15 June 2020
Indonesia

Effective on 1 April 2020 and pursuant to the Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal or “BKPM”) Regulation No. 1 of 2020 on Guidelines for the Implementation of Electronically Integrated Business Licensing Services (“BKPM Reg 1/2020”), the authority over the OSS system has been transferred from the Coordinating Ministry of Economic Affairs to BKPM.

BKPM Reg 1/2020 was issued as an implementing regulation of Government Regulation No. 24 of 2018 on Electronic Integrated Business Licensing Services (“GR 24/2018”) and President Instruction No. 7 of 2020 on Acceleration of the Ease of Doing Business.

BKPM Reg 1/2020 regulates technical requirements for business licensing that were not covered in GR 24/2018, licensing procedures for representative offices, foreign franchisors, foreign futures traders and branch offices, monitoring of business actors and payment for business licenses.

Obtaining Access Rights

Before an applicant can access the OSS system, the applicant is required to obtain access rights that can be applied through the OSS system. The flowchart below describes the process for obtaining access rights:


Obtaining Business Identification Number/Nomor Induk Berusaha (“NIB”)

According to Article 1 paragraph (13) of BKPM Reg 1/2020, NIB is the identity of a business actor issued by the Government of the Republic of Indonesia after they register at the OSS System. The NIB will also be deemed to be a Company Registration Certificate or Tanda Daftar Perusahaan, Importer’s Identification Number or Angka Pengenal Importir and custom duties access right as provided under relevant regulations. Below are the guidelines on how to obtain an NIB from the OSS System.


Obtaining Business License

The sectors impacted by the issuance of business and commercial/operational license under BKPM Reg 1/2020 are as follows:

  • electricity
  • agriculture
  • environment and forestry;
  • public works and housing;
  • marine and fishery;
  • health;
  • food and drugs;
  • industry;
  • trade;
  • transportation;
  • communication and information;
  • finance;
  • tourism;
  • education and culture;
  • higher education;
  • religion;
  • manpower;
  • police;
  • cooperation and micro, small, middle business; and
  • nuclear power

The issuance of business license for the sectors that are not mentioned above will be based on the prevailing laws and regulations issued by the relevant institutions.

BKPM Reg 1/2020 also regulates a new type of issuance of business and commercial/operational license as described in the table below:

Business License and Commercial/Operational License TypeRemarks
License without commitment fulfillment (“Type 1”)Business licenses are issued via the OSS system issue and become immediately effective.
License with technical requirements (“Type 2”)

Business

Business licenses are issued via the OSS system issue but do not become immediately effective. Instead, these licenses become effective after businesses have fulfilled the relevant commitments. Provisions relating to these business licenses and Commercial/Operational Licenses are to be further stipulated by the Head of BKPM.
License with fee requirements (“Type 3”)
License with technical and fee requirements (“Type 4”)

The issuance of business licenses and Type 2 and Type 4 should be completed via the OSS system by following the guidelines below:

 

Due to the large scope of BKPM Reg 1/2020, we have summarised the important amendments covered in BKPM Reg 1/2020:

SubjectProvisions
NIBBKPM Reg 1/2020 specifically sets out guidelines for business actors on how to obtain an NIB through a detailed process.

NIB can be revoked. Based on BKPM Reg 1/2020, BKPM can revoke the NIB if the company conducts business activities that are inconsistent with its NIB or violates any provisions of the prevailing laws and regulations, and if it is declared void or invalid based on a binding court decision and/or based on the request of the company. Please see our further explanation in Monitoring section.

Investment valueA Foreign Capital Investment company/perusahaan Penanaman Modal Asing (“PMA company”) is required to fulfill the total investment value of more than IDR 10 billion (excluding the value of land and buildings) and apply for each line of business activity per KBLI per project location. The minimum issued and paid-up capital for a PMA company remains at IDR 2.5 billion.

We set an example for the wording in bold as follows: if a PMA company engages in the manufacture of plastics (KBLI No. 22299) and large scale trading of spare parts and car accessories (KBLI No. 45301), the total investment value that must be fulfilled by the PMA Company is more than IDR 20 billion because the PMA company engages in two lines of businesses. 

