KSP Legal Updates
Indonesian E-court System
The Indonesian Supreme Court launched the E-court System to implement more efficient court proceeding in light of time, fees and effort for all disputing parties. The E-court System also gives greater access for people seeking legal justice and living in the remote areas in Indonesia. The E-court System was stipulated under Supreme Court Regulation Number 3 of 2018 on Electronic Based Case Administration in Court (“SCR 3/2018”).
The E-court System can basically be accessed by the advocate and/or individual registered in the system. The advocate is currently the one who can access and register the E-court application, while further regulation or implementation guideline for individual users have not been issued.
The SCR 3/2018 defines some type of cases that can be administrated through the E-court System like civil, religious, military administrative or state administrative cases. In principle, the E-Court System shall electronically administer the registration of law suit until the court verdict is granted to all disputing parties.
The following is the mechanisms to submit lawsuit through the E-court System:
1. The advocate is required to make registration to get user account and password, including to provide the advocate’s electronic domicile i.e. email address and/or mobile number at the E-court Mahkamah Agung website.
2. All data in the registration shall be validated by the Supreme Court and they have full authority to approve or reject the registration and to penalize any violation on the use of the E Court System like warning and/or suspension of the user account.
3. Registration of the lawsuit and power of attorney as well as submission of the relevant documents can be done through the E court System. Further, payment for initial court fees (e-SKUM) shall be done through the Court’s virtual account or some stated-owned banks. The court clerk shall then verify the documents and issue the case registration number (Nomor Perkara) in the E-court System.
4. Court summon shall be sent electronically to the plaintiff through the Electronic Domicile, while the defendant shall firstly receive the summon via registered mail. During the first hearing, the judges panel shall ask the defendant whether to proceed the hearing electronically or conventionally. The defendant’s attorney should provide the approval to the court if the hearing shall be conducted through the E-court system.
5. The judges panel shall deliver the court verdict electronically to all disputing parties at the latest 14 days as of the verdict granted. In terms of bankruptcy case, the court verdict shall be delivered earlier i.e. within 7 days.
The E-court System has progressively been improved by adding some features like e-filling, e-payment and e-summons. At the first phase, the E-court System shall be implemented in 32 courts in Indonesia and registration of the lawsuit via the E-court System in Central Jakarta District and Religious Courts and Surabaya District Court has successfully been tested during the launch.
Read MoreThe E-court System can basically be accessed by the advocate and/or individual registered in the system. The advocate is currently the one who can access and register the E-court application, while further regulation or implementation guideline for individual users have not been issued.
The SCR 3/2018 defines some type of cases that can be administrated through the E-court System like civil, religious, military administrative or state administrative cases. In principle, the E-Court System shall electronically administer the registration of law suit until the court verdict is granted to all disputing parties.
The following is the mechanisms to submit lawsuit through the E-court System:
1. The advocate is required to make registration to get user account and password, including to provide the advocate’s electronic domicile i.e. email address and/or mobile number at the E-court Mahkamah Agung website.
2. All data in the registration shall be validated by the Supreme Court and they have full authority to approve or reject the registration and to penalize any violation on the use of the E Court System like warning and/or suspension of the user account.
3. Registration of the lawsuit and power of attorney as well as submission of the relevant documents can be done through the E court System. Further, payment for initial court fees (e-SKUM) shall be done through the Court’s virtual account or some stated-owned banks. The court clerk shall then verify the documents and issue the case registration number (Nomor Perkara) in the E-court System.
4. Court summon shall be sent electronically to the plaintiff through the Electronic Domicile, while the defendant shall firstly receive the summon via registered mail. During the first hearing, the judges panel shall ask the defendant whether to proceed the hearing electronically or conventionally. The defendant’s attorney should provide the approval to the court if the hearing shall be conducted through the E-court system.
5. The judges panel shall deliver the court verdict electronically to all disputing parties at the latest 14 days as of the verdict granted. In terms of bankruptcy case, the court verdict shall be delivered earlier i.e. within 7 days.
The E-court System has progressively been improved by adding some features like e-filling, e-payment and e-summons. At the first phase, the E-court System shall be implemented in 32 courts in Indonesia and registration of the lawsuit via the E-court System in Central Jakarta District and Religious Courts and Surabaya District Court has successfully been tested during the launch.
Registration of Limited Partnership, Firm and Civil Partnership
Indonesia recognizes some type of business entities other than a limited liability company (Perseroan Terbatas - PT). They are Limited Partnership (Persekutuan Komanditer - CV), Firm (Firma) and Civil Partnership (Persekutuan Perdata) (“Legal Entity”).
The Ministry of Laws and Human Rights (MOLHR) recently enacted the MOLHR Regulation Number 17 of 2018 on Registration of Limited Partnership, Firm and Civil Partnership (“MOLHR Reg 17/2018”). Before enactment of the MOLHR Reg 17/2018, the Legal Entity should make registration at the district court which has not been well electronically organized.
