Indonesian Law | Hukum Indonesia - Blog: Foreign Investment New Licensing System in Indonesia

Tuesday, July 31, 2018

Foreign Investment New Licensing System in Indonesia

Following the issuance of Indonesia Government Regulation No. 24 of 2018 (“Regulation 24”) the licensing authority for most of business fields, in this case for foreign investment company, has been transferred from Capital Investment Coordinating Board ("BKPM") to OSS Body. The OSS stands for Online Single Submission. The OSS Body is currently under the administration of Indonesia Coordinating Ministry for Economic Affair. Nevertheless, there are still some permits and licenses which are remained under the authority of BKPM especially licenses for certain business fields in the energy and mineral resources sector, public works and public housing sector, and financial sector. BKPM is also still processing application for foreign company representative office license, branch office license if its business license was issued by BKPM’s Central PTSP, recommendation for a Limited Stay Visa (VITAS) for shareholder(s), recommendation for upgrading a Visit Stay Permit into a Temporary Stay Permit (ITAS), and recommendation for upgrading a Temporary Stay Permit to a Permanent Stay Permit (ITAP).

Business Fields and Limitations on Foreign Investment

Not all business fields are ‘open’ to foreign investment. The latest regulation concerning limitation on foreign investment (which usually referred to as ‘Negative Investment List’) is President Regulation Number 44 year 2016 (and may, at the time of writing, be revised again). This regulation provides what business sectors are completely ‘closed to’ investment or ‘conditionally open’ (meaning that they are subject to foreign ownership limits or require special arrangements).

The OSS System 

The OSS System is an electronically integrated business licensing system, managed by the OSS Body and it can be found here: In general, the OSS System is launched to simplify the processing and issuance of business licenses and permits, either for foreign-owned investment company or domestic-owned company.

To use the OSS System, business owners must firstly create their OSS account in the OSS System.

NIB or Business Identification Number 

After the business owners have registered and created their OSS accounts, the very first step that the business owners must do is obtaining Business Identification Number or the “NIB” (Nomor Induk Berusaha). The NIB is a business identity issued by the OSS Body and is a mandatory requirement for obtaining other licenses through the OSS System. The NIB also serves as Company Registration Certificate (“TDP” – Tanda Daftar Perusahaan), Importer’s Identification Number (“API” - Angka Pengenal Importir), and customs access (Akses Kepabeanan).

Business License 

The issuance of a Business License by the OSS Body through the OSS System is based on a mechanism compliance commitment. This means that the OSS Body will automatically issue the Business License after the business declares its commitment to obtain the prerequisite permits, such as location permit, environmental permit, and any other permit (if required). After obtaining the Business License, the business can start commencing activities such as:

  • land procurement and changing of land size; 
  • construction and operation of buildings; 
  • procurement of equipment and facilities; 
  • obtaining certification; 
  • hiring employees; 
  • production testing (commissioning); and 
  • commencement of production. 

The business will receive a notification from OSS Body regarding activation of the Business License, after the commitment of location permit, environment permit, building permit, functionality certificate (“SLF” – Sertifikat Laik Fungsi) and other requirements have been fulfilled, including payment of invoices incurred (if any).

Commercial License / Operational License 

There are particular businesses or companies that must obtain a Commercial/Operational License in order to start operational activity. The issuance of a Commercial/Operational License by the OSS Body through the OSS System is based on a mechanism compliance commitment similar to Business License issuance.

For obtaining the Commercial/Operational License, the business must fill out commitment form to complete Operational/Commercial license within a specific timeframe. This is in the form of a commitment to fulfill:

a. standard, certificate and/or license; 
b. registration of goods/services; and/or 
c. customs and taxation registration, 
in accordance with the type of goods and/or services commercialized by the business. 

The OSS Body will automatically issue the Operational/Commercial License after the commitment statement is filled but shall take effect after the commitment has been fulfilled, including payment of invoices incurred (if any).

By: tnrlawfirm

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