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25 May 2018 (closed)
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Recently, the Indonesian Investment Authority (BKPM) issued Regulation no. 13 of 2017 regarding Guidelines and Procedures for Investment Licensing and Facilities (13/2017 Regulation). The 13/2017 Regulation is of great importance for foreign investors that currently have or wish to establish a foreign investment company in Indonesia. The regulation regulates the investment requirements for Foreign Limited Liability Companies (PT PMA) and several types of Foreign Representative Offices. In this column we discuss the licensing system for foreign capital investment.
The 13/2017 Regulation replaces the following BKPM regulations (Old BKPM Regulations):
- BKPM Regulation no. 8/2015 on Procedures for Applying for Income-Tax Concessions for Investment in Certain Fields and / or Areas, as amended by BKPM Regulation 18/2015
- BKPM Regulation no. 13/2015 on Procedures for Applying for Corporate Income-Tax Deductions, as amended by BKPM Regulation no. 19/2015
- BKPM Regulation no. 14/2015 on Guidelines and Procedures for Principle Investment Licensing, as amended several times, most recently by BKPM Regulation no. 8/2016
- BKPM Regulation no. 15/2015 on the Guidelines and Procedures for Applying Investment Licenses and Non-License Facilities
Above regulations are as of January 2, 2018, revoked and not longer valid for foreign investors in Indonesia.
PT PMA Licensing
Under the Old BKPM Regulations, a foreign investor was first required to obtain a principle license before being able to apply for a business license. Under the 13/2017 Regulation, the principle license is no longer regulated.
Registration of Capital Investment
The 13/2017 Regulation now introduces a new type of license, namely the Registration of Capital Investment. The Registration of Capital Investment only applies to foreign investment companies that fulfill one of the below criteria:
- businesses that need time for construction activities;
- businesses that are entitled to investment facilities;
- businesses that have medium to high potential of environmental pollution;
- businesses related to national defense, natural resources management, energy, and infrastructure; or
- other businesses as determined by specific regulations.
Above businesses can, however, only start their business activities after they have obtained their business license.
The 13/2017 Regulation now regulates two types of business licenses for foreign investment companies (PT PMA), namely:
- The temporary business license, which is valid for one year. This license will be issued to foreign investment companies (PT PMA) that are unable to fulfill the investment requirements set by BKPM (explained below). This temporary business license can be extended one time for maximum one year.
- Permanent business license, which is valid for as long as the company remains operational. This license will be issued to PT PMAs that have already complied with BKPM’s investment requirements
Minimum BKPM Investment Requirements
No changes are made to the minimum investment requirements under the 13/2017 Regulation. The minimum investment requirements to obtain a permanent business license remain the same, namely:
- Minimum investment by the PT PMA must be more than 10 billion Rupiah. This investment amount excludes investments in land and buildings;
- The paid-up capital of the PT PMA must me more than 2.5 billion Rupiah; and
- The minimum value per share is 10 million Rupiah.
Please note that there are certain exceptions to this rule, for certain types of industries and businesses.
Representative Office Licenses
The 13/2017 Regulation regulates the licenses for the following types of representative offices:
- Foreign Company Representative Offices
- Foreign Trade Company Representative Offices
- Foreign Construction Services Business Entity Representative Offices; and
- Foreign Oil and Gas Company Representative Offices
Foreign Oil and Gas Company Representative Offices were previously not regulated under the Old Regulation and have now been added.
We would like to make one remark on the validity period of a Foreign Company Representative Offices (KPPA): previously under the Old Regulations, the KPPA license was valid for a maximum period of 3 years and could be extended for two times one year. Under the 13/2017 Regulation the restriction of maximum two years extension has been removed. Now the KPPA can be extended in accordance with the validity period mentioned in the appointment letter of the Chief Representative. This may indicate that there is no limit anymore to extensions of a KPPA, which would be good news for foreign investors.
The 13/2017 Regulation came into force on January 2, 2018 for foreign companies.
This column is provided by PNB Law Firm Jakarta