Indonesia Invesment – Guideline and Procedure for Controlling Capital Investment Operation

Portrait of a woman holding a newspaperBackground

Head of Capital Investment Coordinating Board of Indonesia has issued the Regulation Number 17 of 2015 on the Guideline and Procedure for Controlling Capital Investment Operation (“PERKA BKPM 17/2015”), which became effective on 8 October 2015. This PERKA BKPM 17/2015 revokes Head of Capital Investment Coordinating Board Regulation No.3 of 2012.

Capital Investment

Capital Investment means all types of activities on capital investment, either by Domestic Investor or Foreign Investor, to run businesses in all sectors within the territories of the State of the Republic of Indonesia.

Investor

Investor means an individual or business entity which conducts Capital Investment that may be in the form of Domestic Investor and Foreign Investor.

Report on Capital Investment Activity

Report on Capital Investment Activity means a report on the progress of Capital Investment accomplishment and any issue encountered by Investor that must be prepared and submitted periodically (“LKPM”).

Rights of Investor

a. certainty of the right, law, and protection;

b. transparent information on the business to be carried out;

c .right to service; and

d. various types of facilities based on the provisions of laws and regulations.

Investor Obligation

a. improve competence of Indonesian manpower by providing work training in accordance with the provisions of laws and regulations;

b. provide training and initiate transfer of technology to Indonesian manpower in accordance with the provisions of laws and regulations for company hiring expatriates;

c. apply the principle of good corporate governance of the company;

d. exercise social responsibility of the company;

e. prepare and submit LKPM;

f. submit realization report on imported machinery, goods and material;

g. submit realization report on  import based on API;

h. honor the tradition and culture of the people around the location of business activity of Capital Investment;

i. comply with all provisions of laws and regulations; and

j. allocate fund in phases for recovery of the location that complies with the feasibility standard of living environment for company exploiting non-renewable natural resource, the implementation of which must be in accordance with the provisions of laws and regulations.

Investor Responsibility

a. guarantee the availability of capital originating from resource that does not contravene the provisions of laws and regulations;

b. responsible to fulfill and settle all obligations and loss if Investor ceases or abandons its business activity;

c. create healthy business competition climate and prevent monopoly practice;

d. maintain preservation of living environment;

e. create safety, health, harmony and welfare of the workers; and

f. comply with all provisions in the laws and regulations.

Monitoring Procedure of Capital Investment Implementation

Monitoring over Capital Investment will be conducted either for investment that is still under construction or that has been producing commercially under Business License. Monitoring shall be exercised by collecting, verifying, and evaluating data on Capital Investment realization as set forth in the Capital Investment Activity Report submitted based on the Permits for Capital Investment held by the company.

Company that has obtained Permits for Capital Investment is obliged to prepare and submit Capital Investment Activity Report periodically and shall be delivered to BKPM, BPMPTSP of Province, BPMPTSP or Regency/Municipality, and to KPBPB Concession Board if the project is located within the KPBPB area or to KEK Administrator if the project is located within the KEK Area.

Management Procedure of Capital Investment Implementation

Management of Capital Investment Implementation shall be conducted through:

a. socialization guidance, workshop, technical guidance or dialogue on investment concerning provision for Capital Investment Implementation and/or technical control on the Capital Investment Implementation;

b. granting the consultation on controlling the Capital Investment Implementation according to laws and regulations;

c. facilitation for settlement issue encountered by Investor in its Capital Investment realization.

Supervision Procedure of Capital Investment Implementation

The Supervision Procedure of Capital Investment implementation conducted at the project location of Capital Investment, as a follow up action of:

a. evaluation of the implementation of Capital Investment based on the Permits and Non-Permits held by the company;

b. deviation indication existence from the provision on implementation of Capital Investment or failure to comply with its obligation and responsibility of Investor;

c. grant of facilities for exemption of import duty on imported machinery, goods, material, and non-fiscal (manpower).

Cancellation Procedure of Capital Investment License

BKPM, BPMPTSP of Province, BPMPTSP or Regency/Municipality, KPBPB Concession Board, or KEK Administrator, undertake the Cancellation of Licensing Capital Investment they issued that fails to achieve the accomplishment in actual activity and/or doing the particular violation and urgent. Actual activity administratively may be in the form of:

a. deed of  Establishment of the company and its legalization;

b. taxpayer identification number (NPWP);

c. location Permit;

d. land or building lease agreement;

e. approval letter for facilities of import duty on imported capital goods;

f. importer-producer identification number (API-P);

g. plan of utilization of foreign manpower (RPTKA);

h. building construction license (IMB);

i. permit for nuisance act (UUG/HO) or certificate place of business permit (SITU);

j. other permits according to laws and regulations.

Actual activity in physical form is an activity that has been carried out, such as:

a. procurement of land or places for business;

b. construction, lease of building, lease of factory or office space or place for business;

c. import of machinery or purchase of locally-made machinery.

Particular violation and urgent refer to environmental damage and endangering the people’s safety which having impact across region or cross-country. Cancellation of Capital Investment License is conducted without prior warning.

Revocation Procedure of Capital Investment License

BKPM, BPMPTSP of Province, BPMPTSP of Regency/Municipality, KPBPB Concession Board, or KEK Administrator, undertake the Revocation of Capital Investment License which has been conducted in the form of real activity either administratively or physically and particular violation and urgent. Revocation of Capital Investment License conducted based on:

a. application of the company;

b. proposal by bpmptsp of province or bpmptsp of Regency/Municipality or KPBPB Concession Board or KEK Administrator to BKPM for Licensing of Capital Investment issued by BKPM, or issued by BPMPTSP of Province and presently constituting authority of Central Government;

c. proposal by bpmptsp of regency/municipality to BPMPTSP of Province for Capital Investment License issued by BPMPTSP of Regency/Municipality and presently constituting authority of Province;

d. court decision that has permanent legal power;

e. proposal for revocation by the Ministry or Non-Ministry Government Institution on Technical Matter.

 

Procedure for Closing of KPPA, KP3A, and Branch Office of Foreign Capital Investment Company or Domestic Capital Investment Company

BKPM conducts the closing of Foreign Company Representative Office and Foreign Trading Company Representative Office submitted by:

a. Head of Foreign Company Representative Office to the BKPM;

b. Head of Foreign Trading Company Representative Office to the BKPM;

c. Branch of Foreign Capital Investment Company or Domestic Capital Investment Company to the BPMPTSP of Province based on the position and domicile of the Branch Office.

Cost of Capital Investment Implementation

Investor is not subject to charges in controlling the Capital Investment Implementation Activity conducted by BKPM, BPMPTSP of Province, BPMPTSP of Regency/Municipality, KPBPB Concession Board or KEK Administrator.

Sanction

BKPM or BPMPTSP Province or BPMPTSP of Regency/Municipality or KPBPB Concession Board or KEK Administrator based on issued Permit and Non-Permit for Capital Investment may impose administrative sanction on the company that:

a. fails to comply with the obligation and responsibility as an Investor;

b. deviate from the:

1. Permit and Non Permit for Capital Investment; or

2. terms and conditions in the Capital Investment Implementation including the facilities of import duty on imported machinery and/or goods, material, services and non-fiscal (manpower) that have been granted.

c. has produced commercially but does not have business license yet.

Administrative sanction in the form of:

a. written warning or online warning;

b. limitation of business activity;

c. suspension of business activity and Capital Investment facilities;

d. cancellation or revocation of Capital Investment License and business activity or Capital Investment facilities.

Susan Saraswati

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