions regarding the use of the flags and symbols of Indonesia, any other country, separatist organizations, other societal organizations, and political parties; activities related to disturbing public order, separatism, and hatred against any ethnicity, religion, race, and group; receiving illegal donations and collecting funds for political party; as well as subscribing, promoting, and spreading ideologies contradictory to Pancasila (the five elements of Indonesian philosophical foundation).
Societal organizations that violate any of the terms in Article 21 and Article 50 will first be given written notice. If the organization continues the violation, the government will freeze its funding (if it receives funding from the government) and/or its activities. To freeze an organization’s activities, in the case of a national-level societal organization, the government has to consult the Supreme Court and the Supreme Court shall give its opinion within 14 days. If this time frame of 14 days is not met, the government may impose the freezing sanction without the opinion of the Supreme Court. In the case of a provincial-level or city/regency-level organization, the government must consult the leadership of the local House of Representatives, the head of the local attorney office, and the head of the local police. This temporary ban can be imposed for the maximum of six months. If the organization continues the violation after the maximum timeframe for the temporary ban, the organization can be dissolved.
The Law on Societal Organizations provides that a foundation, including foundation founded by foreign legal entity, can be dissolved by revoking its legal entity status if it continues violate Article 21 and Article 50 after a temporary ban. In order to dissolve a foundation, the Minister of Home Affairs must first submit a petition to the district court in which the foundation is domiciled. The district court then must issue a decision within 60 days upon receiving the petition. The court decision can be challenged to the Supreme Court as a cassation case and the Supreme Court must issue a decision in 60 days.
For foreign foundations, because their legal entity status does not depend on the Indonesian government, the additional sanctions after a temporary ban are, in sequence: to freeze their Operational Permit, to revoke their Operational Permit, to freeze their Principle Permit, to revoke their Principle Permit, and, lastly, to impose immigration sanctions according to immigration law. 
After dissolution, Law No. 16 of 2001 stipulates that the remaining assets after liquidation shall be given to other foundations that share the same objectives, as selected by the Governing Board (Article 68). Law No. 28 of 2004 adds that the remaining assets can also be given to other legal entities pursuing the same objectives provided the laws regulating those legal entities allow such transfers. If neither of these laws is applicable, then the remaining assets shall be given to the State and used in accordance with the activities of the foundation.
As a membership-based organization, an association is governed substantially by the agreement among its members. An association can be voluntarily dissolved if it reaches its expiration date, accomplishes its objectives, or its members agree to dissolve it (as long as doing so is not prohibited by law). Under Article 7 of Staatsblad 1870-64, assets remaining after liquidation can be owned by the members or divided based on their contributions.
An association can be involuntarily dissolved by revoking its legal entity status if it continues to violate Article 21 and Article 50 after a temporary ban. In order to dissolve an association, the Minister of Home Affairs must first submit a petition to the district court in which the association is domiciled. The district court then must issue a decision within 60 days upon receiving the petition. The court decision can be challenged to the Supreme Court as a cassation case and the Supreme Court must issue a decision in 60 days.
Members of the association are allowed to receive their contributions back from remaining assets after the State Receiver (Balai Harta Peninggalan) completes the liquidation process.
3.Societal Organizations without Legal Entity Status
For societal organizations without legal entity status, the government can revoke their Registration Certificate (Surat Keterangan Terdaftar or SKT). Prior to revoking the Registration Certificate, the Law on Societal Organizations provides that the Minister of Home Affairs or the provincial or city/regency level government, depending on the level of operation of the organization, is obliged to seek an opinion from the Supreme Court. The Supreme Court is then obliged to provide an opinion in 14 days.
There are no rules on the liquidation process of a societal organization without legal entity status.
1. General Activities
In general, a foundation or an association can undertake any lawful, not-for-profit activities. The Law on Societal Organizations then further regulates obligations and prohibitions for all types of societal organizations.
The obligations are: to conduct activities according to the organization’s purposes; to guard the unity and integrity as well as integrality of Indonesia; to maintain religious, cultural, moral, ethical, and decency values as well as to provide benefit for the society; to maintain public order and peace in the society; to manage finance in transparent and accountable ways; and to participate in pursuing the goal of the country (Article 21).