Pursuant to Article 2 of the MOLHR Reg 17/2018, registration of the Legal Entity including registration of deed of establishment, registration of amendment of articles of association and dissolution. All applications should be made through Business Entity Administration System (Sistem Adminstrasi Badan Usaha - SABU) that can be accessed by the Indonesian public notary.
Before making registration, applicant should check and reserve their entities’ names at SABU to avoid double booking of one certain name. Afterwards, the applicant signs the deed of establishment and followed by application on establishment of the Legal Entity to the MOLHR maximum 60 days as of the date of the Deed of Establishment
Applicant is required to pay the official cost, known as non-tax state revenues for entities’ names reservation and application of establishment. The MOLHR grants its approval namely Surat Keterangan Terdaftar (SKT) electronically to the applicant which shall be printed out, signed and chopped by the public notary.
Meanwhile, applicant should prepare deed of dissolution, court verdict on dissolution or other documents stating the dissolution before submitting the dissolution application to the MOLHR. The application should also be supported with the valid reasons i.e.:
1. Expiration of the agreement period made between partners;
2. Destruction of goods used for the objectives of the Legal Entity or the objectives have been achieved;
3. The consent of all partners to dissolve the Legal Entity; or
4. Other reasons as provided in the prevailing laws and regulations.
The Legal Entity which has been registered before the enactment of the MOLHR Reg 17/2018, should make registration to the MOLHR at the latest 1 (one) year as of the date of the enactment of the MOLHR Reg 17/2018 i.e.12 July 2019. However, according to information from some notaries, the requirements have not been fully implemented due to transition of other business licenses application through the OSS System.
Read MoreThe Ministry of Laws and Human Rights (MOLHR) recently enacted the MOLHR Regulation Number 17 of 2018 on Registration of Limited Partnership, Firm and Civil Partnership (“MOLHR Reg 17/2018”). Before enactment of the MOLHR Reg 17/2018, the Legal Entity should make registration at the district court which has not been well electronically organized.
Pursuant to Article 2 of the MOLHR Reg 17/2018, registration of the Legal Entity including registration of deed of establishment, registration of amendment of articles of association and dissolution. All applications should be made through Business Entity Administration System (Sistem Adminstrasi Badan Usaha - SABU) that can be accessed by the Indonesian public notary.
Before making registration, applicant should check and reserve their entities’ names at SABU to avoid double booking of one certain name. Afterwards, the applicant signs the deed of establishment and followed by application on establishment of the Legal Entity to the MOLHR maximum 60 days as of the date of the Deed of Establishment
Applicant is required to pay the official cost, known as non-tax state revenues for entities’ names reservation and application of establishment. The MOLHR grants its approval namely Surat Keterangan Terdaftar (SKT) electronically to the applicant which shall be printed out, signed and chopped by the public notary.
Meanwhile, applicant should prepare deed of dissolution, court verdict on dissolution or other documents stating the dissolution before submitting the dissolution application to the MOLHR. The application should also be supported with the valid reasons i.e.:
1. Expiration of the agreement period made between partners;
2. Destruction of goods used for the objectives of the Legal Entity or the objectives have been achieved;
3. The consent of all partners to dissolve the Legal Entity; or
4. Other reasons as provided in the prevailing laws and regulations.
The Legal Entity which has been registered before the enactment of the MOLHR Reg 17/2018, should make registration to the MOLHR at the latest 1 (one) year as of the date of the enactment of the MOLHR Reg 17/2018 i.e.12 July 2019. However, according to information from some notaries, the requirements have not been fully implemented due to transition of other business licenses application through the OSS System.
Online Single Submission (OSS) System – New Regime of Business Licensing Process in Indonesia
Overview
A big movement to simplify licensing process in Indonesia was made by the Government of Indonesia (“GOI”). The OSS System was launched in the mid of July under the Governmental Regulation Number 24 of 2018 on Online Integrated Business License (“GR 24/2018”).
The Online Single Submission (OSS) System significantly shifted the government’s responsibility to monitor compliance of companies to companies who are expected to be more proactive to fulfill all licensing requirements to conduct their business activities.
Registration
The OSS System applies to individual and non-individual businesses. It means that local companies (PT Lokal), foreign investment companies (PT PMA), foundation (yayasan), firm (firma or CV), etc. should be registered in the OSS System.
The registration in the OSS System is not immediately required for the existing licensed businesses. In case of licenses renewal or new application for business licenses, companies must be registered and then proceed the application through the OSS System. Meanwhile, new businesses is required to register with the OSS System.
