Indonesia Looks to Simplify Business Licensing With OSS System
In a push to improve ease of doing business, a new government regulation has moved most capital investment licensing from BKPM to the Online Single Submission system
By SSEK Legal Consultants
Tuesday, July 24, 2018
As part of the push by the administration of President Joko Widodo to improve the ease of doing business in Indonesia and increase investment, the government has issued Government Regulation Number 24 of 2018 regarding Online Business Licensing Services (GR 24), which was signed and came into effect on June 21, 2018.
GR 24 introduces major changes to every aspect of business regulation and supervision in Indonesia. Most notably, a significant portion of capital investment licensing is transferred from the Indonesia Investment Coordinating Board (BKPM) and other government agencies to the Online Single Submission (OSS) system, which for the time being is overseen by the Coordinating Ministry for Economic Affairs.
A stated aim of the OSS system is to simplify the licensing process and make it paperless. Licenses and registrations will be issued “in reverse,” meaning the OSS system will issue a “temporary” license after the submission of the required information, and the license will only become effective once post-issuance requirements are met.
The following is a summary of the biggest changes under GR 24.
Simplification of licenses
GR 24 introduces new types of licenses and registrations through the consolidation and/or abolishment of older licenses. The following are new licenses and registrations introduced by GR 24:
- Business Identification Number (NIB). Pursuant to Article 26 of GR 24, the NIB consolidates and replaces the Company Registration Certificate (TDP), Import Identification Number (API), and customs access rights. Article 28 of GR 24 also provides that an NIB serves as a registration for Indonesia’s health and manpower social security programs (BPJS Kesehatan and BPJS Ketenagakerjaan).
- Business License. Any company with an NIB may immediately apply for a Business License, effectively removing the need to apply for an Investment Registration. Pursuant to Article 38 of GR 24, companies with a Business License may engage in the following activities: (i) land procurement; (ii) construction and operation of buildings; (iii) procurement of equipment and facilities; (iv) hiring employees; (v) completion of certification or quality testing; (vi) production testing (commissioning); and (vii) production.
- Commercial/Operational License. Article 39 of GR 24 provides that certain businesses must obtain a Commercial/Operational License before beginning commercial operations. Companies must meet certain “commitments” related to mandatory standards, certifications and/or licenses, and/or registrations including Indonesian National Standard (SNI), Good Manufacturing Practice (CPOB) certification, import approvals, etc. before the Commercial/Operational License becomes effective.
As a general rule, companies can only begin commercial operations once a Commercial/Operational License is obtained. An exception is made for goods and services that by law do not require any further standardization or certification. In this case, the Business License also serves as a Commercial/Operational License.
A Business or Commercial/Operational License will be generated by the OSS system once a completed application is filed. However, the license will clearly state that it will only become effective once the required commitments are met.
License application procedures
The license application process begins by creating an OSS account. The OSS system will automatically generate a link delivered to the applicant’s email address that will provide login details. Unlike the process for obtaining BKPM access rights, no documentation is necessary to obtain login access to the OSS system.
Applicants first apply for an NIB. Applicants that are individuals must provide: (a) ID Number (NIK); (b) address; (c) line of business; (d) location of capital investment; (e) value of planned capital investment; (f) manpower utilization plan; (g) business and/or activity contact number; (h) plan to request fiscal, customs, and/or other facilities; and (i) Individual Tax Identification Number (NPWP).
For legal entities, the required information is: (a) name and/or deed of establishment number or registration number; (b) line of business; (c) type of capital investment; (d) country of origin of shareholders, for foreign shareholders; (e) location of capital investment; (f) value of planned capital investment; (g) manpower utilization plan; (h) business contact number; (i) plan to request fiscal, customs, and/or other facilities; (j) non-individual NPWP; and (k) NIK of business and/or person-in-charge.
If the applicant does not yet have an NPWP, the OSS system will generate one. Once the above information is completed and an NPWP has been obtained, the OSS system will generate an NIB in the form of a 13-digit code accompanied by a unique electronic signature. The NIB is required for the subsequent application for Business and Commercial/Operational licenses.
As noted above, a Business License only becomes effective once the required commitments are fulfilled. In general, these commitments may include:
- Location Permit or Water Location Permit
- Environmental Permit
- Building Establishment Permit (IMB).
Once the required commitments are met, the OSS system will generate a Business License. If the applicant’s line of business does not require a Commercial/Operational License, the applicant may begin commercial operations.
A Commercial/Operational License is required where the standardization and/or certification of goods/services is required before commercial operation. A Commercial/Operational License will be issued once the respective commitments are satisfied by the applicant, allowing the applicant to begin commercial operations. This excludes licenses necessary for imports/exports, the Indonesia National Single Window (INSW) and other ministerial license application systems, which will notify the OSS of the fulfillment of required commitments.
Business expansion and changes in company data
Pursuant to OSS guidelines, a business that increases production capacity is not required to apply for an expansion license, as was the case under the relevant BKPM regulations. Any increase in production capacity, as long as it is in the same line of business, simply requires an update of the company data in the OSS system. However, any expansion into a different line of business or location requires an application for a new Business License.
In terms of changes to company data, OSS guidelines, as verbally confirmed by OSS officials, provide that in principle any corporate action must first be drawn up in a notarial deed. When the deed is filed in the general law administration system of the Ministry of Law and Human Rights, the update will automatically be reflected in the OSS system. Alternatively, applicants can manually input changes in the OSS system. No further approval will be required.
With the introduction of new types of business licenses and license application processes under GR 24, previous regulations on business licenses issued by BKPM and other government bodies are no longer in effect. Pursuant to Article 103 of GR 24 any license applications regulated under GR 24 submitted prior to the enactment of GR 24 must be processed through the OSS system.
It is worth noting that the enactment of GR 24 does not completely replace previous laws and regulations in respect of capital investment licensing. For example, rules on minimum capital investment for foreign investment (PMA) companies and maximum debt-to-equity ratios as regulated under existing BKPM regulations still apply.
Additionally, the transfer of the licensing authority of the BKPM and other ministerial bodies to OSS does not completely remove the existing statutory obligations for companies. For instance the authority to review Capital Investment Quarterly Reports (LKPM) is still held by the BKPM. The BKPM and other ministerial bodies are still coordinating with the Coordinating Ministry for Economic Affairs to determine the extent of capital investment licensing and facilities under the OSS system.