Foreign investment activities are a powerhouse for the country’s economy. So, of course, the provisions in the Investment Law and the Indonesian Negative List play an essential role in guiding foreign investors to carry out investment activities in the Republic of Indonesia.

Investors must understand the intricacies of business licensing and its derivatives such as environmental permits and other related licenses. Recently, the Indonesian government officially implemented the Approval of the Suitability of Space Utilization Activities or Persetujuan Kesesuaian Kegiatan Pemanfaatan Ruang (“PKKPR”). This PKKPR is regulated in Government Regulation No. 21 of 2021 regarding Spatial Management. A PKKPR is a type of permit that acts as a substitute for location permits and space utilization permits in building and managing land.

In accordance with Article 1 point 1 of the Regulation of the Minister of Agrarian Affairs and Spatial Planning/National Land Agency No. 17 of 2019, a location permit is a permit that is given to business entities to obtain land needed for their business and/or activities and also applies as a permit to acquire/transfer rights and to use the land for other business purposes and/or activities. Furthermore, the definition of acquisition of land rights according to Article 2 paragraph (2) letter b of Law No. 20 of 2000 explains the acquisition of land and building rights include the relinquishment or pelepasan hak.

Indonesian Agrarian Law (Law No. 5 of 1960) does not allow a Limited Liability Company (PT) to hold Right of Ownership or Hak Milik (“HM”) except for certain legal entities determined by the government. One of the land rights that a PT can obtain is the Right to Build or Hak Guna Bangunan (HGB). Furthermore, if a PT wants to acquire land with HM title, the original owner (seller) relinquishes its rights over the land to the State and the buyer can apply to the State for the intended primary title to the land. Relinquishment is done if the seller intends to change the land title granted upon the land.

The Relinquishment Deed and PKKPR have a close relationship where PKKPR is a prerequisite to create the deed. If you would like a consultation regarding both matters or have other questions, please get in touch with us at info@schinderlawfirm.com.