New Business Licenses
Principally, there are 3 (three) licenses that should be obtained by Indonesia companies through the OSS System:
1. Business Identity Number (Nomor Induk Berusaha - NIB)
Upon registration in the OSS System, companies shall obtain a Business Identity Number (Nomor Induk Berusaha - NIB). The NIB shall now serve as the Company Registration Certificate (TDP), the Importer Identification Number (API) and the customs access right (Hak Akses Kepabeanan). It will be valid for as long as companies run their business.
2. Business License (Izin Usaha)
After obtaining the NIB, companies must apply for Business License (Izin Usaha). Business License shall be granted if companies have fulfilled their commitment listed in the OSS System such as Location Permit (Izin Lokasi), Aquatic Location Permit (Izin Lokasi Perairan), Environmental Licenses (Izin Lingkungan) and/or Building Construction Permit (IMB).
Business License shall apply in all regions of Indonesia. Once it is obtained, companies may conduct land procurement, expansion, building construction, hiring workers, commissioning and/or production. Similar with NIB, this license will be valid for as long as the business is in operation.
3. Commercial License (Izin Komersial)
Before selling products and/or services to the market, companies must obtain Commercial License (Izin Komersial). At this stage, companies must fulfill commitments to obtain standard, certification and/or licenses and/or registration of their products and/or services. Validity of this Commercial License is specifically stipulated in the laws and regulations governing such license.
The OSS System is a self-assessment concept where failing to fulfill the agreed commitments in the OSS System shall lead to suspension of business activities or revocation of business licenses. The relevant departments which have been linked through the OSS System shall monitor companies’ responsibility to their commitments.
Other Compliances
The OSS System is basically the platform for business licensing process, while reporting requirements, such as Investment Report (LKPM) and representative office reports, are still under supervision of the Investment Coordinating Board (BKPM). To avoid any sanctions of non-compliance, companies must keep themselves updated with new compliance/reporting requirements from the relevant departments.
KSP Law Office can assist clients to apply NIB, Business License and Commercial License through the OSS System, please call us at +6221 3972 2042 or drop us an email at mail@ksplaw.co.id.
Read MoreA big movement to simplify licensing process in Indonesia was made by the Government of Indonesia (“GOI”). The OSS System was launched in the mid of July under the Governmental Regulation Number 24 of 2018 on Online Integrated Business License (“GR 24/2018”).
The Online Single Submission (OSS) System significantly shifted the government’s responsibility to monitor compliance of companies to companies who are expected to be more proactive to fulfill all licensing requirements to conduct their business activities.
Registration
The OSS System applies to individual and non-individual businesses. It means that local companies (PT Lokal), foreign investment companies (PT PMA), foundation (yayasan), firm (firma or CV), etc. should be registered in the OSS System.
The registration in the OSS System is not immediately required for the existing licensed businesses. In case of licenses renewal or new application for business licenses, companies must be registered and then proceed the application through the OSS System. Meanwhile, new businesses is required to register with the OSS System.
New Business Licenses
Principally, there are 3 (three) licenses that should be obtained by Indonesia companies through the OSS System:
1. Business Identity Number (Nomor Induk Berusaha - NIB)
Upon registration in the OSS System, companies shall obtain a Business Identity Number (Nomor Induk Berusaha - NIB). The NIB shall now serve as the Company Registration Certificate (TDP), the Importer Identification Number (API) and the customs access right (Hak Akses Kepabeanan). It will be valid for as long as companies run their business.
2. Business License (Izin Usaha)
After obtaining the NIB, companies must apply for Business License (Izin Usaha). Business License shall be granted if companies have fulfilled their commitment listed in the OSS System such as Location Permit (Izin Lokasi), Aquatic Location Permit (Izin Lokasi Perairan), Environmental Licenses (Izin Lingkungan) and/or Building Construction Permit (IMB).
Business License shall apply in all regions of Indonesia. Once it is obtained, companies may conduct land procurement, expansion, building construction, hiring workers, commissioning and/or production. Similar with NIB, this license will be valid for as long as the business is in operation.
3. Commercial License (Izin Komersial)
Before selling products and/or services to the market, companies must obtain Commercial License (Izin Komersial). At this stage, companies must fulfill commitments to obtain standard, certification and/or licenses and/or registration of their products and/or services. Validity of this Commercial License is specifically stipulated in the laws and regulations governing such license.
The OSS System is a self-assessment concept where failing to fulfill the agreed commitments in the OSS System shall lead to suspension of business activities or revocation of business licenses. The relevant departments which have been linked through the OSS System shall monitor companies’ responsibility to their commitments.
Other Compliances
The OSS System is basically the platform for business licensing process, while reporting requirements, such as Investment Report (LKPM) and representative office reports, are still under supervision of the Investment Coordinating Board (BKPM). To avoid any sanctions of non-compliance, companies must keep themselves updated with new compliance/reporting requirements from the relevant departments.
