In the previous article, SMART has explained how to fill out LKPM for PT PMA in its construction phase. After the PT PMA has obtained a Permanent Business License (Izin Usaha Tetap), PT PMA enters a production phase, and the LKPM obligation change to the LKPM for Production phase.
LKPM for PT PMA in Production Phase must be submitted 2 (two) times a year, every 6 (six) months. You can find our article on When and How to Submit LKPM here.
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.
For PT PMA in production phases, the PT PMA has already realized their investment. However, they are still required to report any increase in investment, both for their Fixed Capital and Working Capital during the period of report.
TIP: Any increase in investment reported that exceeds certain requirements will require PT PMA to apply for an expansion of its Business License, which must first be processed by applying for an expansion of its Principle License.
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.
PT PMA working in trade business or manufacturing business must also report how much their import realization within the period of report, using API-P or API-U facilities.
PT PMA must report on how much goods or services produced and sold within the reporting period, pursuant to the type of goods or services set forth in its Permanent Business License. The unit used to count the goods/services (tons, litres, kgs, person(s), USD, IDR) is also set forth in the Permanent Business License, and the report must be made accordingly. For PT PMA who exports their products, they must also report their export realization in USD for the reporting period.
TIP: If the goods/services produced and sold exceeds more than 30% of the capacity set within the Permanent Business License, of such excess the PT PMA is required to apply for expansion of project. This expansion application starts from applying for an expansion of Principle License (Izin Prinsip Perluasan), which will then be realized into an expansion of Permanent Business License (Izin Usaha Perluasan).
Pursuant to its Permanent Business License, PT PMA may have several obligations that it must fulfill and report of its fulfillment, such as:
Some PT PMA working in certain business sectors, especially in the manufacturing and industrial sector, is obliged to comply with Environmental regulations and obtain Environmental Documents, such as AMDAL, or UKL/UPL.
Some PT PMA working in certain business sectors is required to conduct partnership with Small and Medium Enterprises (Usaha Kecil dan Menengah or UKM). In LKPM, PT PMA must report regarding these mandatory partnerships and the UKM they are partnering with.
c. TRAINING FOR INDONESIAN WORKERS
PT PMA utilizing Indonesian workers are required to conduct training for transfer of technology to Indoensian workers. In LKPM, PT PMA must report regarding the type of training, how many workers trained, and who conducts the training, whether the PT PMA itself or a third party.
d. CORPORATE SOCIAL RESPONSIBILITIES (CSR)
In LKPM, PT PMA may fill the CSR pursuant to any corporate social responsibilities programs and/or activities it has done within the reporting period.
e. OTHER OBLIGATIONS
Within the Principle License and Permanent Business License, the PT PMA has a list of obligations not classified within the ones mentioned above. For example, PT PMA working in portal web services is required to host their website in an Indonesian-based server. This is reported in LKPM under other obligations.
PT PMA is encouraged to fill this part of the LKPM with as much detail of obstacles faced by PT PMA in their production phase, which includes delays and obstacles in preparing the PT PMA to conduct their 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, so that the investment can run smoothly and PT PMA can run their production and commercial activities smoothly.
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 explanations about foreign companies and investments in Indonesia, at:
O: +6221- 2278-3385
The Article was prepared by:
Sekar Ayu Primandani/Asharyanto