There are prohibitions on:the use of the flags and symbols that use flags or symbols of Indonesia, any other country, separatist organizations, other societal organizations, and political party; activities related to disturbing public order, separatism, and hatred against any ethnicity, religion, race, and group; receiving illegal donations and collecting funds for political party; as well as subscribing, promoting, and spreading ideologies contradictory to Pancasila (Article 59).
There are also additional sets of obligations and prohibitions specifically for foreign foundations and foundations founded by foreign entity. The obligations are: to respect the sovereignty of Indonesia; to comply and obey all laws and regulations; to honor and respect religious and cultural values of the Indonesian society; to provide benefit for the Indonesian society and state; to publish value, all resources, and all spending of the funds; to make periodic report to the government or local government and publish it in the Indonesian language news media (Article 51).
The additional prohibitions are not to: conduct activities violating laws and regulations; disturb stability and unity of Indonesia; conduct intelligence activities; conduct political activities; conduct activities that may disturb diplomatic relations; conduct activities that are not in line with the foundation’s purposes; raise funds from the Indonesian society; and use facilities of government.
A foundation or an incorporated association becomes a legal entity, with all the attendant rights and responsibilities, upon the approval of the Ministry of Law and Human Rights. A societal organization without legal entity status is formally recognized upon the issuance of Registration Certificate (Surat Keterangan Terdaftar or SKT).
2. Public Benefit Activities
According to the Law on Societal Organizations, foundations, associations, and societal organizations without legal entity status are required to undertake public benefit activities.
3. Economic Activities
A foundation can engage in commercial activities to support the attainment of its objectives through:
- setting up commercial enterprises (badan usaha); and/or
- participating as a shareholder in commercial enterprises.
If the foundation sets up its own commercial enterprise, the activities of the enterprise must relate to the foundation’s statutory purposes. These activities are defined broadly, including the fields of human rights, art, sport, consumer protection, education, environment, health, and the pursuit of knowledge (see Elucidation of Article 8, Law on Foundations (2001)).
Apart from setting up its own commercial enterprise, a foundation may participate as a shareholder in other (unrelated) commercial enterprises that are deemed to be prospective, provided that such shareholding does not exceed 25 percent of the total value of the foundation’s assets (Article 7 (2) Law on Foundations (2001)). Dividends received by the foundation from investment in its commercial enterprise are not subject to income tax.
The revision of the Law on Foundations in 2004 provides a more explicit provision prohibiting foundations in Indonesia from directly conducting any business activities (Elucidation of Article 3(1) Law on Foundation (2004)).
In order to maintain good 'corporate' governance, no member of the governing, supervisory, or executive board of the foundation may simultaneously serve as a manager, supervisor, member of the Board of Directors, or member of the Board of Commissioners of any commercial enterprise that a foundation establishes or in which it invests.
According to the Law on Societal Organizations, associations may also engage in commercial activities to support their objectives (Article 39), but the Law does not provide further regulations on this matter; Societal Organizations without legal entity status cannot engage in any commercial activities.
Indonesian law does not restrict an NPO from participating in the political process by lobbying officials, endorsing or opposing candidates, or otherwise. However, the Law on Societal Organizations clearly prohibits foreign foundations and foundations founded by foreign entities to engage in political activities.
The 1945 Constitution provides a legal basis for anti-discrimination, especially Article 28, which provides that every person shall have the right to be free from discriminative treatment based upon any grounds whatsoever and shall have the right to protection from such discriminative treatment. This is further regulated by Law No. 12 of 2005 regarding the Ratification of the International Covenant on Civil and Political Rights (ICCPR).
Furthermore, Law No. 20 of 2003 concerning the National Education System, in Article 11 section (1), requires the government to help provide an excellent education for every citizen without any discrimination. The anti-discrimination regulation also applies to nongovernmental educational institutions (“Principles on Conducting Education” (Prinsip Penyelenggaraan Pendidikan), Article 4 section (1), Law No. 20 of 2003).
No law bars a third party from forming or controlling an NPO.
