Phases To Commence Investment

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The investor who want to engage in investment must pass several phases of procedure in accordance with applicable laws and regulations in Indonesia. The procedure covers legal entity establishment, handling license for implementation and utilization of fiscal and non-fiscal facilities provided by the Government. Procedure for investing in jurisdiction of Indonesia consists of three phases:

I. Prepatory Phase

In Law of Investment is described that all business activities are open for investment activities in Indonesia. In an effort to boost investment in Indonesia and preparation for facing ASEAN Economic Community (AEC), the Government of Indonesia revised provisions of List of Business fields Closed and Open with conditions in investment field (Investment Negative List/ DNI).

These revisions are set forth in Presidential Regulation (Perpres) Number 39 of 2014 on List of Business fields Closed and Open With Conditions to Investment.

To determine business field to be conducted, first of all, the business actors learn the Investment Negative List (DNI) of Business fields mentioned in Presidential Regulation Number 39 of 2014.

As for intended business fields are stated there are three groups of business field for investment activities in Indonesia, namely:

A. Business fields closed, forming certain business fields which are prohibited to be undertaken as investment activity.Type of business which are stated closed to investments are :

1   Chemicals industry which is regulated in Attachment 1 of Law Number 9 of 2008 on the Use of Chemicals as Chemical Weapons;
2   Alcoholic Drink industry (liquor, wine, drink contain mar);
3   Organization and operating of Land Transport Passenger Terminal;
4   Organization and Operating of Motor Vehicles Weighing;
5   Telecommunication/ Navigation Assisting facility;
6   Organization of Flight Navigation Services;
7   Organization of Testing for Type of Motor Vehicle;
8   Management and Organization of Radio Frequency Spectrum Monitoring Station and Satellite Orbit;
9   Government Museums;
10 Historical and Ancient times Inheritances (temple, royal palace (keratin), historic inscription (prasasti), and        ancient building); and
11 Gambling/ casino.

In attachment 1 of Presidential Regulation Number 30 of 2014, closed business fields may be utilized for the noncommercial purpose, such as: research and development after obtaining approval from the agency in-charge of development in such business field.

B. Open Business fields with conditions, business field being reserved for Small, medium Business and Cooperative, business field required with partnership, and business field required with capital ownership, certain location and special license.Business field open with conditions must comply with location requirement as regulated in applicable conditions of laws and regulations in the field of layout and environment.

C. Open Business field Further step that must be taken by the investor is to submit an application in the form of :

  1. Principle license of investment Principle license on investment forms a license from the Government, Provincial Government, Regency/ Municipality Government (pursuant to its authority) in the form of Initial Approval from the Government to engage in investment which must be owned by the Company in commencing business or carrying on business activity in Indonesia both in the framework of Domestic Investment (PMDN) and Foreign Investment (PMA) framework. Principle License is a basis of licensing and non-licensing for further investment.
  2. Deed Establishment of the Company Based on Principle License of Investment, the Investor makes the Company’s Deed of Establishment of the Company is drawn up by Notary Public in Indonesia in the framework of establishment of Indonesia Legal Entity. With respect to Foreign Investment, its legal entity must be in the form of Limited Liability Company (Perseroan Terbatas/ PT).
  3. Legalization of the Company’s Deed of Establishment, hereinafter is processed by Notary Public in Indonesia, will be requested for Legalization from Ministry of Law and Human Rights of the Republic of Indonesia. By the legalization of Deed of Establishment of the Company then the said legal entity has been legally as Indonesian Legal Entity.

II. Construction Phase

Construction Phase means a phase for preparation of physical facilities/ infrastructure of Company operation and processes licensing/ non-licensing for investment implementation/ this phase including among others

A. The Importers Identification Number – Producer (API-P) for industrial company the Importers Identification Number – Producer (API-P) forms an identification that must be owned by the Company that imports goods for own use and capital goods, raw materials, auxiliary material and/ or material to support production process.

