In its latest effort to cut the red tapes of business licensing and to follow-up the takeover of Online Single Submission (“OSS”) system, as mandated by Government Regulation 24/2018 (“GR 24/2018”) (click here for the previous update), the Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal “BKPM”) issued Regulation No. 1 of 2020 on Guidelines for the Implementation of Integrated Electronic Business Licensing Service (“BKPM Reg 1/2020”), which sets out guidelines for the issuance of business licenses.
The guidelines exclude oil and gas sectors, as well as mineral and coal sectors. These sectors are to be processed separately through the Electronic Investment Information and Licensing Service System (Sistem Pelayanan Informasi dan Perizinan Investasi Secara Elektronik – SPIPISE). Previous updates on BKPM’s licensing procedure through SPIPISE can be found here and here.
We summarize the highlighted provisions of BKPM Reg 1/2020 that we believe are of your interest below:
- New Rules on Minimum Investment Value
Similar to the previous regulation, BKPM Reg 1/2020 requires all foreign investment (Penanaman Modal Asing, or “PMA”) to have a minimum investment of more than IDR 10 billion (excluding land and building) for each location and type of business (also known as Klasifikasi Baku Lapangan Usaha – KBLI). Nonetheless, BKPM Reg 1/2020 now introduces some new rules for the following sectors:
- Wholesale: if the products are cars or motorcycles, the investment value can be kept at IDR 10 billion despite variation of products, unless the PMA is also wholesaling products other than cars or motorcycles, in which case it must add an additional IDR 10 billion to the investment value. The same rule applies for wholesalers whose products are other than cars or motorcycles that also simultaneously conduct wholesale of cars or motorcycles.
- Construction: stricter than the general rule, the minimum investment of more than IDR 10 Billion (excluding land and building) now applies per construction project rather than per business type.
- Food and beverage service: the minimum investment is calculated per cumulative businesses in one regency/city rather than per store.
Applications that have secured BKPM’s approval prior to 21 June 2018 are grandfathered.
- Differentiation between Main Project and Supporting Project(s)
BKPM Reg 1/2020 requires all companies to identify its main project and if relevant, supporting project(s). Main project refers to business activities with the purpose of gaining profit for the company, while supporting project is defined as a non-profitable activity that supports the main project. It is now clear that supporting projects do not require additional investment, but they must obtain relevant commercial/operational licenses from relevant institutions.
- Types of Business Licenses and Commercial/Operational Licenses
BKPM Reg 1/2020 clarifies and differentiates business licenses and commercial/operational licenses into the following:
- licenses without commitment, which is effective immediately upon the issuance through the OSS system;
- licenses with technical requirements;
- licenses with payment of duty requirements; or
- licenses with technical and payment of duty requirements.
All licenses under (b) through (d) will become effective only after the company has fulfilled the commitment(s) stated therein. It is therefore very important for all clients to carefully examine their licenses prior to commencing their commercial activities in order to identify whether their respective licenses fall under category (a) or whether they have fully met the prior requirements set under their licenses.
- Re-Introduction of Merger Licenses
BKPM Reg 1/2020 re-introduces merger licenses (as was last introduced by BKPM Regulation No.13/2017), meaning that in the event of a merger, the surviving company must obtain a separate license from the OSS that substantially merges the business licenses of both the surviving and merging companies (“Merger License”). As the requirement to obtain this Merger License is after obtaining the approval from the Minister of Law and Human Rights, it appears that this Merger License is merely administrative in nature.
- Transitional Provisions
As of BKPM Reg 1/2020 being effective, the following transitional rules apply:
- Any Principle Licenses, Investment Registrations, Investment Licenses, as well as Business Licenses and/or Commercial Licenses issued before the issuance of BKPM Reg 1/2020 are still valid as long as it does not conflict with BKPM Reg 1/2020.
- Any company who obtained Business Licenses and/or Commercial/Operating Licenses prior to 21 June 2018 must obtain a business identification number (Nomor Induk Berusaha – NIB) and register their business activities through the OSS system, although there is no mention of any specific deadline to comply by.