KSP Legal Updates
New Government Regulation on Bringing Cash and/or Other Payment Instruments Into or Out of Indonesia Customs Area
As part of the Government of Indonesia (“GOI”)’s commitment in combating money laundering activities, the GOI finished the year of 2016 by enacting Government Regulation Number 99 of 2016 on Bringing Cash and/or Other Payment Instruments Into or Out of Indonesia Customs Area (“GR 99/2016”). The GR 99/2016 is mandated by Article 36 of Law Number 8 of 2010 on Prevention and Suppression of Money Laundering Activities.
The GR 99/2016 defines the other payment instruments are giro, checks, travel checks, promissory note and deposit certificates, while cash refers to Indonesian Rupiah and/or foreign currencies. The customs officers have full authority to interview or doing hand inspection or inspection to any individual’s belongings.
Article 2 of the GR 99/2016 stipulates that any individual bringing cash and/or other payment instruments exceeding IDR 100.000.000 (one hundred million Indonesian Rupiah) is required to declare it to the customs officers by filling out the form. In particular, any cash and/or other payment instruments exceeding such requirement and leaving Indonesia territory must be accompanied by the approval from Bank Indonesia.
Fines of 10% of the total cash and/or other payment instruments or maximum of IDR 300.0000.000 (three hundred million Indonesian Rupiah) apply to any individual bringing the cash as meant in Article 2 of the GR 99/2016 without declaring it.
Further, if the declared amount of cash is smaller than the actual cash, an individual shall be fined by 10% of the excess of actual cash and/or other payment instruments or by maximum fines of IDR 300.0000.000 (three hundred million Indonesian Rupiah).
These fines should be paid from the cash brought by the individual right on the spot. In terms of other payment instruments, fines shall be calculated from the amount stated in such instruments and be made at the latest 5 (five) working days as of the notification date from the customs officers.
Read MoreThe GR 99/2016 defines the other payment instruments are giro, checks, travel checks, promissory note and deposit certificates, while cash refers to Indonesian Rupiah and/or foreign currencies. The customs officers have full authority to interview or doing hand inspection or inspection to any individual’s belongings.
Article 2 of the GR 99/2016 stipulates that any individual bringing cash and/or other payment instruments exceeding IDR 100.000.000 (one hundred million Indonesian Rupiah) is required to declare it to the customs officers by filling out the form. In particular, any cash and/or other payment instruments exceeding such requirement and leaving Indonesia territory must be accompanied by the approval from Bank Indonesia.
Fines of 10% of the total cash and/or other payment instruments or maximum of IDR 300.0000.000 (three hundred million Indonesian Rupiah) apply to any individual bringing the cash as meant in Article 2 of the GR 99/2016 without declaring it.
Further, if the declared amount of cash is smaller than the actual cash, an individual shall be fined by 10% of the excess of actual cash and/or other payment instruments or by maximum fines of IDR 300.0000.000 (three hundred million Indonesian Rupiah).
These fines should be paid from the cash brought by the individual right on the spot. In terms of other payment instruments, fines shall be calculated from the amount stated in such instruments and be made at the latest 5 (five) working days as of the notification date from the customs officers.
New Government Regulation on The Implementation of Mining and Mineral Business Activities
The fourth amendment on the implementation of mineral and coal mining business activities was promulgated by the Government of Indonesia (the “GOI”) on 11 January 2017 through the Government Regulation Number 1 of 2017 (the “GR 1/2017”).
Three main issues are amended in the GR 1/2017 as follow:
1. Time Limit to Apply for Extension of Mining Business License (“IUP”).
The GOI requires the application for the extension of the Operation Production IUP (“IUP OP”) to be submitted no earlier than 5 (five) years and at the latest 1 (one) year prior to the expiration of such IUP OP, while the Special Operation Production IUP (“IUPK OP”) application can be submitted no earlier than 2 (two) years and at the latest 6 (six) months prior to the expiration of such IUPK OP.
2. Share Divestment
Compared to the previous government regulation, the GR 1/2017 by the GOI made some significant changes on share divestment matter.
Firstly, all IUP and IUPK holders are obliged to divest their shares after five years of production, so that the Indonesian party, either the GOI, regional government, municipal or regency government, state-owned and regional-owned enterprises or local private business entities, holds at least 51% (fifty one percent) of the total shares.
The Indonesian party share participation shall be performed gradually as follows:
This provision eliminates the previous share divestment classification for IUP OP or IUPK OP with smelting and refinery operations (maximum of 60% (sixty percent) of the total shares on the fifteenth year of production) and underground mining and/or open pit mining activities (maximum of 70% (seventy percent) of the total shares on the tenth year of production).
In addition, ambiguity arises when the IUP OP holders for smelting and/or refinery is also obliged to divest their shares, while the GR 1/2017 provides the time limit of share divestment is starting after 5 (five) years of mining stage.