B. The Employment of Foreign Workers. Plan for the Employment of Foreign Workers (RPTKA) means a document about Planning for the Employment of Foreign Workers must be owned by investment activities (Foreign Investment and Domestic Investment) which employ foreign workers in their business activities. Plan for the Employment of Foreign Workers is issued by Ministry of Manpower and Transmigration.b. Visa Recommendation to Work (TA-01)Recommendation of TA-01 means document to obtain visa special facility for foreign workers which are employed at investment activities (Foreign Investment and Domestic Investment) owned. Recommendation of TA-01 is submitted and processed at Ministry of Manpower and Transmigration.c. License for the Employment of Foreign Workers (IMTA)License for the Employment of Foreign Workers (IMTA) must be owned by the investment (License for the Employment of Foreign Workers) which will employ foreign workers in the framework of their investment in Indonesia. IMTA is submitted and processed at Ministry of Manpower and Transmigration.

C. Approval for Exemption of Import Duty on Import of Machinery for the Company whose business field may obtain Exemption of Import Duty on Import of Machinery granted by the Government to the Company carrying on activities in certain business field in accordance with Regulation of Minister of Finance No. 176/ PMK. 011/2009. Exemption of Import Duty on import of Machinery is given if it complies with the conditions as follows:a. Such machinery has not been manufactured at home.b. Machinery has been manufactured at home but inappropriate specifications.c. Machinery has been manufactured at home, inappropriate capacity.

D. Corporate Income Tax (PPh Badan) Facility – if its business field is included in list of business fields which may obtain corporate income Tax.

  1. Corporate Income Tax Facility which is granted by the Government, may be in the form of Tax Allowance (by virtue of Regulation of the Government of the Republic of Indonesia No. 1/2007 jo. 62/2008 jo. 52/2011) or Tax Holiday (by virtue of Regulation of Minister of Finance of the Republic of Indonesia Number 130/PMK.011/2011).
  2. In order to obtain Tax Allowance, the Company may submit an application for Chairman of Indonesia Investment Coordinating Board (BKPM).
  3. In order to obtain Tax Holiday, the Company may submit an application to Chairman of Indonesia Investment Coordinating Board (BKPM) or Minister of Finance of the Republic of Indonesia.
  4. Chairman of Indonesia Investment Coordinating Board (BKPM) or Minister of Industry of the Republic of Indonesia will grant proposed Corporate Income Tax facility for Tax Allowance and Tax Holiday, referred ro Minister of Finance of the Republic of Indonesia cq Director General of Taxes of the Republic of Indonesia.

E. Implementation licensing conforms to project location issued by Regional Government.

  1. In investment implementation, the Company is obliged to have implementation licensing issued by Regional Government (Provincial/ Regency/ Municipality Government) conforms to project location.
  2. Regional licensing in issuance process (conform to project/ business location) is conducted at the Agency Organizing One Stop Services in Investment Field in accordance with its authority.
  3. Types of regional licensing among others are:
  • Location Permit
  • Building (Construction) Permit
  • UUG/ HO Permit (Nuisance Permit/ Izin Gangguan)
  • Company Registration Certificate (TDP)
  • Operational License (Sector Technical License) such as Operational License for Taxi Business; Certification of Aircraft ofr airline business activity.

a. In investment implementation, the Company is obliged to have Operational License, namely those in technical nature in respect of its business field.

b. Operational License Issuance Process is carried out at the Ministry or agency concerned related to its business field.

III. Ready For Production/ Operation Phase

Production/ Operational Phase means a phase the Company has been ready to carry out production (industrial) activities or conduct operational activities (except for industrial activity).

A. Business License means a license from the Government/ Provincial Government/ Regency/ Municipality Government must be owned by the Company to commence production/ Operating activity implementation which produces goods or services, unless otherwise stipulated by Sectoral Laws and Regulations. In order to obtain a Business License, the Company shall file an Application for Business License to the Agency Organizing One Stop Service in Investment Field pursuant to its authority.

B. Importers Identification Number – General (API-U)Having obtained the Business License, regarding trading company it may file the Importers Identification Number – General (API-U).c. Import Duty Exemption Facility on Goods and Materials Whereas the Company that has utilized import duty exemption facility on import of machinery may file import duty exemption facility on goods and materials.

HOW CAN SMART LEGAL CONSULTING HELP YOU?

SMART Legal Consulting has extensive experience in helping employers to ensure that their hired expatriates acquire work permits in order to work in Indonesia, and to maintain such permits to be updated so that they do not lose their validity.

If you need immediate assistance, please contact the SMART Help Desk at:

E:  info@smartcolaw.com

H: +62821-1234-1235

 

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