KSP Law Office can assist clients to apply NIB, Business License and Commercial License through the OSS System, please call us at +6221 3972 2042 or drop us an email at mail@ksplaw.co.id.
Indonesia National Single Window
In late May 2018, the President of the Republic of Indonesia, Joko Widodo, signed the President Regulation Number 44 of 2018 on Indonesia National Single Window (INSW). An integrated system for submitting and processing data and information and granting single decision related to import and export activities is essentially required in Indonesia to maintain the sustainability of the implementation of the Indonesian economy.
INSW can be accessed through this link Indonesia National Single Window (INSW). Ministry of Finance shall be in charge for maintaining this port which basically coordinate 15 ministries/departments and 18 license issuing authorities.
Some import and export licenses can be applied through INSW such as customs documents, quarantine documents, licensing documents, port/airport documents and other import and/or export related documents.
INSW portal is made in bilingual version, Indonesian and English version. To use this portal, INSW users must have access rights that can be done through INSW website, Portal User Registration. Article 7 of the Regulation firmly requires that all data and information submitted to INSW are true and valid.
Another important point in this regulation is the requirement to build an audit record of all activities done through INSW portal by the INSW portal users. In case of discrepancy, audit record of INSW portal shall be the basis for tracking. INSW is also equipped with ‘Tracking’ menu to trace Pemberitahuan Impor Barang - PIB, Pemberitahuan Ekspor Barang - PEB, e-Form D, licensing and recommendations. Meanwhile, INSW portal users can be charged some fees for using INSW portal.
For further information on import and export license, please drop us an email at mail@ksplaw.co.id.
Read MoreINSW can be accessed through this link Indonesia National Single Window (INSW). Ministry of Finance shall be in charge for maintaining this port which basically coordinate 15 ministries/departments and 18 license issuing authorities.
Some import and export licenses can be applied through INSW such as customs documents, quarantine documents, licensing documents, port/airport documents and other import and/or export related documents.
INSW portal is made in bilingual version, Indonesian and English version. To use this portal, INSW users must have access rights that can be done through INSW website, Portal User Registration. Article 7 of the Regulation firmly requires that all data and information submitted to INSW are true and valid.
Another important point in this regulation is the requirement to build an audit record of all activities done through INSW portal by the INSW portal users. In case of discrepancy, audit record of INSW portal shall be the basis for tracking. INSW is also equipped with ‘Tracking’ menu to trace Pemberitahuan Impor Barang - PIB, Pemberitahuan Ekspor Barang - PEB, e-Form D, licensing and recommendations. Meanwhile, INSW portal users can be charged some fees for using INSW portal.
For further information on import and export license, please drop us an email at mail@ksplaw.co.id.
Coal Sale Price For The Supply of Electricity For The Public Interest
To anticipate fluctuation of the Indonesia’s Coal Reference Price (Harga Batubara Acuan - HBA) which reached USD 101.86 per metric ton in March 2018 and significantly affect the production cost of Indonesian State Electricity Company (Perusahaan Listrik Negara – PLN), the Ministry of Energy and Mineral Resources (MEMR) enacted MEMR Decree No. 1395 K/30/MEM/2018 dated 9 March 2018 on the Coal Sale Price for the Supply of Electricity for the Public Interest (“MEMR 1395”).
The main point in the MEMR 1395 is the coal sale price for the supply of public electricity at USD 70 per metric ton free on board (FOB), with specification of the calories of 6,322kcal/kg GAR, total moisture of 8%, total Sulphur of 0.8%, and ash 15%.
In case of the prevailing HBA is equal to or greater than USD 70, the MEMR 1395 price of USD 70 shall apply. Otherwise, if the HBA is lower than USD 70, the calculation shall refer to the prevailing HBA. The formulations to calculate the coal sale price are provided in the attachment of the MEMR 1395.
HBA is updated on monthly basis and the latest version can be found in MEMR Decree Number 1812 K/30/MEM/2018 on Reference Prices for Coal and Metal Mineral of May 2018.
The MEMR 1395 point 4 stipulates the royalty that should be paid by the holder Operation Production Mining Business License (IUP OP), Specific Operation Production Mining Business License (IUPK OP), Coal Contract of Work (Perjanjian Karya Batubara). If the HBA is equal to or higher than USD 70, the royalty shall refer to the actual coal sale price (Harga Jual). Otherwise, the calculation shall refer to the Indonesian Coal Benchmark Price (Harga Patokan Batubara – HPB).
The Government of Indonesia shall provide an incentive for any coal producer in the form of a 10% increase of production if they fulfill the domestic market obligation as stipulated under MEMR Decree No. 23 K/30/MEM/2018. This Decree require 25% of total coal production to be distributed to domestic market before being imported.
In light of the maximum sale volume, the MEMR 1395 provides maximum of 100 million metric tons per year that is allowed to be supplied to the Indonesian State Electricity Company or other Independent Power Producers (IPPs).
