The Indonesia Investment Coordinating Board (“BKPM”) has just enacted BKPM Regulation No. 13 of 2017 on Guidelines and Procedures for Licenses and Investment Facilities (“BKPM Reg 13”), which will be effective at the Central One Stop Services Office of BKPM as of January 2, 2018 and at the regional level as of July 2, 2018 at the latest. Once BKPM Reg 13 comes into force, the (previous/existing) BKPM regulations of the same matters (“Previous Regulations”) will be repealed.
As summarized below, BKPM Reg 13 amends some significant provisions of licensing and investment procedures.
Investment Licenses
Similar to the Previous Regulations, BKPM Reg 13 divides investment licenses into 2 stages, but change the name of Principle License to “Investment Registration”; and therefore the corresponding licenses are now called Investment Registration and Business License. However, unlike the so-called “Principle License” under the Previous Regulations, the Investment Registration will be required only to the extent that the investment meets the following criteria:
- requiring physical construction;
- requiring investment incentives;
- potentially causing environmental damage;
- relating to (a) state defense, or (b) natural resources and infrastructure; or
- subject to certain sectoral requirements under the prevailing regulations.
While BKPM Reg 13 enables investors to directly apply for a Business License, it is important to note that BKPM will only issue a “direct” Business License (i.e., without requiring the Investment Registration) subject to the following requirements: (i) the applicant is a business entity in the form of legal person (PT), with shareholding composition in line with the prevailing regulations, (ii) the applicant has a valid taxpayer identification number (NPWP) and an office or place of business. However, BKPM Reg 13 does not address the status and consequences of the applicant (the PT) if, for whatever reason, BKPM denies its application for the Business License. It should be noted, however, if the direct Business License is granted, the PT is required to commence its business operation within one year.
Minimum Investment Amount
Like the Previous Regulation, BKPM Reg 13 requires a minimum investment of more than Rp 10 billion (excluding land and building). Nonetheless, BKPM Reg 13 introduces a more relaxed requirement on property development and management companies by allowing them to take into account their land and building when calculating the minimum investment amount. It should be noted, however, that such leniency is only applicable to property development and
management companies that undertake development works involving (i) a whole building or (ii) integrated real estate.
Divestment Requirement
BKPM Reg 13 provides a possibility to PMA companies not to conduct its stipulated divestment (in their BKPM licenses) if:
- the existing local shareholders state their approvals in a GMS not requiring the divestment; or
- in the case of a 100% foreign-owned PMA company, all shareholders declare in a GMS that they do not have any commitment or agreement with a domestic party to sell/divest the shares.
In the case of the above, the PMA company must seek an approval to BKPM.
Change of Status from PMDN to PMA
BKPM Reg 13 now explicitly stipulates that any company changing its status from a PMDN company into a PMA company must also cause the status of its subsidiary to be changed into a PMA company once the relevant subsidiary performs a corporate action. Consequently, if such PMA subsidiary conducts a business activity prohibited for PMA companies, it will be compelled to cease such activity.
Other Notable Changes
| Matters | Previous Regulations | BKPM Reg 13 |
|---|---|---|
| Expansion License for Industrial Sector. |
required if the capacity increase is ≥ 30%. | any increase in capacity requires an expansion license from BKPM. |
| Business License. | a company with more than 1 activity can apply for Business Licenses separately. | a company with more than 1 activity must simultaneously apply for the Business Licenses for all the activities; otherwise, the activity for which no application for business license is made, will be deemed \not materialized or cancelled. |
| Venture Capital Companies. | allowed to hold shares in a PMA company only for a maximum of 10 years. | allowed to hold shares in a PMA company for a maximum of 20 years in total. |
| License for General Representative Office. |
valid for 3 years, renewable twice at maximum. | generally valid for 3 years, unlimited renewals. |
Transitional Provisions
Any Principle Licenses issued under the regime of the Previous Regulations will remain valid and any application submitted prior to the effectiveness of BKPM Reg 13 will be processed subject to the requirements specified in BKPM Reg 13.
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