TILE, songsion USgatne? Karis, Jul 8,202) [Issue Number: 4161 BKPM Regulates Risk-Based Business Licensing Services and Investment Facilities In order to ensure legal certainty during the implementation of risk-based business licensing, as originally stipulated under Regulation of the Government No. $ of 2021 on the Organization of Risk-Based Business Licensing (‘Regulation 5/2027"), the Investment Coordinating of BKPM No. 4 of 2021 on Guidelines and Procedures for Risk-Based Business Licensing Services and Investment Facilities (Regulation 4/2021"). Through the enforcement of Regulation 4/2021, the following legal frameworks have now been replaced and repealed2) rd (Badan Koordinasi Penanaman Modal -"BKPM’) has issued Regulation | Regulation of the BKPM No. 6 of 2018 on Guidelines and Procedures for Investment Licensing and Facilities, as amended by Regulation of the BKPM No. 5 of 2019 ("Regulation 6/2018")(3); and 2. Regulation of the BKPM No, | of 2020 on Guidelines for the Implementation of Electronically Integrated Licensing Services ("Regulation 1/2020")(4) As background information, Regulation 4/2021 en mmpasses 102 Articles and nine chapters, which address the following areas: 1} General provisions; 2) Scope; 3) Business licensing services; 4) Implementation of business licensing through the Online Single Submission ("OSS") system; 5) Investment facilities; 6) Risk-based business licensing services under certain conditions; 7) Miscellaneous; 8) Transitional provisions; and 9) Closing provisions, However, due to the wide scope of Regulation 4/2021, this edition of Indonesian Legal Brief {ILB) will limit its discussion to the following matters: 1. Business licensing services: capital provisions for micro-, small- and medium-scale enterprises (Usaha Mikro, Kecll don Menengah -"UMKM’ and large businesses; and 2. Investment facilities: fiscal and nonfiscal ‘Business Licensing Services: Capital Provisions for UMKM and Large Business Provisions that address investment and capital values for UMKM{5] refer to the criteria elaborated upon in the following table:[6] Enterprises Business Capital Micro-scale enterprises | Up to Rp. 1billion excluding land and buildings used for business premises, Small-scale enterprises | Rp. 1 billion - Rp. 5 billion excluding land and buildings used for business premises. Medium-scale enterprises | Rp. Shillion - Rp. 10 billon excluding land and buildings used for business premises. Meanwhile, a minimum investment value requirement for foreign investment has also been set and states that any total investment must be greater than Rp. 10 billion{7] excluding land and buildings per five-digit Indonesian Standard Industrial Classification (Kiasifikas! Baku Lopangan Usaha Indonesia - *KBLI') business field per project location 8] However, the following business activities are exempted from this total investment requirement {3] Business Activiti Total Investment Greater than Rp. 10 billion excluding land and buildings and applies arge trading four digits of the relevant KB per init Greater than Rp. 10 billion excluding land and buildings and applies Food and beverage services per two initial digits of the relevant KBLI per one point locationGreater than Rp. 10 billion excluding land and buildings for one Construction services activity and applies per initial four digits of the relevant KBLI Industrial business activities that produce different types of products with five-digit | Greater than Rp. 10 bllon excluding land and buildings KBL las a part of one single production line Includes the following provisions: 1 ‘or property that takes the form of complete buildings or Integrated housing complexes, the relevant investment value property development and exploitation ‘must be greater than Rp. 10 billion, including land and buildings; 2.For property units not in one building as a whole or not in Integrated housing complexes, the relevant investment value ‘must be greater than Rp. 10 billion excluding land and buildings Investment Facilities: Fiscol and Nonfisco! investment facilities break down as follows: In general, the available fiscal and non‘) 1 Fiscal facilities, which encompass the following [10] a