Although the MEMR 1395 was initially intended to be applied retroactively from 1 January 2018, the MEMR later amend its effective date through MEMR Decree No. 1410K/30/MEM/2018 dated 12 March 2018 due to financial administration issue. Therefore, the MEMR 1395 shall take into effect as of 12 March 2018.
Read MoreThe main point in the MEMR 1395 is the coal sale price for the supply of public electricity at USD 70 per metric ton free on board (FOB), with specification of the calories of 6,322kcal/kg GAR, total moisture of 8%, total Sulphur of 0.8%, and ash 15%.
In case of the prevailing HBA is equal to or greater than USD 70, the MEMR 1395 price of USD 70 shall apply. Otherwise, if the HBA is lower than USD 70, the calculation shall refer to the prevailing HBA. The formulations to calculate the coal sale price are provided in the attachment of the MEMR 1395.
HBA is updated on monthly basis and the latest version can be found in MEMR Decree Number 1812 K/30/MEM/2018 on Reference Prices for Coal and Metal Mineral of May 2018.
The MEMR 1395 point 4 stipulates the royalty that should be paid by the holder Operation Production Mining Business License (IUP OP), Specific Operation Production Mining Business License (IUPK OP), Coal Contract of Work (Perjanjian Karya Batubara). If the HBA is equal to or higher than USD 70, the royalty shall refer to the actual coal sale price (Harga Jual). Otherwise, the calculation shall refer to the Indonesian Coal Benchmark Price (Harga Patokan Batubara – HPB).
The Government of Indonesia shall provide an incentive for any coal producer in the form of a 10% increase of production if they fulfill the domestic market obligation as stipulated under MEMR Decree No. 23 K/30/MEM/2018. This Decree require 25% of total coal production to be distributed to domestic market before being imported.
In light of the maximum sale volume, the MEMR 1395 provides maximum of 100 million metric tons per year that is allowed to be supplied to the Indonesian State Electricity Company or other Independent Power Producers (IPPs).
Although the MEMR 1395 was initially intended to be applied retroactively from 1 January 2018, the MEMR later amend its effective date through MEMR Decree No. 1410K/30/MEM/2018 dated 12 March 2018 due to financial administration issue. Therefore, the MEMR 1395 shall take into effect as of 12 March 2018.
Indonesia Investment Realization Report Quarter I 2018
The Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal - BKPM) recently released the First Quarterly Investment Realization Report 2018. The result is pretty impressive, Domestic Direct Investment (DDI) and Foreign Direct Investment (FDI) reach significant increase of IDR 185.3 Trillion, grew at 11,8% compared to the same period in 2017.
The BKPM is very optimistic to reach the 2018 national target of IDR 765 trillion. The Government of Indonesia (GOI) also fully support it by issuing some regulations such as Presidential Regulation Number 20 of 2018 (“Reg 20/2018”) to simplify working permit procedure and Presidential Regulation Number 91 of 2017 to simplify investment license procedure. The Reg 20/2018 is particularly expected to improve number of job opportunities, whereby the current direct investments has successfully absorbed 201,239 Indonesian jobseekers.
In terms of investment destination, West Java is still the favorite location for DDI and FDI with the realization of IDR 37 trillion (19.9% of total realization), followed by Special Territory of Jakarta (IDR 28.9 trillion), Central Java (IDR 16.1 trillion) and other cities. It is widely known that many multinational companies establish their factories and the GOI build several toll roads, seaports and airport in West Java.
Real Estate, Industrial Estate and Office Building sector still lead the top three industries in the Quarter I 2018 with IDR 27.6 trillion or equal to 14.9% of total investment, while Metal, Machinery and Electronic Industry and Electricity, Gas and Water Supply are respectively on the second and third rank with IDR 22.7 trillion and IDR 19.3 trillion.
Another strategy of the GOI to improve the investment climate is by issuing new tax holidays regulation under The Minister of Finance Regulation No. 35/MK.010/2018 on Granting of Corporate Income Tax Reduction Facility. It is definitely an interesting package for investors from other countries which is now leaded by Singapore (USD 2.6 billion, 32.6%); Japan (USD 1.4 billion, 16.7%); South Korea (USD 0.9 billion, 11.6%); People’s Republic of China (USD 0.7 billion, 8.3%); and Hong Kong (USD 0.5 billion, 6.3%).
Read MoreThe BKPM is very optimistic to reach the 2018 national target of IDR 765 trillion. The Government of Indonesia (GOI) also fully support it by issuing some regulations such as Presidential Regulation Number 20 of 2018 (“Reg 20/2018”) to simplify working permit procedure and Presidential Regulation Number 91 of 2017 to simplify investment license procedure. The Reg 20/2018 is particularly expected to improve number of job opportunities, whereby the current direct investments has successfully absorbed 201,239 Indonesian jobseekers.