If a company engages in telecommunications construction services (KBLI No. 42214) and operates in Jakarta, Bandung and Semarang, the total investment value of the PMA company must be more than IDR 30 billion due to the total number of project locations.

This provision has been an unwritten policy of BKPM since 2015, albeit with inconsistent enforcement and has now been made an express requirement under this new regulation.

Kindly note that BKPM has made a certain exception to the additional investment value for a PMA company engaging in the following lines of businesses:

Large Scale Trading (Perdagangan Besar). A PMA company that engages in large-scale trading can engage in more than one line of business without having to increase its investment only if the two initial digits of the KBLI number are in the same category. For example, if a PT PMA carries out trading activity (export or local sales) of sports equipment (KBLI No. 46495) and adds trading activity of musical instruments (KBLI No. 46496), the PMA company is only required to meet a minimum of IDR 10 billion of total investment value (i.e., the minimum investment will not be doubled to IDR 20 billion) because trading activity of sports equipment and musical instruments have two similar initial digits of the KBLI number i.e.:46495 and 46496. However, this will not apply if the two initial digits of the KBLI number are different.

Food and Beverage Services that are open to foreign investment will be required to add an additional minimum total investment value of more than IDR 10 billion if the project locations are not located in the same regency or city. According to verbal confirmation from the BKPM official, the provision of investment value also applies to food and beverage service with a franchise scheme.

For Construction Services that are open to foreign investment, BKPM requires an additional minimum total investment value of more than IDR 10 billion only if the business activity is not part of one activity.

Main project and supporting project

 

Under OSS System version 1.1 and BKPM Reg. 1/2020, a PMA company can separate its business activities into main business activity and supporting business activity. A business activity is considered to be a supporting project if it:

  • falls under a different KBLI number from the main project
  • is intended only to support the main project;
  • is not utilised to generate revenue; and
  • is carried out in accordance with the applicable laws and regulations.

Even though the PMA company is not required to increase its investment value to support its business activity, the PMA company is required to fulfill the commitments under both the main and the supporting activities.

The above total investment value requirement is imposed on the company that has obtained their license on or after the effective date of GR 24/2018, which was 21 June 2018, not after the effective date of BKPM Reg. 1/2020 itself.

MergerUnder BKPM Reg 1/2020, business actors can carry out merger under the business license. Upon obtaining approval from the Ministry of Law and Human Rights (“MLHR”), the OSS system will receive the merger deed from the AHU system and then the OSS system will issue a Merger Business License. The surviving entity from the merger results must still fulfill the commitment against the business license and/or commercial/operational license and requirements for business sectors in accordance with the prevailing laws and regulations.
Representative officeAccording to BKPM Reg 1/2020, a KPPA must obtain a Registration for Foreign Representative Office (Pendaftaran Kantor Perwakilan Perusahaan Asing/KPPA) and an NIB. Unlike the previous BKPM Regulation which was silent on the provision related to Kantor Perwakilan Perusahaan Perdagangan Asing/”KP3A”), BKPM Reg 1/2020 requires KP3A to obtain a KP3A Business License and an NIB in order to operate in Indonesia.

Other than licensing for KPPA and KP3A, BKPM Reg 1/2020 also regulates licensing procedures for obtaining a franchise registration certificate for foreign franchisors, representative offices for foreign construction service entities, futures traders and branch offices.

MonitoringBKPM has authority to coordinate with relevant ministries/other government institutions to conduct monitoring of fulfilment of commitment by business actors and verification of the data and information that has been filled in and submitted by the business actors through the OSS System, such as checking the conformity of the line of business and KBLI with the provisions of the negative list of investment, checking the investment value and capital structure of the company and other specific criteria based on the relevant laws and regulation.

BKPM can revoke the NIB if the company conducts business activities that are inconsistent with its NIB or violates any provisions of the prevailing laws and regulations, and if it is declared void or invalid based on a binding court decision and/or based on the request of the company.

If you have any questions or require any additional information, please contact Hanim Hamzah or Andina Sitoresmi of Roosdiono & Partners (a member of ZICO Law).


This alert is for general information only and is not a substitute for legal advice. It may not be reproduced in any manner without prior consent. This article represents the author’s opinion and does not necessarily reflect that of Roosdiono & Partners and/or the ZICOlaw Network. All rights reserved.