Opening a Company in Indonesia as a Foreign Investor? You Must Get Familiar with the Latest BKPM Regulation
PLATO Admin -
On December 11th 2017, the BKPM (Indonesia Investment Coordinating Board), put forth BKPM Regulation No. 13 of 2017 on Guidelines and Procedures for Licenses and Investment Facilities (BKPM Reg. 13/2017).
As someone who has made the choice to have direct investments in Indonesia in 2018, this is crucial for you to learn. Why? Because the previous BKPM regulations regarding the same areas will be repealed once this newest BKPM is in place, andthis could affect your business.
First, let’s consider how BKPM Reg. 13/2017 will affect switching your PMDN status to PMA:
Once the relevant subsidiary conducts a corporate action, the new BKPM Reg. 13/2017 requires all parent companies who want to change its status from a PT PMDN into a PT PMA to change the status of its subsidiary into a PT PMA company.
The Negative Investment List (DNI), a Presidential Regulation that lists business fields that are closed, partially open, and open to foreign investments, is what the relevant subsidiary must comply with. This subsidiary should stop conducting all prohibited PT PMA activities under the applicable DNI.
Here’s a list of important changes under the BKPM Reg. 13/2017 that are related to Indonesian investment and licensing procedures:
The BKPM Reg. 13/2017 gives a PT PMA the chance not to execute its required divestment as specified under its BKPM license,if in its general meetings of shareholders document it expresses:
- PT PMA with 100% foreign ownership - there are no agreements or commitments with any Indonesian parties to sell their shares as expressed by all shareholders; or
- PT PMA with joint venture -the Indonesian party stated that it does not require/wish the share ownership to be inline with the divestment requirements as stated under its approval letter and/business license.
Based on the shareholders resolutions mentioned above, the PT PMA shall seek BKPM approval to cancel its divestment requirement.
Remember: Within 1 year after receiving your business license, your business must partake in its business activity.
- For specific business fields, the BKPM Reg. 13/2017 allows you to apply for a business license directly without you already having the Investment Registration (unlike the previous BKPM regulations) provided that:
- you have formed a PT, Indonesian business entity (which shareholding composition is lined up with the prevailinglaws and regulations);
- you've acquired a valid taxpayer identification number (NPWP); and
- you have a place of business or office for your business.
It’s important to understand that specific business fields are dependent on these conditions:
- if it's in the part of business that does not need exemption capital facilities/products of import duty on the import of machinery; or
- if it's in the part of business that does not need construction activities at all.
- The Principal License (IP) is now called the Investment Registration in the BKPM Reg. 13/2017.The Investment Registration is necessary for investments in specific business activities (unlike the IP in the previous BKPM regulations)as follows:
- if it's in the partof business related to natural resource management, national defense, energy and infrastructure;
- if it's in the partof business that have the potential to cause pollution to large or medium environments in accordance with the applicablelaws and regulations;
- if it's in the partof business that takes time to conduct construction/ construction activities;
- if it's in the partof business that can obtain investment facilities in accordance with the applicablelaws and regulations; or
- in other business fields in accordance with the prevailing provisions of sectoral legislation.
You should also know about these changes due to the BKPM Reg. 13/2017:
Venture capital company
In preceding BKPM regulations, venture capital companies were able to hold shares in a PT for a total of 10 years. Now the BKPM Reg. 13/2017 enables venture capital company to hold shares in a PT for a total of 20 years from the date the Minister of Law and Human Rights (MOLHR) approved its share participation in the relevant PT.
Representative office license (KPPA)
On the condition that the applicable renewal application is submitted to the BKPM at least 30 days before its expiration date under the relevant KPPA license, the BKPM Reg. 13/2017 grants unlimited renewal for the KPPA license. Unlike previous BKPM regulations, the KPPA license valid for 3 years with maximum 2 times renewal, in this case, in total the KPPA license can be valid for maximum 5 years, and cannot be extended after 5 years.
Any application sent in before the new BKPM Reg. 13/2017 was put into place will be processed liable to the requirements stated in the BKPM Reg. 13/2017 and any Principal Licenses (IP) issued under the regime of the preceding regulations will stay valid.
Want to speak with a Plato consultant to learn more about the new BKPM Regulation? Call us today at +62 21 2988 7964 and we can help with establishing your Indonesian company, electronic signatures, customising legal documents, and fixed-fee quotes (tailored to your specific budget and needs!) from Indonesia’s best pre-vetted lawyers.