Under Indonesian law, a PMA is required to obtain a Location Permit (Izin Lokasi) from the relevant regional government or the Ministry of Agrarian Affairs and Spatial Planning/Head of the National Land Agency (“MAA”) to procure and/or utilize a plot of land for its investment purposes. However, it is important to note that the Location Permit is not a document evidencing title or ownership of the land; instead, this document merely gives the holder the right or permission to acquire the land area as specified in the Location Permit. To acquire the land area as designated in the Location Permit, the holder of the Location Permit must consummate the land acquisition by entering into a sale and purchase transaction and/or offering certain compensation.
The MAA recently issued Regulation No. 14 of 2018 on Location Permits (“Reg 14/2018”), which revokes and replaces the previous regulation on the same matter, i.e. MAA Regulation No. 5 of 2015, as amended by MAA Regulation No. 19 of 2017 (“Reg 5/2015”).
Reg 14/2018 lays down, among others, the procedures and requirements for obtaining Location Permits via the Online Submission System (OSS), as mandated by Government Regulation No. 24 of 2018 on Electronic Integrated Licensing Services (“GR 24/2018”). The OSS simplifies the licensing procedure and therefore expedites the application process for Location Permits.
Notable Differences between Reg 5/2015 and Reg 14/2018
- Submission of Required Documents
In the previous regime of Reg 5/2015, applicants had to submit physical documents to the relevant authorities to apply for Location Permits. By contrast, Reg 14/2018 requires that such documentation be submitted online via the OSS system.
- Types of Location Permit
While there was only one type of Location Permit in the previous regime, Reg 14/2018 now introduces 2 types of Location Permit, namely: (i) Location Permit with Commitment, and (ii) Location Permit without Commitment.
Location Permit with Commitment
The Location Permit with Commitment is effective only after the applicant obtains approvals (i) from the Land Office on its technical aspects; and (ii) from the relevant Regional Government where the land is located, upon fulfilment of certain commitments. To obtain these approvals, the applicant must submit applications via the OSS system.
Location Permit without Commitment
The Location Permit without Commitment is immediately effective once issued by the relevant authority through the OSS system and, unlike the Location Permit with Commitment, does not require prior approvals to be immediately operative.
The Location Permit without Commitment will be automatically issued if the plot land concerned fulfills the following criteria, among others:
- in compliance with the zoning regulation;
- located in an industrial estate, special economic zone, free trade area and free port;
- having a total area of less than 25 hectares for agriculture, 5 hectares for housing development intended for low-income people, or 1 hectare for non-agriculture purposes;
- originating in the area of development authority or agency; or
- to be used for expansion purposes and located adjacent to the company’s existing land.
- Deadline for Registration of Acquired Land
In the previous regime, there was no specific deadline for the location permit holder to register the acquired land with the land office; however, Reg 14/2018 requires that the acquired land be registered with the relevant land office no later than 1 year after the expiration of the Location Permit.
The Location Permit issued prior to the issuance of Reg 14/2018 remains valid until its expiration date, and expired Location Permits may be extended, subject to the provisions of Reg 14/2018. To comply with the registration deadline under Reg 14/2018, investors should bear in mind that the acquired land must be registered with the land office no later than 1 (one) year after the expiration of the Location Permit.