In terms of investment destination, West Java is still the favorite location for DDI and FDI with the realization of IDR 37 trillion (19.9% of total realization), followed by Special Territory of Jakarta (IDR 28.9 trillion), Central Java (IDR 16.1 trillion) and other cities. It is widely known that many multinational companies establish their factories and the GOI build several toll roads, seaports and airport in West Java.
Real Estate, Industrial Estate and Office Building sector still lead the top three industries in the Quarter I 2018 with IDR 27.6 trillion or equal to 14.9% of total investment, while Metal, Machinery and Electronic Industry and Electricity, Gas and Water Supply are respectively on the second and third rank with IDR 22.7 trillion and IDR 19.3 trillion.
Another strategy of the GOI to improve the investment climate is by issuing new tax holidays regulation under The Minister of Finance Regulation No. 35/MK.010/2018 on Granting of Corporate Income Tax Reduction Facility. It is definitely an interesting package for investors from other countries which is now leaded by Singapore (USD 2.6 billion, 32.6%); Japan (USD 1.4 billion, 16.7%); South Korea (USD 0.9 billion, 11.6%); People’s Republic of China (USD 0.7 billion, 8.3%); and Hong Kong (USD 0.5 billion, 6.3%).
New Presidential Regulation on Use of Foreign Workers
In consideration of improving national economic and creating more job opportunities, the Government of Indonesia (GOI) enacted Presidential Regulation Number 20 of 2018 on Use of Foreign Workers (“Reg 20/2018”). The Reg 20/2018 shall force into effect 3 (three) months after its promulgation or since 26 June 2018.
There are some pros and cons to the Reg 20/2018 which can be seen from different perspectives. From government perspectives, the Reg 20/2018 is definitely aimed to attract and boost foreign direct investment (FDI) to Indonesia with the tagline of ‘more investment, more job opportunities’. This is based on the facts from the Indonesian Investment Coordinating Board that FDI created more than million job opportunities and only 2% occupied by foreign workers.
It is worth noting that the Reg 20/2018 only simplify the previous complicated procedures, instead of lowering the requirements to obtain working and stay permits. By doing so, the GOI expects to reduce high administration costs and eliminate unofficial fees.
On the other hand, many Indonesian workers and some labor organization contended that the Reg 20/2018 shall widely open job market in Indonesia to foreign workers. As a consequence, Indonesian workers shall not be able to compete with foreign workers and loss their jobs. Their most concern is on the invasion of unskilled foreign workers who does not meet the criteria to work in Indonesia.
Furthermore, some provisions in the Reg 20/2018 contradict with Law Number 13 of 2003 on Employment. For instance, foreign workers whose skills are needed by the GOI, should not be required to obtain working permit, but the definition of the skills is not clearly stipulated in the Reg 20/2018.
Some key changes in the Reg 20/2018 that should be taken into account are as follows:
1. In case of certain function does not fit to the Indonesian workers, it could be occupied by foreign workers. For instance, an oil and gas company requires a machine operator for new drilling oil technologies, thus it may hire foreign workers with the required skills.
2. Foreign workers are specifically prohibited from occupying positions of authority in human resources and/or particular function as determined by the Ministry of Manpower.
3. Employer of foreign workers in specific sector may employ foreign workers who are already hired by other employer in the same position. Their term of office shall be according to terms in the employment contract with their previous employer.
4. To be able to work in Indonesia, foreign workers are only required to obtain Expatriate Manpower Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing - RPTKA). The Working Permit (Izin Mempekerjakan Tenaga Asing - IMTA) is now removed from the procedure of obtaining working permit. The information in the RPTKA shall include reasons of employing the foreign workers; position of the foreign workers in the company’s structure; term of office of the foreign workers; and appointment of Indonesian worker as a co-worker for a foreign worker.
5. Foreign workers who hold shareholder, director or commissioner position is not required to have RPTKA. This provision completely simplify the previous procedure which require RPTKA and IMTA for these positions.
6. For emergency and urgent works, employer of foreign workers may employ the foreign workers without firstly obtaining RPTKA. However, the application of obtaining RPTKA should be submitted not later than 2 (two) days since their first day of work.
7. Employer of foreign workers should pay compensation fees for every foreign workers employed to the GOI as a non-tax states revenue. It does not apply for foreign government officials and its representative or international agency which employ foreign workers.
8. Other license for foreign workers is Limited Stay Visa (Visa Izin Tinggal Terbatas - VITAS) and Limited Stay Permit (Izin Tinggal Terbatas - ITAS). Both can be applied at the Indonesian Embassy/Consulate overseas, while collection of ITAS should be done at the Immigration office in Indonesia. ITAS shall be valid for 2 (two) years and can be extended.
