Since the implementation of integrated business licensing through the Online Single Submission (“OSS”) platform began in 2018 pursuant to Government Regulation No. 24 of 2018 on Electronic Integrated Business Licensing Services, the OSS platform has undergone various changes including the transfer of OSS management and operation from the Coordinating Economic Minister to the Investment Coordinating Board (the “BKPM”) since January 2019. As an effort to boost clear guidance and legal certainty in the OSS platform, BKPM issued BKPM Regulation No. 1 of 2020 on the Guidelines for Implementation of Integrated Electronic Business Licensing Services (“BKPM Regulation 01/2020”) effective from 1 April 2020.

Entering the third month since the issuance of BKPM Regulation 01/2020, we note there are some questions which are commonly asked by business actors (especially foreign business actors) planning to establish a company in Indonesia, are raised again in view of the new BKPM Regulation 01/2020 (such as the minimum investment requirements for establishing a PT PMA, the limitation on number of business field that can be engaged in Indonesia, land/location related issues, etc.).

Given the above, we have summarized the frequently asked Q&As on company establishment and/or operation in Indonesia in relation to the BKPM Regulation 01/2020 as below:

1. Is there any limit on number of business field, in particular the Indonesian Standard Business Sectors Classification (KBLI) code, that may be engaged in by a company?

BKPM Regulation 01/2020 is silent on the KBLI limit for 1 (one) company. In practice, as long as the business fields are related and is not expressly prohibited by the applicable laws and regulation, a company may engage in more than one business field. 

Specifically, for foreign investment companies (“PT PMA”), if they wish to engage in more than one business field, they have to be aware on the foreign shareholding limitation applicable for each business field they intend to apply (particularly if one is different than the other – which can be checked in the Indonesian Negative Investment List (“DNI”)). The DNI regulates which line of businesses are open, restricted or open with certain limitation or requirement for foreign investment.

For example, If the PT PMA is planning to engage in 2 (two) business fields in which one business field is open for up to 95% of foreign shareholding while the other one is open for only up to 67% of foreign shareholding, in order to engage in both of business fields, the PT PMA must comply with the stricter requirement, i.e. the 67% foreign shareholding. This example can be seen in the various business fields of construction services (i.e. civil construction which is open for up to 67% foreign shareholding and construction and installation of electric power installations which is open for up to 95% of foreign shareholding).

In addition to the above, by having more than one business field, there is also a minimum investment requirement for each business field per its KBLI code. Further on this, kindly see our explanation on question 4 below.

2. According to BKPM Regulation 01/2020, there are conditions (which varies between different types of business fields) which are required to be satisfied by business actors before Business Licenses and/or Commercial or Operational Licenses of a company issued by the OSS institution are effective. In light of this:

1. does every business sector have these conditions to meet before they are granted the appropriate licenses?

Under BKPM Regulation No. 01/2020, depending on the types of business, it is possible for a Business Licenses and/or Commercial or Operational Licenses to be issued without having to satisfy conditions. In this case, the Business License and/or Commercial or Operational License issued by the OSS institution will be effective immediately upon issuance. To be more precise, under Article 21 (2) BKPM Regulation No. 1/2020, there are 4 types of Business Licenses and Commercial/Operational Licenses issuance:

• Type 1 – Business Licenses and Commercial/Operational Licenses without Conditions

            Licenses under this category will be effective immediately upon issuance.

• Type 2 – Business Licenses and Commercial/Operational Licenses with technical requirements

           Licenses under this category shall be effective once the technical requirements, such as technical evaluation and/or field survey and/or laboratory examination (it will largely depend on the type of business field applied), are satisfied.

• Type 3 – Business Licenses and Commercial/Operational Licenses with fee requirements

           Licenses under this category shall be effective once the fee requirements (such as non-tax state revenue, regional taxes, etc.) are settled; and

• Type 4 – Business Licenses and Commercial/Operational Licenses with technical and fee requirements 

           Licenses under this category shall be effective once both technical and fee requirements are satisfied.

The types of Business Licenses and Commercial/Operational Licenses issuance discussed above will be further clarified and regulated by the Head of Investment Coordinating Board (BKPM).

b.when must the business actors satisfy the conditions? Is there a time limit?

The timeline to satisfy the conditions of the Business Licenses and Commercial/Operational Licenses for type 2, 3, and 4 differ depending on the type of licenses required to be satisfied (e.g. building permits, location permits, and/or environmental permits) varying from 5 (five) days to 30 (thirty) days since the issuance of the (non-effective) applicable licenses.

3. According to BKPM Regulation No. 1/2020, a location permit is required for certain business sectors:

a. what is a location permit? Is it a permit to immediately utilize the location/plots of land set out in the location permit for business purposes?

