Guidelines on the Implementation of The Integrated Electronic Business Licensing Service Introduced by Indonesia Investment Coordinating Board

On 1 April 2020, the Investment Coordinating Board/Badan Koordinasi Penanaman Modal (“BKPM”) has issued a new regulation to govern the implementation of the Integrated Electronic Business Licensing Service. We note that the said regulation was issued as the follow-up of the official transfer of authorization over the Online Single Submission (“OSS”) system from the Coordinating Ministry of Economic Affairs/Kementerian Koordinator Perekonomian to the BKPM the as of 2 January 2019.

Legal Frameworks: Our below executive summary refers to the following regulations:

  1. Government Regulation No. 24 of 2018 on Integrated Electronic Business Licensing Service (“GR 24/2018”); and
  2. BKPM Regulation No. 1 of 2020 on Guidelines for the Implementation of Integrated Electronic Business Licensing Service (“BKPM Regulation 1/2020).

Main Keys of the new guidelines on the implementation of Integrated Electronic Business Licensing service: Please find below the main keys to the implementation of Integrated Electronic Business Licensing service as stipulated under BKPM Regulation 1/2020.

Mandatory Investment Value for Foreign Investment/Penanaman Modal Asing (PMA) Company: Art. 6 (2) of BKPM Regulation 1/2020 stipulates that PMA Company shall fulfill the following mandatory investment value and capital structure requirements:

  1. Total investment value shall exceed to IDR 10Billion (excluding land and buildings) per registered business activity (known as Klasifikasi Baku Lapangan Usaha or KBLI) per project location; and
  2. The amount of issued capital shall be equivalent to the paid-up capital that is amounting at the minimum of IDR2.5Billion; 
  3. Share ownership percentages should be calculated based on the nominal value of shares.

(Collectively referred to as “Required Investment Value”)

However, please be advised that the Required Investment Value does not apply for PMA Company that have secured valid investment licenses prior to the issuance of GR 24/2018.

Specific Requirement on the Investment Value for Certain Business Activities: We note that the Art. 6 (3) of BKPM Regulation 1/2020 addresses particular requirements of the investment value for the following business activities:

  1. Wholesale business activities: An additional IDR10Billion shall be added to the investment value if the PMA Company conducted wholesaling of various commodities as shown on its first-two digit of KBLI number.
  2. Food and beverage service: The minimum investment of IDR10Billion is calculated per cumulative businesses in one regency/city rather than per store.
  3. Construction business activity: The minimum investment of IDR 10Billion (excluding land and building) is mandatory for each construction project instead of per business activity, which is sterner than the general rule.

Distinction between Main Project and Supporting Project(s): We further note that BKPM expects all business practitioners to specify and distinct its main project and its supporting project(s).

The main project is construed as the company’s essential business activities with the main purpose of gaining profit. Meanwhile, the supporting project is defined as a non-profitable activity that supports the main project. Please be advised that the operation of every company’s supporting projects shall obtain its own commercial/operational licenses from the relevant institutions. (Art. 15 (2) and (3) of BKPM Regulation 1/2020)

Business Licenses and Commercial/Operational Licenses: We note that BKPM Regulation 1/2020 classifies business licenses and commercial/operational licenses to the following (Art. 21 (2) of BKPM Regulation 1/2020):

No

Classification of License

Remark

1.

License without commitment fulfillment (“Type 1”)

Business licenses will become immediately effective upon its issuance through OSS system. (Art. 21 (3) of BKPM Regulation 1/2020)

2.

License with technical requirement (“Type 2”)
  • Business licenses as issued by OSS system will become effective upon the fulfillment of relevant commitments. (Art. 21 (4) of BKPM Regulation 1/2020)
  • The provision related to Licenses Type 2, Type 3, and Type 4 will be further addressed through the Decree of the Chairman of BKPM. (Art. 21 (5) of BKPM Regulation 1/2020)

3.

License with duty payment requirement (“Type 3”)

4.

Licenses with technical and payment of duty requirements (“Type 4”)

Establishment of Merger License: We note that the OSS system will issue a merger license for the surviving company pursuant to the merger deed which has been approved by the Minister of Law and Human Rights (“Merger License”).  

On a related note, the Merger License will merge the business licenses of both the surviving and merging companies. Furthermore, any commitments related to a business license and/or commercial/operational license issuance shall be fulfilled by the surviving company (Art. 62 (4) and (5) of BKPM Regulation 1/2020).

The article above was prepared by Marshall S. Situmorang (Partner) and Aniendita Rahmawati (Associate). 

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances. For more information, please contact us at mail@nusantaralegal.com.