Meanwhile, the GR 1/2017 clarifies the timeframe of share divestment i.e. 90 (ninety) calendar days after 5 (five) years of ‘the issuance date of IUP OP or IUPK OP’, instead of ‘actual production’ as provided in the previous government regulation.
3. Contact of Work (“COW”) (Kontrak Karya)
Although the GR 1/2017 prohibits export of processed minerals, the Minister of Energy and Mineral Resources (“MEMR“) Regulation Number 6 of 2017 regarding the Procedure to Issue a Recommendation for the Export of Processed and Refined Minerals (“MEMR Reg 5/2017”) specifically allows this activity until 11 January 2022.
However, some requirements should firstly be fulfilled by the COW holder under the MEMR Reg 5/2017:
a. meeting the minimum quality of processing as determined in Attachment I of the MEMR Reg 5/2017;
b. converting COW to IUPK OP;
c. paying export duty; and
d. obtaining export recommendation letter from the MEMR and export approval letter from the Ministry of Trade.
The GR 1/2017 and the MEMR Reg 5/2017 lead to a mandatory for the COW holders to convert its license to IUPK OP and subject to the terms and conditions of IUPK OP regime. Once it is converted all provisions in the COW shall become null and void. Otherwise, the COW holders are still able to mine until expiration of the COW without being able to export the processed minerals.
Read MoreThree main issues are amended in the GR 1/2017 as follow:
1. Time Limit to Apply for Extension of Mining Business License (“IUP”).
The GOI requires the application for the extension of the Operation Production IUP (“IUP OP”) to be submitted no earlier than 5 (five) years and at the latest 1 (one) year prior to the expiration of such IUP OP, while the Special Operation Production IUP (“IUPK OP”) application can be submitted no earlier than 2 (two) years and at the latest 6 (six) months prior to the expiration of such IUPK OP.
2. Share Divestment
Compared to the previous government regulation, the GR 1/2017 by the GOI made some significant changes on share divestment matter.
Firstly, all IUP and IUPK holders are obliged to divest their shares after five years of production, so that the Indonesian party, either the GOI, regional government, municipal or regency government, state-owned and regional-owned enterprises or local private business entities, holds at least 51% (fifty one percent) of the total shares.
The Indonesian party share participation shall be performed gradually as follows:
This provision eliminates the previous share divestment classification for IUP OP or IUPK OP with smelting and refinery operations (maximum of 60% (sixty percent) of the total shares on the fifteenth year of production) and underground mining and/or open pit mining activities (maximum of 70% (seventy percent) of the total shares on the tenth year of production).
In addition, ambiguity arises when the IUP OP holders for smelting and/or refinery is also obliged to divest their shares, while the GR 1/2017 provides the time limit of share divestment is starting after 5 (five) years of mining stage.
Meanwhile, the GR 1/2017 clarifies the timeframe of share divestment i.e. 90 (ninety) calendar days after 5 (five) years of ‘the issuance date of IUP OP or IUPK OP’, instead of ‘actual production’ as provided in the previous government regulation.
3. Contact of Work (“COW”) (Kontrak Karya)
Although the GR 1/2017 prohibits export of processed minerals, the Minister of Energy and Mineral Resources (“MEMR“) Regulation Number 6 of 2017 regarding the Procedure to Issue a Recommendation for the Export of Processed and Refined Minerals (“MEMR Reg 5/2017”) specifically allows this activity until 11 January 2022.
However, some requirements should firstly be fulfilled by the COW holder under the MEMR Reg 5/2017:
a. meeting the minimum quality of processing as determined in Attachment I of the MEMR Reg 5/2017;
b. converting COW to IUPK OP;
c. paying export duty; and
d. obtaining export recommendation letter from the MEMR and export approval letter from the Ministry of Trade.
The GR 1/2017 and the MEMR Reg 5/2017 lead to a mandatory for the COW holders to convert its license to IUPK OP and subject to the terms and conditions of IUPK OP regime. Once it is converted all provisions in the COW shall become null and void. Otherwise, the COW holders are still able to mine until expiration of the COW without being able to export the processed minerals.
Indonesian Corporate Crime Law
The Indonesian Supreme Court recently enacted Supreme Court Regulation Number 13 of 2016 regarding Procedure to Handle Corporate Crime (the “Regulation”).
The Regulation is fundamentally needed for the law enforcement officers in preparing summons or indictment with light of corporate crime as the Indonesian Criminal Procedure Code does not recognize the existence of a legal entity as a subject of law.
The Regulation defines the category of corporate crime as follows:
a. company earns profits or benefits from corporate criminal act or such act is undertaken for interest of the company;
b. company allows criminal act;
c. company does not carry out necessary measures to do a deterrence act, to prevent bigger impact and to comply with the prevailing laws to avoid the occurrence of criminal act.