According to BKPM Regulation 01/2020, Location Permit is a permit granted to business actors to acquire the land needed for its business and this permit also serves as a permit for land rights transfer and to use the land for the intended business. Given this, it is important to note that having a Location Permit does not mean that the permit holder can directly or immediately use the land, particularly if the permit holder is not the registered land title holder, in which case a land acquisition is in order.

In addition to the above, the following are some noteworthy provisions on Location Permit:

• Location Permits are granted for a period of 3 (three) years from the date of issuance of effective Location Permits.
• Holders of Location Permit must report periodically every 3 (three) months to the local Land Office regarding the acquisition of land that has been carried out based on the Location Permit and the implementation of the use and utilization of the land.

b. BKPM Regulation No. 1/2020 mentions two types of location permit namely (i) location permit without conditions, and (ii) location permit with conditions. What are the differences?

(i) Location Permit without conditions

According to Article 28 (4) of BKPM Regulation 01/2020, location permit without conditions will be issued in the event of, among others:

• The land is located in a location with a zoning which matches with the intended business.
• The land is located at special economic zones, industrial estate, free trade areas, and free ports areas.
• The land required to conduct the business  is not more than:

            -25 ha (twenty-five hectare) for agriculture business;

         -5 ha (five hectare) for house development for people with low-income; or

            -1 ha (one hectare) for non-agriculture business.

         In addition, this type of Location Permit is immediately effective upon issuance. 

          (ii) Location Permit with conditions

         According to Article 28 (7) of BKPM Regulation 01/2020, for location permit with conditions, the business actor is required to satisfy the conditions to obtain:

• land technical considerations issued by the local Land Office. In our experience, the technical consideration may grant the entire applied location or it may grant only a portion of the applied location, for example if there is a protected/conservation area in part of the applied location; and
• approval on having satisfied the conditions.

4. What are the minimum investment requirements for PT PMA?

For establishing a PT PMA, business actors are required to meet certain minimum investment value (including the value of the issued and paid up capital).

Unless required otherwise by the laws and regulations of Indonesia, the minimum required investment value is more than IDR 10,000,000,000 (ten billion Rupiah), excluding land and building per 5 (five) digits KBLI code business field per location project. The issued and paid up capital of PT PMA is at least IDR 2,500,000,000 (two billion five hundred million Rupiah). These requirements apply for any business per 5 digits KBLI code other than the businesses specified below.

(i) wholesaler business

The minimum required investment value is more than IDR 10,000,000,000 (ten billion Rupiah) excluding land and building per 2 (two) first digit of the KBLI code. In our understanding, this means that for example, if a PT PMA carries out wholesaler of new cars activity under KBLI code 45101 and wants to add additional wholesaler second-hand car activity under KBLI number 45102, the PT PMA only needs to satisfy the minimum IDR 10 billion of total investment value (i.e. in our understanding the minimum investment will not increase to IDR 20 billion since the first two digits KBLI are the same).;

(ii) food and beverages services (as long as it is open for foreign investment)

The minimum required investment value is more than IDR 10,000,000,000 (ten billion Rupiah) excluding land and building within the same regency/municipality; and

(iii) construction business activities (as long as it is open for foreign investment)

The minimum required investment value is more than IDR 10,000,000,000 (ten billion Rupiah) excluding land and building per one activity (note that for construction activities, there are different types of construction classification such as commercial building construction, infrastructure construction, etc.).

5. What are the procedures for employing foreign manpower under BKPM Regulation No.1/2020?

Under Article 17 of BKPM Regulation 01/2020, the business actors must apply for a ratification of Foreign Manpower Utilization Plan (“RPTKA”). Once the RPTKA is ratified, the business actors are permitted to utilize foreign manpower(s) for their business.

There are some required data to be completed in the OSS system when a business actor applies for the ratification of its RPTKA. The required data are

1. the reason of the foreign worker(s) utilization;
2. the position of the foreign worker(s) in the company’s structure;
3. the period of the utilization of the foreign worker(s);
4. the appointment of Indonesian worker as a companion of the foreign worker(s); and
5. the number of the foreign workers to be hired by the company.

 

The above are some of the questions we commonly encounter, and we note BKPM Regulation 01/2020 has mostly provided clarity and guidance to address them. Going forward, as indicated in BKPM Regulation 01/2020, there will be follow-up regulations to cover the additional details particularly details on the types of business license/commercial license/operational license with their associated conditions. We expect the much-needed clear guidance for the licensing process will be covered in these follow-up regulations.

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The above is a summary prepared by Solis Advisors – Attorneys and Consultants (“Solis”), an Indonesian based Law Firm. It is only intended to inform generally on the topics covered and should not in any way be treated as legal advice or relied upon when making investment or business decisions. If you have any questions/comments on the matter set out above, or other subject(s) you wish to inquire, please contact your usual Solis contact or email us at consult@solis.consulting.