Foreign parties and for-profit entities are allowed to form NPOs in Indonesia, though it is not easy for overseas entities to do so in practice.
The Law on Foundations permits foreign citizens together with Indonesians or otherwise to establish a foundation under Indonesian law, and foreign foundations, such as foundations established under foreign laws, to operate in Indonesian territory. Foreign foundations must be operated in partnership with an Indonesian foundation and are limited to the pursuit of social, religious or humanitarian objectives. The Law on Foundations and relevant regulations outline a set of rules regarding foundations established by foreign individuals or entities. 
Such foundations must have a minimum of one Indonesian member on the executive board and that member must serve as the NPO’s chair, secretary or treasurer (Article 12 of Government Regulation 63/2008). In addition, all members of the executive board must be residents of Indonesia. Members of the executive board, governing board and supervisory board who are not Indonesian citizens must have work and temporary residence permits (KITAS or Kartu Izin Tinggal Sementara) (Article 13 of Government Regulation 63/2008).
There are no other provisions regarding the control of an organization. It is therefore possible that an Indonesian NPO could be controlled by a for-profit entity or by an American grantor charity (which requires that the charity specifically so provide in the affidavit). However, it is important to note that there are regulations regarding “registration” of NPOs.
Foreign foundations are obliged to obtain Government permits, namely the Principle Permit and Operational Permit. Operational permits can only be obtained when the Principle Permit is first granted (Article 44). The Principle Permit is issued by the Ministry of Foreign Affairs based on the considerations of the Permit Issuance Team, which shall be established by the Ministry of Foreign Affairs. To obtain a Principle Permit, the foreign foundation must fulfill the minimum requirements that it was established in a country that has diplomatic relations with Indonesia and that its governing principle, purposes and activities are not-for-profit. The Operational Permit is issued by the Ministry of Home Affairs or the local government according to the level of work of the foreign foundation only after the foreign foundation signs a written agreement with the Indonesian government according to its scope of activities. The duration of the Principle Permit is three years and can be extended, while the duration of the Operational Permit cannot be more than the duration of the Principle Permit.
Further, the Law on Societal Organizations provides that Indonesian Foundations founded by foreign individuals and foreign legal entities must only be granted legal entity status by the Ministry of Law and Regulations after the Ministry receives the consideration of the Permit Issuance Team. Furthermore, Law No. 17 of 2013 states that the foreign individual founding the Indonesian Foundation must have resided in Indonesia for five consecutive years and hold permanent residency (Izin Tinggal Tetap). The minimum assets of the Indonesian foundation founded by foreign individuals are IDR 1 billion (approximately $100,000). There are also additional regulations for Indonesian foundations founded by foreign legal entities. The foreign legal entity must have operated in Indonesia for five consecutive years and the minimum assets of such foundations must be a minimum of IDR 10 billion. (Article 47) In their operations, Indonesian foundations founded by foreign individuals or foreign legal entities are obliged to have partnerships with the government and Indonesian CSOs. (Article 48).
In addition, there is a special regulation for foreign NPOs that cooperate with the Ministry of Home Affairs. Ministry of Home Affairs Regulation No. 15 of 2009 requires a foreign NPO wishing to cooperate with the Ministry, including at the regional government level, to: (1) have approval from the Indonesian government; (2) get an appointment letter from the Ministry of Foreign Affairs to cooperate with the Ministry of Home Affairs; (3) have a representative office in Indonesia; (4) have a legitimate source of funding; (5) be listed as a NPO in its home country; (6) get approval from its headquarters in the appointment of its representative officer in Indonesia; and (7) obtain a recommendation letter from the embassy of its home country. 
NPOs are generally subject to income tax on the same basis as other legal entities (Article 2 section (1) (b) Law No. 36 of 2008 on Income Tax).
Donations, including religious-based donations and grants are not taxed provided that there is no business or ownership relationship between the parties. In addition, the following types of income are tax exempt: (i) income that an NPO uses to provide scholarship funds and (ii) income (sisa lebih) of an NPO working in the area of education, or research and development that is re-invested in its work as per the timing requirements of the income tax law (Article 4 section (3) Law No.36 of 2008 on Income Tax).
