BKPM Simplifies Investment Regulation in Indonesia

BKPM Simplifies Investment Regulation in Indonesia

As of December 11, 2017, BKPM issued BKPM Regulation 13 on Guidelines and Procedures for Investment Licensing and Facilities (Peraturan BKPM No.13 Tahun 2017). The new regulation aims to simplify both investment licensing and investment facilities procedures, thus replace the prior regulations as follow:

• BKPM Regulation 8/2015 on Procedures for Application of Income Tax Facility for Foreign Direct Investment in Particular Business Sectors and/or Regions (amended by BKPM Regulation 18/2015)

• BKPM Regulation 13/2015 on Procedures for Application of Corporate Incomes Tax Reduction Facility (amended by BKPM Regulation 19/2015)

• BKPM Regulation 14/2015 on Guidelines and Procedures for Investment Principle License (amended by BKPM Regulation 8/2016)

• BKPM Regulation 15/2015 on Guidelines and Procedures for Investment Licensing and Non-licensing

• BKPM Regulation 16/2015 on Guidelines and Procedures for Investment Facilities

Some notable changes under BKPM Regulation 13/2017:

• “Investment Registration (Pendaftaran Investasi)” is introduced as a new type of license, while the old “Principle License (Izin Prinsip)” is no longer regulated. To apply for Investment Registration, companies must be under the below criteria:

1. Require construction phase;

2. Entitled to investment facilities;

3. Have medium to high potential of environmental pollution;

4. Related to national defense, natural resources, infrastructure and energy sectors;

5. Other criteria as regulated by particular policy.

Further, companies that own the above criteria are able to start their business activities once they have acquired their Business License.

• Companies now may register their investment and acquire 7 licenses (notarial deed plus decree of the Minister of Justice and Human Rights, tax registration, company registration, employment plan, working permit, import identification and customs registration) directly if the project area is located inside Special Economic Zone, Free Trade Zone and Port Zone, Industrial Estates, or Strategic Zone for Tourism Project; otherwise they are eligible to obtain 3 licenses (notarial deed plus decree of the Minister of Justice and Human Rights, tax registration, and company registration). This policy intends to encourage more investments in the aforementioned locations.

• Companies that require no construction phase or require no duty exemption facility; OR have obtained Business License/Expansion License and will amend the company status may immediately granted Business License (without applying for Investment Registrations).

The regulation was officially implemented at the One Stop Service (Pelayanan Terpadu Satu Pintu / PTSP) BKPM as of January 2, 2018. This will be followed by PTSP in regionals / provinces, cities / regencies, free trade zones, free port zones, and special economic zones which are prompted to enforce it not later than July 2, 2018.

To alleviate investors during the transitional phase, BKPM sets the following provisions:

1. Companies that already possessed an investment registration issued under Chairman of BKPM Regulation 12 of 2009 on Guidelines and Procedures for Capital Investment Licensing must apply for Business License within six months after the effective date of BKPM Regulation 13/2017. If the companies fail to do so, BKPM or the regional PTSP are entitled to revoke their investment registrations.

2. Principle licenses that are issued before the enforcement of Regulation 13/2017 will be valid until the expiration of the project completion date thereunder. However the business license should be processed under Regulation 13/2017.

3. Companies that already obtained Business License but have not fulfilled the large-scale requirements (as stated on Regulation 13/2017 Article 34), must apply for a new investment registration and fulfill the requirement of large-scale investment once they want to start business as specified in Article 10.1 of Regulation 13/2017.

Furthermore, Chairman of BKPM also announced Regulation 14/2017 on Guidelines and Procedures for the Implementation of Investment Monitoring to accommodate changes under Regulation 13. The regulation contains several changes in monitoring, guidance, supervision, and administrative measures activities. One of the most substantial changes is the addition of monitoring activities coverage, not only to the investment realization but also to:

• Compliance checklist commitment report for companies that already have temporary Business License. The companies are required to submit information on the progress of checklist compliance every one month by updating the company’s folder until the commencement of construction;

• Import realization report;

• Representative Office realization report, and;

• Other required business activity reports in accordance with the regulations of the relevant technical agencies.

For full view of BKPM Regulation 13 and 14 of 2017 please click here to download PDFs.