Further, the Regulation covers any corporate criminal acts due to merger, consolidation, separation and liquidation. A company is required to proportionally liable against criminal act limited to the value of shares, properties or assets contributed in the surviving company.
In case of a company is in the liquidation process, its criminal liability shall remain in the company and not legally null and void. If a criminal act is committed after the liquidation process complete, then creditors or any related party may sue the former board of the company or its heirs on the assets which are allegedly used for such criminal acts.
A company shall be represented by its board provided that the board which represents the company in the investigation at police level is obliged to attend the investigation in court level. In terms of the authentication system, it still refers to the system applied in the Indonesian Criminal Procedure Code. Any statement from company shall be regarded as valid evidence.
Any loss suffered by the victim of corporate crime can be claimed through restitution mechanism by submitting civil law suit to the court. Meanwhile, criminal sanction to a company can take the form of monetary fines and additional criminal sanctions such as compensation or revocation of company’s business license.
Having the Regulation in place, the law enforcement officers are currently not only able to prosecute the board of company which breaks the laws. Importantly, they are authorized to penalize the company to pay sum of money, as fines, to the Indonesian government.
Read MoreThe Regulation is fundamentally needed for the law enforcement officers in preparing summons or indictment with light of corporate crime as the Indonesian Criminal Procedure Code does not recognize the existence of a legal entity as a subject of law.
The Regulation defines the category of corporate crime as follows:
a. company earns profits or benefits from corporate criminal act or such act is undertaken for interest of the company;
b. company allows criminal act;
c. company does not carry out necessary measures to do a deterrence act, to prevent bigger impact and to comply with the prevailing laws to avoid the occurrence of criminal act.
Further, the Regulation covers any corporate criminal acts due to merger, consolidation, separation and liquidation. A company is required to proportionally liable against criminal act limited to the value of shares, properties or assets contributed in the surviving company.
In case of a company is in the liquidation process, its criminal liability shall remain in the company and not legally null and void. If a criminal act is committed after the liquidation process complete, then creditors or any related party may sue the former board of the company or its heirs on the assets which are allegedly used for such criminal acts.
A company shall be represented by its board provided that the board which represents the company in the investigation at police level is obliged to attend the investigation in court level. In terms of the authentication system, it still refers to the system applied in the Indonesian Criminal Procedure Code. Any statement from company shall be regarded as valid evidence.
Any loss suffered by the victim of corporate crime can be claimed through restitution mechanism by submitting civil law suit to the court. Meanwhile, criminal sanction to a company can take the form of monetary fines and additional criminal sanctions such as compensation or revocation of company’s business license.
Having the Regulation in place, the law enforcement officers are currently not only able to prosecute the board of company which breaks the laws. Importantly, they are authorized to penalize the company to pay sum of money, as fines, to the Indonesian government.
Indonesia Investment Realization Report Quarter III 2016
The Indonesian Investment Coordinating Board (BKPM) released the Investment Realization Report Quarter III 2016 with positive result in many sectors.
This can be seen that the number increased by around 2.5% from Quarter II 2016 of IDR 151.6 (around USD 114 million) to IDR 155.3 Trillion (around USD 116 million).
The figure affects the overall improvement of investment realization in January – September 2016 to become IDR 453,4 Trillion (around USD 340 million). The number goes up by around 13,4% from the same period last year of IDR 400 Trillion (around USD 300 million).
Metal, machinery and electronic industry is in the top of the sector list which contributed for USD 1,231.41 million with 330 projects. It is followed by mining industry and real estate, industrial estate and office building in second and third place with the total realization of USD 764.06 million (277 projects) and USD 730.02 million (313 projects) respectively.
Some provinces in Java Island remain a top three foreign direct investment destination, i.e. West Java, East Java and Special Territory of Jakarta. Total investment in West Java is so far ahead in the static which hit USD 1,556.44 million with 829 projects.
Read MoreThis can be seen that the number increased by around 2.5% from Quarter II 2016 of IDR 151.6 (around USD 114 million) to IDR 155.3 Trillion (around USD 116 million).
The figure affects the overall improvement of investment realization in January – September 2016 to become IDR 453,4 Trillion (around USD 340 million). The number goes up by around 13,4% from the same period last year of IDR 400 Trillion (around USD 300 million).
Metal, machinery and electronic industry is in the top of the sector list which contributed for USD 1,231.41 million with 330 projects. It is followed by mining industry and real estate, industrial estate and office building in second and third place with the total realization of USD 764.06 million (277 projects) and USD 730.02 million (313 projects) respectively.
Some provinces in Java Island remain a top three foreign direct investment destination, i.e. West Java, East Java and Special Territory of Jakarta. Total investment in West Java is so far ahead in the static which hit USD 1,556.44 million with 829 projects.