TAXES
LAW
4
Luther LLP in collaboration with Maqdir Ismail & Partners
BKPM Regulation 13/2017
T
he Investment Coordinating Board (
Badan Koordinasi
Penanaman Modal
/”BKPM”) issued a new regulation on
investment: Regulation No. 13 of 2017 on The Guidelines
and Procedure for Capital Investment Licensing and Facilities
(“BKPM 13/2017”). It contains a number of changes to procedures
and requirements for investors who have invested and those
contemplating an investment in Indonesia. We would like to provide
an overview of changes to the procedure of obtaining investment
licenses.
BKPM 13/2017 limits the requirement to obtain a Principle
License (now referred to as Investment Registration,
Pendaftaran
Penanaman Modal
) to cases in which the relevant investment:
- includes construction yet to be completed;
- may apply for investment facilities;
- could cause mid- or major-level environmental damage;
- touches the fields of defense, energy, infrastructure or the
management of natural resources;
- needs investment approval due to sectoral regulations.
Investments that do not fall under the above categories, will not
require an Investment Registration (Principle License) provided
the relevant limited liability company (PT) fulfils the following
requirements:
- having the status of foreign owned limited liability company (PT
PMA);
- holding a taxpayer identification number (NPWP);
- occupying a place of business/office.
The details on procedures for the granting of a Permanent Business
License (
Izin Usaha
) without a prior Investment Registration
procedure, will depend on further regulations to be issued or the
establishment of unwritten policies by BKPM.
According to Art. 34 (2) of BKPM 13/2017, a PT PMA that has not yet
met the requirement of being a ‘large scale business’ can only obtain
a Permanent Business License that is valid for one year and may be
extended for another year. The requirement of being a “large scale
business” is deemed met if:
- the PT PMA has net assets of more than IDR 10 billion or annual
sales of more than IDR 50 billion; or
- the specific business line’s requirements for meeting the “large
scale business” requirement are stipulated otherwise in special
laws or regulations.
Since many businesses will not initially or probably at no point in
time require net assets above the aforementioned threshold or reach
IDR 50 billion in sales during their first few years of operation, it will
be crucial, how BKPM will implement this requirement practically.
Philipp Kersting
Head of Indonesia Desk, Luther LLP
+62 21 3911191
Investment Law
Legal Audit in Indonesia
A
legal audit is commonly known as legal due diligence in
Indonesia. It is a process during which a thorough examination
is performed on certain facts, actions or documents in order
to assess compliance and suitability. With the rapid development of
business models in today’s world, the role of legal audits is of high
relevance as regulatory authorities are changing legal frameworks
more rapidly in their reactions to digitization and increasing
globalization.
The reason for this is obvious. Failure to comply with certain laws
and regulations leads to fines and penalties or even interruption of
operations. Scrutiny on legal matters is also beneficial in that it is a
key part of good corporate governance to mitigate potential risks,
that it maintains a company’s consistency with the latest regulatory
developments, and that it prevents conflicts that may disrupt a
company’s progress.
The complexity and the scope of the audit itself may vary, subject to
its purposes. In general, a proper legal audit begins with a preliminary
questionnaire followed by a document review and assessment, site
visit and interviews. A conference with relevant parties is often
scheduled to confirm matters before a final report is submitted and
a legal opinion is rendered. The areas that this scrutiny must address
Legal Audit
consist of: incorporation and corporate legal history of the entity and
its shareholding structure; acts of the board of directors and related
documentation; validity of licenses and permissions, regulatory
compliance, employment affairs, agreements and commercial
arrangements, and pending and threatened litigation.
In a nutshell, while a legal audit may be a complex process to go
through, the benefit of avoiding or mitigating risks typically outweigh
the cost and effort. Not only is a legal audit necessary, but also
beneficial in today’s challenging business world. This applies to
Indonesia in particular, given its often contradictory regulatory
approach and often unclear authorities of regulatory bodies.
M. Dzulfiqar Aly
Associate, Luther LLP
+ 62 21 391 1191
9
th
Edition | June 2018