Individual and corporate taxpayers may deduct charitable contributions for natural disasters, research and development activities, development of social infrastructure, education facilities, and sport (Article 6 section (1) Law No.36 of 2008 on Income Tax).  There is no limit on the amount of the deduction. The tax law stipulates that recipients of such contributions shall further be regulated by a Government Regulation; however, the relevant Government Regulation has not been issued.
Indonesia imposes a Value Added Tax (VAT). The applicable rates are ten percent on most goods and services and between ten and fifty percent for goods and services covered by the Luxury Sales Tax. Certain goods and services are exempt from VAT, including basic food supplies such as rice, salt, corn, and the like; and medical, social (public benefit), religious, education, and art services.
Foreign grants to private NPOs are exempt from VAT upon the approval of the Director General of Tax in the Ministry of Finance. However, this procedure is conducted on an ad-hoc basis, and NPOs often are unfamiliar with it. Grants related to government projects are clearly exempt from VAT (Article 2 Government Regulation No. 42 of 1995).
Every legal entity, including an NPO, conducting business activities that produce taxable income above a certain threshold is called a Taxable Entrepreneur, and must require its buyers/clients to pay VAT. These thresholds are quite high, so most NPOs in Indonesia are not affected. The thresholds are generally between 180 and 360 million IDR, depending on the nature of the activities conducted by the NPO.
Certain items are exempted from customs duties on imports under Article 25 section (1) Law No. 17 of 2006 on Customs and Article 9 section (1) Law No. 39 of 2007 on Duties. Those items include the following: goods belonging to a registered international institution and its officers on duty in Indonesia based on reciprocity principle; science books; grants for religious, charity, social, or cultural activities and for the purpose of natural disaster relief; goods for museums, zoos and other similar public places as well as nature conservation; goods for scientific research and development; goods for the use of disabled people; and goods for social purposes.
To receive such an exemption, the importer must submit a proposal to the Minister of Finance through the Director of Customs and Duties. The proposal must include details of the imported goods, a gift certificate or letter of donation, and a recommendation letter from the related Ministry. If the proposal is approved, the Director of Customs and Duties in the name of the Minister of Finance will issue a decree for the exemption. 
NPOs are subject to Land and Building Taxes, Stamp Duty, and Real Property Acquisition Fee.
A double taxation treaty exists between the United States and Indonesia, but it does not specifically address the deductibility of contributions to NPOs.
No specific rule sets forth the process by which domestic NPOs can receive foreign grants. At present, the Secretary of State through the Overseas Technical Cooperation Bureau tries to coordinate the process. However, procedures vary widely from one donation to another.
 The original term in Indonesian is Organisasi Kemasyarakatan. While the Indonesian government does not publish official translations of laws and regulations, this term is generally translated as “social organizations” or “mass organizations.” Indonesian media generally use “mass organizations.” However, the correct translation according to local partners is “societal organizations” because it refers to “groups in the society” instead of groups that are “social: in their work, as in providing charity or providing a social network. Translating Organisasi Kemasyarakatan as “social organizations” may also confuse it with another type of organization, Organisasi Sosial, which is correctly translated as “social organizations.” Social Organizations are regulated by the Law on Social Welfare and supervised by the Ministry of Social Affairs. Therefore, this note uses the term “societal organizations”.
 Pancasila consists of two Sanskrit words, "panca" meaning five, and "sila" meaning principles. It comprises five principles held to be inseparable and interrelated, namely: belief in the one and only God; just and civilized humanity; the unity of Indonesia; democracy guided by the inner wisdom in the unanimity arising out of deliberations amongst representatives; and social justice for the whole of the people of Indonesia. Among its other uses, Pancasila was used as a counter-ideology to communism.
 It should be highlighted that the broad term ‘social’ in this definition might cause a problem in practice, because it is applicable to any not-for-profit activity. Consequently, there is no overall rule that a foundation must provide a public benefit, as opposed to serving only its stakeholders. It depends on the foundation’s statutory purposes.