Import-duty exemptions ("A") b.Income-tax (Pojak Penghasilan - "PPh" facilities for investments within certain business fields andlor certain areas ('B"); . Reductions in corporate PPh (°C); i Reductions in corporate PPh and PPh facilities for investments within certain business fields and/or certain areas within Special Economic Zones (Kawasan Ekonomi Khusus/KEK) (‘D") fe Reductions in gross income for certain research-and-development activities undertaken within Indonesia (“E") f. Reduct n to the implementation of work training, apprenticeships andjor learning activities under the framework of fostering and developing certain competency-based human resources ('F"}; and Reductions in net income for new investments and business expansions within certain business fields that ‘encompass labor-intensive industries ("6") Ins in gross income in relat 2. Nonfiscal facilities, hat are granted in the form of immigration recommendations break down as follows a. Recommendations relating permits (H'), and b Recommendations relating to changes in immigration status, specifically from limited-stay permits to permanent- stay permits ("T) changes in immigration status, specifically from visitor-stay permits to limited-stay Moreover, under Regulation 4/2021, any business actors who have secured the following documents: 1) Business Identification Number (Nomor induk Berusaha —"NIB");2} Standard certificate; and/or 3) Permit, can secure investment facilities in accordance with the relevant laws and regulations(12] In order to secure any of these facilties, = business actor should submit an application via the OSS systemn.[13] A brief elaboration of each of these investment facilities is set ‘out in the following table: Fiscal Facility Remarks Import-duty exemption facilities include the following:{¥4] 1 Import-duty exemptions for imports of the following items: a) Machinery (not including spare parts) for industrial construction or development; b) Goods and materials for industrial construction or A development; c} Capital goads within the context of the construction or development of electrical power generation infrastructure in the public interest; and and/or exemptions from value-added tax for imports of goods under the framework of a contract of work (kentrak karya/KK) or 2 caal mining concession work agreement (perjanjian korya pengusahaan pertambangan batubara/PKP2B};Must comply with provisions set out under the relevant regulations, for example: I) Regulation of the Minister of Finance No. 11/MX.010/2020 on the Implementation of Regulation of the Government No. 78 of 2019 on Corporate Income-Tax Facilities for Investments Within Certain Business Fields andlor in Certain 8 Areas (‘Regulation 11/2020°)[IS], 2s amended by Regulation of the Minister of Finance No. 96/PMK010/2020 (‘Regulation 96/2020")[16|, and 2) Regulation of the BKPM No. 5 of 2020 on Procedures for the Submission of Offline Applications for Corporate Income-Tax Facilities for Investments Within Certain Business Fields and/or in Certain Regions (‘Regulation 5/2020")17\/18) Must comply with the provisions set out under the relevant regulations, for example: !) Regulation of the Minister of Finance No. 150/PMK.010/2020 on the Granting of Corporate Income-Tax Deduction Facilities; 2) Regulation of BKPM No. 7 of 2020 on Details of Business Fields and Types of Pioneering Industry Production and Procedures for the Provision of Corporate Income-Tax Deduction Facilities 13] Must comply with provisions set out under the relevant regulations, for example: 1) Regulation of the Minister of Finance No. 237/PMK.010/2020 on Tax, Customs and Excise Treatments in Special Economic Zones, as amended by Regulation of the Minister of Finance No. 33/PMK010/2021; and 2) Regulation of BKPM No, 2 of 2021 on Procedures for Determining the Fulfillment of Criteria and the Offline Submission of Income-Tax Facility Applications Within Special Economic Zones.