9. Every foreign workers who work for more than 6 (six) months should be insured with Indonesian Employee’s Social Security and/or private insurance organized by Indonesian insurance companies.
10. Employer of foreign workers is obliged to provide training and education to Indonesian workers according to the position held by such foreign workers. Further, the foreign workers should learn Indonesian language. These provisions does not apply for director and/or commissioner positions.
Despite the above pros and cons, the development skills of Indonesian workers should be improved since the high school level. Vocational education could be an alternative solution for Indonesian to compete with foreign workers in strategic sectors in the country such as maritime, electronics, shipping, agriculture and manufacturing sectors. Additionally, private sectors are expected to build learning center for knowledge transfer purposes, particularly on using high technology equipment.
Read MoreThere are some pros and cons to the Reg 20/2018 which can be seen from different perspectives. From government perspectives, the Reg 20/2018 is definitely aimed to attract and boost foreign direct investment (FDI) to Indonesia with the tagline of ‘more investment, more job opportunities’. This is based on the facts from the Indonesian Investment Coordinating Board that FDI created more than million job opportunities and only 2% occupied by foreign workers.
It is worth noting that the Reg 20/2018 only simplify the previous complicated procedures, instead of lowering the requirements to obtain working and stay permits. By doing so, the GOI expects to reduce high administration costs and eliminate unofficial fees.
On the other hand, many Indonesian workers and some labor organization contended that the Reg 20/2018 shall widely open job market in Indonesia to foreign workers. As a consequence, Indonesian workers shall not be able to compete with foreign workers and loss their jobs. Their most concern is on the invasion of unskilled foreign workers who does not meet the criteria to work in Indonesia.
Furthermore, some provisions in the Reg 20/2018 contradict with Law Number 13 of 2003 on Employment. For instance, foreign workers whose skills are needed by the GOI, should not be required to obtain working permit, but the definition of the skills is not clearly stipulated in the Reg 20/2018.
Some key changes in the Reg 20/2018 that should be taken into account are as follows:
1. In case of certain function does not fit to the Indonesian workers, it could be occupied by foreign workers. For instance, an oil and gas company requires a machine operator for new drilling oil technologies, thus it may hire foreign workers with the required skills.
2. Foreign workers are specifically prohibited from occupying positions of authority in human resources and/or particular function as determined by the Ministry of Manpower.
3. Employer of foreign workers in specific sector may employ foreign workers who are already hired by other employer in the same position. Their term of office shall be according to terms in the employment contract with their previous employer.
4. To be able to work in Indonesia, foreign workers are only required to obtain Expatriate Manpower Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing - RPTKA). The Working Permit (Izin Mempekerjakan Tenaga Asing - IMTA) is now removed from the procedure of obtaining working permit. The information in the RPTKA shall include reasons of employing the foreign workers; position of the foreign workers in the company’s structure; term of office of the foreign workers; and appointment of Indonesian worker as a co-worker for a foreign worker.
5. Foreign workers who hold shareholder, director or commissioner position is not required to have RPTKA. This provision completely simplify the previous procedure which require RPTKA and IMTA for these positions.
6. For emergency and urgent works, employer of foreign workers may employ the foreign workers without firstly obtaining RPTKA. However, the application of obtaining RPTKA should be submitted not later than 2 (two) days since their first day of work.
7. Employer of foreign workers should pay compensation fees for every foreign workers employed to the GOI as a non-tax states revenue. It does not apply for foreign government officials and its representative or international agency which employ foreign workers.
8. Other license for foreign workers is Limited Stay Visa (Visa Izin Tinggal Terbatas - VITAS) and Limited Stay Permit (Izin Tinggal Terbatas - ITAS). Both can be applied at the Indonesian Embassy/Consulate overseas, while collection of ITAS should be done at the Immigration office in Indonesia. ITAS shall be valid for 2 (two) years and can be extended.
9. Every foreign workers who work for more than 6 (six) months should be insured with Indonesian Employee’s Social Security and/or private insurance organized by Indonesian insurance companies.
10. Employer of foreign workers is obliged to provide training and education to Indonesian workers according to the position held by such foreign workers. Further, the foreign workers should learn Indonesian language. These provisions does not apply for director and/or commissioner positions.
Despite the above pros and cons, the development skills of Indonesian workers should be improved since the high school level. Vocational education could be an alternative solution for Indonesian to compete with foreign workers in strategic sectors in the country such as maritime, electronics, shipping, agriculture and manufacturing sectors. Additionally, private sectors are expected to build learning center for knowledge transfer purposes, particularly on using high technology equipment.
Indonesian Companies Must Report Their Beneficial Owners
The Presidential Regulation Number 13 of 2018 on the Implementation of the Principle of Knowing Beneficial Owners of Corporations in Relation to the Prevention and Eradication of Money Laundering and Terrorism Financing Crimes ("Reg 13/2018”) was recently enacted.
