Therefore, SMART will explain how to fill out the Investment Activity Report (Laporan Kegiatan Penanaman Modal or “LKPM”) for PMA Companies (Perusahaan Penanaman Modal Asing, also known as “PT PMA”).
There are 2 (two) types of LKPM reports:
It is important to understand that PT PMA with only Izin Prinsip or Principle License are not allowed to conduct production/commercial activities in Indonesia. To do so, they must first realize their investment and apply for Permanent Business License or Izin Usaha Tetap. You can find our article on how to apply for Permanent Business License here.
FILLING OUT LKPM
In this article, SMART will explain how to fill out the LKPM for PT PMA who only has Principle License or Izin Prinsip, and therefore is still in its construction phase.
PT PMA who only has Principle License must report its LKPM quarterly, which means 4 (four) times in one year. You can find our article on When and How to Submit LKPM here.
LKPM for PT PMA in its Construction Phase has 6 (six) parts to fill in:
1. Company Details
TIP: It is important for PT PMA to keep track on any changes regarding company details. Changes such as change of address (project location or correspondence location) and change of company name must be supported by official legal documents reflecting the new detail.
Any disrepancy between PT PMA legal documents and the real conditions of the company can result in administrative issues which will delay any licensing process in BKPM.
2. Investment License and Non-License Facilities
TIP: For PT PMA in services business, such as consultancy, it is common to lease their office instead of building it from scratch, which does not require them to obtain most of the licenses and/or permits referred above.
It is handy to have the copies of documents such as location permit and IMB from their building management, and it must be noted that PT PMA not located in industrial area or office buildings are required to obtain nuisance permit. This includes PT PMA located in office buildings built on a non-office zone (such as in Ruko).
3. Investment Realization
In LKPM, PT PMA is required to report their investment realization in the period of report used to prepare the business. The expenses paid and reported in the investment realization must correspond to the source of funding to make those investments.
TIP: Investment realization report in LKPM is different from book keeping in accounting. In LKPM, the investment realization includes all expenses paid for the investment project, even before the PT PMA is established. And you do not need to report in LKPM your income or profit accrued from such expenses.
Therefore, it also includes expenses paid from the shareholders’ own account, and not only after the PT PMA is established and has its own bank account. Expenses for the incorporation of PT PMA itself, such as incorporation and Notary Fee must also be reported to BKPM.
TIP #2: All investment reported within LKPM will be used by BKPM to determine whether the PT PMA can obtain the Permanent Business License or Izin Usaha Tetap. Therefore, it is important to fill the investment realization correctly.
Irregularities in filling LKPM will be noted by BKPM, and they can request the PT PMA to revise their report, or conduct physical survey to the PT PMA office to verify the actual situation.
4. Machines and Spareparts Realization
PT PMA must also report how much investment that has been spent to purchase machines, tools and its spareparts that will be used to begin production.
The machines and spareparts are divided from origins: domestic and imported machines. For imported machines, PT PMA must also report whether they purchased the machines using import facilities or not.
PT PMA must report the amount of Indonesian and foreign employees hired during the investment reporting period. They must also report any third party/contractor workers who worked for PT PMA during an investment reporting period.
Foreign employees include all foreigners who obtains their IMTA under the PT PMA, including foreign Directors and/or Commissioners.
6. Issues Faced by PT PMA
PT PMA is encouraged to fill this part of the LKPM with as much detail of obstacles faced by PT PMA in their construction phase, which includes delays and obstacles in preparing the PT PMA to begin production or commercial activities.
It can range from the financial difficulties, the high price for facilities required, the long period required to apply for recommendations and licenses, and other issues. Based on this report, BKPM may contact PT PMA to assist and/or give their support in resolving their issues.
WHAT HAPPENS TO PT PMA IF LKPM IS NOT FILLED CORRECTLY ?
Irregularities in LKPM can result in BKPM contacting PT PMA to revise their LKPM pursuant to their actual activities, or BKPM conducting a verification to the PT PMA office to observe directly the investment project.
Pursuant to the LKPM, if the PT PMA is found conducting production and commercial activities without a Business License, or is found conducting business activities not allowed for PT PMA pursuant to its Principle License, the BKPM administrative sanctions will apply. You can find more about BKPM administrative sanctions here.
HOW CAN SMART CONSULTING HELP YOU?
To ensure a smooth investment and business operation from the legal perspective, but also still focus on establishing your business in Indonesia and reach your revenue target, it is advised for you to find capable and trusted lawyers or legal consultants for advice and assistance in ensuring your legal compliance with investment regulation.
SMART Legal Consulting have worked and assisted with foreign investors and PMA Companies to restructure, maintain and operate their business in Indonesia in compliance with all prevailing laws and regulations under the current Indonesian foreign investment legal regime. SMART is also able to assist PT PMA in submitting LKPM, and liaising with BKPM in regards of LKPM obligations.
CONTACT US NOW for further explanation about foreign companies and investments in Indonesia, at:
O: +6221- 2278-3385
The Article was prepared by:
Sekar Ayu Primandani / Asharyanto