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New Head of BKPM Regulation on Investment Licenses and Facilities

KSP LEGAL UPDATES New Head of BKPM Regulation on Investment Licenses and Facilities investorsNew Head of BKPM Regulation on Investment Licenses and Facilities
The Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal - BKPM) recently enacted Head of BKPM Regulation Number 13 of 2017 on Guideline and Procedure of Investment Licenses and Facilities (“BKPM Reg 13/2017”) on 15 December 2017.

The BKPM Reg 13/2017 came into effect since 2 January 2018 and automatically annul the previous Head of BKPM regulations such as:

1. Head of BKPM Regulation Number 8 of 2015;
2. Head of BKPM Regulation Number 13 of 2015;
3. Head of BKPM Regulation Number 14 of 2015;
4. Head of BKPM Regulation Number 15 of 2015;
5. Head of BKPM Regulation Number 16 of 2015.

Some changes are made in the BKPM Reg 13/2017 to simplify the investment license process. Given those changes, we highlight 5 (five) important provisions as follows:

1. Investors may apply business license directly for certain line of business i.e. business which does not require construction activities and business which does not require facility for exemption of import duty on machinery or capital goods. The business should be carried out within 1 (one) year by the holder of this business license. In this regard, investors should firstly establish an Indonesian legal entity, obtain company tax ID (NPWP) and having place of business. Implementation of this provision requires synchronization with the BKPM, the Ministry of Laws and Human Rights as well as Directorate General of Tax.

2. The BKPM confirm prohibition of nominee arrangement under nominee agreement or statement. If needed, the BKPM may require investors to provide a written statement and recorded by the pubic Notary (waarmerking).

3. Divestment requirement under the existing business license still has to be completed according to the determined timeframe. However, this requirement could be waived if:

a. The Indonesian party in a joint venture business do not want to acquire the shares that should be divested according to the business license.

b. All shareholders of a foreign investment company (PT PMA) whose shares 100% owned by foreign investors do not commit to divest the company’s shares to any Indonesian party.

4. Business license is basically valid as long as the company still operates. For a PT PMA which has not been classified as a company with large scale business (minimum net assets of IDR 10 billion or net profit more than IDR 50 billion), its business license shall only be valid for 1 (one) year.

5. Under the BKPM Reg 13/2017, investment license for representative office shall be valid for 3 (three) years and can be extended according to letter of appointment.

The BKPM Reg 13/2017 also stipulates some transitional provisions among others:

1. Companies that have been obtained investment registration under the Head of BKPM Regulation Number 12 of 2009 should apply business license not later than 6 (six) months since the effective date of the BKPM Reg 13/2017. Otherwise, it can be revoked by the BKPM.

2. Principle license that is issued before the BKPM Reg 13/2017 shall remain be valid until its expiration date as determined in it.

3. Application of principle license received by the BKPM, but still under review, shall be proceed under the provisions of the BKPM Reg 13/2017.

4. Companies that have obtained a business license but have not fulfilled the large scale business requirements, should start the business by submitting a new investment registration as provided in the BKPM Reg 13/2017.
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