As required under the Reg 13/2018, a limited liability company should determine its beneficial owner. A limited liability company defines as local and foreign investment companies. Given this definition, the Reg 13/2018 also indirectly support the prohibition of nominee arrangement for a foreign investment company as set forth Article 12.7 of the Head of BKPM Regulation Number 13 of 2017.
The following are criteria of being considered as a beneficial owner:
1. Possessing more than 25% (twenty five percent) of the shares in the company as set forth in its articles of association.
2. Possessing more than 25% (twenty five percent) of the voting rights in the company as set forth in the articles of association.
3. Receiving more than 25% of the profits earned annually by the company.
4. Having authority to appoint, replace or dismiss members of the board of directors and board of commissioners of the company.
5. Having authority or power to influence or control the company without the need to obtain authorization from any party.
6. Receiving benefits from the company.
7. The beneficial owner is the actual owner of the fund used to subscribe the shares of the company.
Otherwise, the Authorized institutions are also entitled to determine other beneficial owner based on their audit result, information from government or private departments who are maintaining such beneficial owner’s information or other reliable information.
The Authorized Institutions is defined as central or local government institutions that have authority over registration, ratification, approval, notification, business license or dissolution of company; and Institutions that have authority to monitor and regulate corporation businesses.
Another obligation of a company is to appoint an officer or employee to implement the principle of knowing the beneficial owners and provide beneficial owners’ information based on request from the Authorized Institutions. In addition, a company should report the updated beneficial owners’ information to the Authorized Institutions.
A company must report beneficial owners’ information when it applies for establishment, registration, ratification, approval or business license; or for any changes or updates. The reporting can be done by the management of the company, a notary or a proxy.
Meanwhile, the Reg 13/2018 stipulates minimum beneficial owners’ information i.e. name; identity card/passport/driving license number; date and place of birth; citizenship; complete address as stated in the identity card, country of origin if foreigners; tax ID number and explanation on relationship between the company and the beneficial owner.
In light of the sanction of failing to comply with the Reg 13/2018, it is still unclear on what laws and regulations the Reg 13/2018 is referring to. However, it could refer to the laws and regulations issued by other authorities which have basically the same purpose such as Minister of Law and Human Rights Regulation No. 9 of 2017 on the Principle of Knowing the Service Users for Notaries or OJK Rule No. 11/POJK.04/2017 on Reporting of Share Ownership in Public Companies.
Read MoreAs required under the Reg 13/2018, a limited liability company should determine its beneficial owner. A limited liability company defines as local and foreign investment companies. Given this definition, the Reg 13/2018 also indirectly support the prohibition of nominee arrangement for a foreign investment company as set forth Article 12.7 of the Head of BKPM Regulation Number 13 of 2017.
The following are criteria of being considered as a beneficial owner:
1. Possessing more than 25% (twenty five percent) of the shares in the company as set forth in its articles of association.
2. Possessing more than 25% (twenty five percent) of the voting rights in the company as set forth in the articles of association.
3. Receiving more than 25% of the profits earned annually by the company.
4. Having authority to appoint, replace or dismiss members of the board of directors and board of commissioners of the company.
5. Having authority or power to influence or control the company without the need to obtain authorization from any party.
6. Receiving benefits from the company.
7. The beneficial owner is the actual owner of the fund used to subscribe the shares of the company.
Otherwise, the Authorized institutions are also entitled to determine other beneficial owner based on their audit result, information from government or private departments who are maintaining such beneficial owner’s information or other reliable information.
The Authorized Institutions is defined as central or local government institutions that have authority over registration, ratification, approval, notification, business license or dissolution of company; and Institutions that have authority to monitor and regulate corporation businesses.
Another obligation of a company is to appoint an officer or employee to implement the principle of knowing the beneficial owners and provide beneficial owners’ information based on request from the Authorized Institutions. In addition, a company should report the updated beneficial owners’ information to the Authorized Institutions.
A company must report beneficial owners’ information when it applies for establishment, registration, ratification, approval or business license; or for any changes or updates. The reporting can be done by the management of the company, a notary or a proxy.
Meanwhile, the Reg 13/2018 stipulates minimum beneficial owners’ information i.e. name; identity card/passport/driving license number; date and place of birth; citizenship; complete address as stated in the identity card, country of origin if foreigners; tax ID number and explanation on relationship between the company and the beneficial owner.
In light of the sanction of failing to comply with the Reg 13/2018, it is still unclear on what laws and regulations the Reg 13/2018 is referring to. However, it could refer to the laws and regulations issued by other authorities which have basically the same purpose such as Minister of Law and Human Rights Regulation No. 9 of 2017 on the Principle of Knowing the Service Users for Notaries or OJK Rule No. 11/POJK.04/2017 on Reporting of Share Ownership in Public Companies.
New 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.
Read MoreThe 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.