Update COVID-19 in Indonesia: 115,056 confirmed infections, 5,388 deaths (4 August 2020)
5 August 2020 (closed)
USD/IDR (14,647) +60.00 +0.41%
EUR/IDR (17,355) +42.63 +0.25%
Jakarta Composite Index (5,127.05) +52.02 +1.03%
This is the second column explaining the contents of circular letter number 17/11/DKSP on the Mandatory Use of Rupiah Currency in the Territory of Indonesia (Circular BI). In the column of last week we have already discussed the exception to the obligation to use the rupiah in strategic infrastructure projects. In the column of this week we discuss the exception on the mandatory use of the rupiah based on the specific policy set by Bank Indonesia (BI), the prohibition to use dual quotations and the imposition of sanctions in case of violation as detailed in the Circular BI.
Exception Mandatory Use of Rupiah Based on Policy BI
In case businesses experience difficulties in implementing the mandatory use of rupiah based on the Circular and regulation number 17/3/PBI/2015 on the Mandatory Use of Rupiah Currency in the Territory of Indonesia (Regulation), BI may provide an exception to this obligation for non-cash transaction, based on a specific policy. In determining the specific policy, the Circular BI explains that BI considers the following points:
1. Readiness of the business: to which extent the business requires fundamental changes in the system and / or the business processes of the business operations and/or certain business actors, in order to fulfill with the obligation to use the rupiah;
2. Continuity of business activities: to which extent could the obligation to use the rupiah sufficient transitional period affect the continuity of the business operations;
3. Investment activities: to which extent the business activities require financing in foreign currencies for a certain period, which may interfere with the obligation to use the rupiah;
4. National economic growth: to which extend the business activities have a significant impact on the Indonesian economic growth; and/or
5. BI regulation: to which extent the company complies with BI legislation (general requirement).
Quotations In Rupiah: Dual Quotation Prohibited
The Regulation already explained that all quotations must be stated in rupiah. The Circular BI further explains that dual price quotations are prohibited. Dual price quotations state the price of services or goods in both a foreign currency and the rupiah. An example of a prohibited quotation: “the price of legal services is USD 200 (IDR 2,600,000) per hour”.
Further, the Circular BI provides examples of quotations which must be stated in rupiah, amongst others:
1. price tag on goods;
2. service fees (e.g. consultancy fees, travel agency fees, housing agency fees, etc.);
3. rental fees;
4. rates for harbor services or flight ticket fares;
5. price lists, (e.g. restaurant menus);
6. prices/costs stated in an agreement;
7. offer letters, invoice prices, purchase orders, etc.; and/or
8. proof of payment.
Imposition of Sanctions in Case of Violation
The Regulation already explained that BI could impose the following sanctions in case of non-compliance with the obligation to use the rupiah for non-cash transactions:
1. a written warning;
2. a penalty of 1%, limited to a maximum amount of 1 billion rupiah; and/or
3. a prohibition to participate in payment traffic.
The Circular BI explains that the penalty shall be given after BI has issued two warning letters to the violator. In case the violator keeps on using a foreign currency, BI can impose a new sanction without any new warning letter.
A violation of the obligation to quote prices in rupiah will be subject to a written warning letter only (and not to any penalty). However BI can recommend to related authorities to take actions, such as revocation or suspension of business license. Therefore non-compliance with this obligation may lead to severe consequences for businesses.
This column is provided by PNB Law Firm Jakarta