[20] Must comply with provisions set out under the relevant regulations, for example: Regulation of the Minister e of Finance No, 153/PM/010/2020 on Provisions on Reductions in Gross Inco Development Activities Undertaken Within Indonesia ("Regulation 153/2020")[21} [22 me for Certain Research-and Must comply with provisions set out under the relevant regulations, for example: Regulation of the Minister . of Finance No. 128/PMK/o10/2019 on the Granting of Deductions in Gross Income for the Organization of Work Practice, Internships and/or Learning Activities in Relation to the Building and Development of Certain Comperence-Based Human Resources ("Regulation 128/2019")(231 24] Must comply with provisions set out under the relevant regulations, for example: Regulation of the Minister of Finance No. 16/PMK.010/2020 on the Granting of Net Income Deduction Facilities for New Investments or Business Expansions Within Certain Business Sectors Classified as Labor-Intensive Industries ("Regulation 16/2020")[25],26] Furthermore, nonfiscal facilities can be granted in the form of immigration recommendations, as elaborated upon the following table: Investment fectty | Remarks Recommendations for a changes to the status of visitor-stay permits to a limited-stay permits can be issued to: Foreign citizens as shareholders who serve as directors or commissioners of companies; and 2. Foreign citizens as shareholders whe do net serve as directors or commissioners of companies. Said foreign citizens as shareholders must meet the following criteria 427) Must be a shareholder and may also be serving as a director or commissioner in the relevant company with a provision of share ownership amounting to at least Rp. | billion or its equivalent in United States dollars, as stated in the relevant deed; or 2, Must be a shareholder but isn’t either a director or a cormmissioner in the relevant company with 2 provision of share ownership amounting to at least Rp. 1125 billion of its equivalent in United tes dollars, as stated in the relevant deed,Recommendations for changes to the status of limited-stay permits to permanent-residency permits ‘can be issued to foreign citizens as shareholders who serve as dire not hold said positions, in line with the following criteria commissioners of who do Must be a shareholder and may also be serving as a director or commissioner in the relevant 28) company with a provision of share ownership amounting to at least Rp. | billion or its equivalent in United States dollars, as stated in the relevant deed: or 2. Must be a shareholder but isr't either a director or a commissioner in the relevant company wit a provision of share ownership amounting to at least Rp. 10 billion or its equivalent in United States dollars, as stated in the relevant deed Regulation 4/2021 has been in force since 2 June 2021. (A) [1] For more on Regulation 5/2021, see IL No. 4078. [2] Art. 101 (2), Regulation 4/2021 [5] Regulation 6/2018 was briefly discussed in ILB No. 3423, [4] Regulation 1/2020 was briefly discussed in ILB No. 3861 [5] Regulation 6/2018 did not previously incorporate any provisions that addressed UMKM capital [an 1 (2}, Regulation 4/2021 [7] Under Regulation 6/2018, the provisions that addressed issued and paid-up capi disetor) set an amount of Rp. 25 bllion. {modal ditempatkan dan modal [e] Art. 12 (2), Regulation 4/2021, [9] Art.12 (3), Regulation 4/2021 [NO] Art. 4 (4), Regulation 4/2021. Under the previous framework of Regulation 6/2018, fiscal facilities were divided up as follows: 1) Import-duty exemptions for machinery; and 2} Import-duty exemptions for goods and materials (Art. 14, Regulation 6/2018) {M] Art. 4 5), Regulation 4/2021 {12] Art. 66 (1), Regulation 4/202 115] Art. 66 (3), Regulation 4/202 (14) Art. 67 0), Regulation 4/2021 [15] Regulation 1/2020 was briefly discussed in IL8 No. 3818 [N6) Regulation 96/2020 was briefly discussed in ILB No. 3925. 1071 Regutation 5/2020 was briefly discussed in ILB No, 4017. [1a] art. 75, Regulation 4/202 19) Art. 76, Regulation 4/202 [20] Art.77, Regulation 4/2021 [21] Regulation 153/2020 was briefly discussed in ILB No. 3986, [22] Art.78, Regulation 4/202 [23] Regulation 128/2019 was briefly discussed in IL B No, 3703, [24] Art. 79, Regulation 4/2021 [25] Regulation 16/2020 was briefly discussed in ILB No. 3840, [26] Art. 80, Regulation 4/2021 [27] Art 83 (2-3), Regulation 4/2021[28] Art. 84 (2-3), Regulation 4/2021