May

19

New Minimum Requirements of Paid-Up Capital & Investment for Foreign Direct Investment (PMA)

On April 1st, 2021, the Investment Coordinating Board (“BKPM”) had issued regulation No. 4 of 2021 concerning Guidelines and Procedures for Risk-Based Licensing and Investment Facilities (“BKPM Regulation 4/2021”) following the changing approach related to licensing from a commitment-based system to risk-based system, as stipulated in Law No. 11 of 2020 concerning Job Creation. Though the above-mentioned regulation is mainly about government services on licensing issuance, it also covers other government services related to Investment Facilities and their requirements. Two of the amended provisions are regarding minimum requirements for investment and issued/paid-up capital of several types of businesses, including those which are operated by foreign direct investment companies (“PMA”).

Article 12 section (7) of BKPM Regulation 4/2021 has stated explicitly that the minimum issued/paid-up capital for PMA, other than the required minimum investment (which will be mentioned below), is at least Rp.10.000.000.000,00 (ten billion Rupiah) unless stipulated otherwise by the Indonesian positive laws. The amendment mentioned above is a drastic shift from the present regulation that required only a minimum total of  Rp.2.500.000.000,00 (two billion and five hundred million Rupiah) as issued/paid-up capital, or 25% of the minimum required authorized capital for PMA.

The said regulation further stipulates that the amount of investment required for every five-digit code of Indonesia Standard Industrial Classification / KBLI (outside lands and buildings) is more than Rp.10.000.000.000,00 (ten billion Rupiah) excluding a few business sectors in which the minimum requirements are regulated separately in Article 12 section (5). The specialized requirements are as follows:

Business Sectors Minimum Investment  
Wholesale Trade > Rp.10.000.000.000,00 (ten billion Rupiah) outside lands and buildings for every 4 first-digit code of KBLI
Food & Beverage Services > Rp.10.000.000.000,00 (ten billion Rupiah) outside lands and buildings for every 2 first-digit code of KBLI
Construction Services (consultation services, construction works, or integrated construction works) > Rp.10.000.000.000,00 (ten billion Rupiah) in one project outside lands and buildings for every 4 first-digit code of KBLI
Industry services that produce several different products categorized in different five digit-code KBLI in 1 line of production > Rp.10.000.000.000,00 (ten billion Rupiah) outside lands and buildings
Property Construction and Business with property unit types including:
a.      A whole building or integrated residential complex; > Rp.10.000.000.000,00 (ten billion Rupiah) including lands and buildings
b.      A unit not as a whole building or integrated residential complex > Rp.10.000.000.000,00 (ten billion Rupiah) outside lands and buildings
The legal entities exempted from the said condition as mentioned in Article 13 juncto Article 9 section (1) alphabet c and d, section (3) and (4) of BKPM Regulation 4/2021 are:
  • Representative Offices, defined as an Indonesian person or a person of foreign nationalities or a business entity which is a representation of a foreign entrepreneur who has obtained approval of office establishment in the territory of the Republic of Indonesia.
  • Foreign Business Entities, defined as any foreign business entity incorporated outside of the Republic of Indonesia’s territory and is conducting business and/or activities in specified sectors.
BKPM Regulation 4/2021 will be effective from June 2, 2021, and is a non-retroactive regulation. This means that such requirements will apply only to PMA licensing applications submitted and approved after the aforementioned enactment date. Furthermore, no other regulations, formal instruction, or circular letters have been issued related to PMA which have been established after the issuance of the said regulation but have not yet submitted any licensing application.

Should you need legal advisory or consultation for investment in Indonesia, please do not hesitate to contact us or drop us an email at info@schinderlawfirm.com.

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