Mandatory Use of Rupiah

All cash and non-cash transactions in Indonesia performed by individuals or corporations must use the Rupiah Transactions, which include:

1. each transaction which has the purpose of a payment for something;
2. other settlement of obligations that must be fulfilled by transferring money; and/or
3. other financial transactions.

For above mentioned transactions it is not only required to perform the actual transaction in rupiah, the products and services related to the transaction must indicated in rupiah in for instance quotations towards customers.

Exemptions to the Mandatory Use of Rupiah

The obligation to use the rupiah does not apply to the following transactions:

1. certain transactions related to the state budget
2. the acceptance of grants from abroad or the provision of grants to abroad;
3. international trading transactions, which consists of the following activities:

    a. import goods from outside the Indonesian customs area;
    b. export goods from inside the Indonesian customs area;
    c. cross-border supply; and
    d. consumption abroad.

Please note that ancillary services such as berthing, the loading/unloading of containers, container storage, and aircraft parking are not considered an international trading transaction and therefore the use of the rupiah is obligatory for these services.

4. bank savings in foreign currencies; and
5. international financing transactions.

Sanctions

A violation of the mandatory use of rupiah in non-cash transactions can be subject to the following sanctions:

1. written warnings
2. administrative penalty of 1% of the transaction value; and/or
3. prohibition of being involved in any payment transaction.

A violation of the obligation to quote services or products in rupiah may be subject to written warnings.

Besides the sanctions above, Bank Indonesia has the authority to recommend relevant government bodies to impose sanctions in line with their authority. For foreign investors this might result in a revocation of e.g. business license by BKPM. It is however too early too early to estimate whether or not such sanctions will be actually imposed on foreign investors which violated the BI Regulation.

The BI Regulation will become enforceable as of July 1, 2015

This column is provided by PNB Law Firm Jakarta

Further Reading:

Circular Bank Indonesia Clarifies Mandatory Use Rupiah (1/2)
Circular BI Clarifies Mandatory Use of Rupiah Indonesia (2/2)

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