 The law also requires every foundation to publish the abridged version of its annual report on an announcement board in its office. Furthermore, foundations which have received donations from the state, overseas parties, or third parties totaling 500 million Indonesian rupiah (IDR) or more, or which possess assets other than endowed assets of over 20 billion IDR, must be audited by a public accountant and have their annual report summaries published in an Indonesian-language daily newspaper. See Article 52 Foundation Law (Law No. 16/2001).
 The word “Perkumpulan” (Association) is “Vereneging” in Dutch and “Verein” in German, which means an opposite of maatschap or vennootschap (company or corporation). See Chidir Ali, Badan Hukum (Bandung: Alumni, 1999), at 119.
 Article 1663 states: “All other corporate bodies shall continue their existence until they are specifically dissolved in accordance with their rulings, agreements and regulations, or until the purpose or the object of the corporate body ceases to exist.”
 Indonesia is a unitary state; regional governments, both at the provincial and city/regency levels, are placed under the Ministry of Home Affairs. Regional autonomy is put on the city/regency level, except for provinces with special autonomy, such as Aceh and West Papua. Regional Autonomy does not include foreign policy, defense, security, judicial matters, monetary and fiscal policy, and religious issues.
 Foreign foundations are obliged to obtain Government permits, namely principle permit and operational permit. Operational permit can only be obtained when the principle permit is granted. The principle permit is issued by the Ministry of Foreign Affairs based on considerations of the Permit Issuance Team, which shall be established by the Ministry of Foreign Affairs. The Operational Permit is issued by the Ministry of Home Affairs or the local government according to the level of work of the foreign foundation only after the foreign foundation signed a written agreement with the Indonesian government according to its scope of activities.
 The United Nations’ Human Rights Committee on its 108th session on the July 10 and 11, 2013 in Geneva expressed its concern over the recently adopted Law on Societal Organizations and urged the Government of Indonesia to review the Law to ensure that it is in compliance with the provisions of articles 18, 19 and 22 of the ICCPR. This concern was expressed in a Concluding Observation as a response to the initial periodic report of the Indonesian Government on the International Covenant on Civil and Political Rights, esp. paragraph 24.
 The Law, for example, mandates a minimum contribution to the foundation’s assets of 100 million IDR. For registration, the minimum contribution must be documented, the foreign individual/entity must provide identification, and there must be a statement that the foundation will not be detrimental to the Indonesian society, nation and country. Activities must be in partnership with foundations established by Indonesian citizens/entities that have the same goal and purpose as the foreign foundation. Further, such partnership must be “safe” from the political, legal, technical and security perspective (Article 26 of Government Regulation 63/2008); the Regulation does not further define what is meant by these terms.
 Law No. 11 of 2009 on Social Welfare, which was enacted in January 2009 and replaces the old law from 1974, requires institutions, including NPOs, dealing with social welfare to be registered with the Ministry of Social Affairs. Foreign NPOs working in this area are also required to obtain permits and report their activities in advance to the Minister of Social Affairs and the appropriate district head. Violations of these provisions are subject to administrative sanctions such as a written warning, a temporary cessation of activities, permit revocation, and/or an administrative fine/penalty.
The 1985 Law on Societal Organizations provides the basis for regional governments to enact Regional Regulations requiring ‘societal organizations’ to register with the Regional Government Office of National Unity and Political Affairs. The term ‘societal organizations’ in this Law means all organizations established by Indonesian citizens voluntarily on the basis of similarity of activity, profession, function, or religion (Article 1 of Law No. 8 of 1985). .
Although the Ministry of Home Affairs insists that this law addresses all organizations, only a few NPOs have admitted that their organizations are societal organizations.
 Before the enactment of the 2008 Law, additional tax incentives were set up on an ad hoc basis. As but one example, the Minister of Finance issued a special regulation concerning the tax deductibility on donations for the Tsunami disaster in Aceh (Regulation Number 609/04).
 There is no specific provision about the abuse of this exemption through resale, but a general provision states that those who violate these exemption regulations and cause losses to the country’s income will be fined in the amount of 100 percent of the duty (Article 25 (4) Law on Customs and Duties).