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As part of phase two of the Indonesian government's economic stimulus package, improving the investment climate for both domestic and foreign investments, and to support the one roof investment services, the head of the Indonesian Capital Investment Coordinating Board (BKPM) has just issued Regulation No. 16 of 2015 on Guidelines and Procedures for Capital Investment Facilities (BKPM Regulation 16/2015), which became effective on 26th October 2015 for central BKPM - the regulation also applies to provincial/regional investment boards, for which it will become effective at a later date. Regulation 16/2015 is one of four regulations issued by BKPM to support phase two of the government's economic stimulus packages.
BKPM Regulation 16/2015 focuses on granting fiscal facilities (which are applied through BKPM) to qualified investors and sectors in the form of:
Import duty exemptions for the import of capital goods;
Import duty exemptions for the import of raw materials for production;
Import duty exemptions for the import of capital goods used by companies engaged in the construction and development of power plants for public use; or
Import duty exemptions or reductions and value added tax (VAT) exemptions or deferral for the import of capital goods used by companies with mining contract of works (KK/PKB2B).
The issuance of BKPM Regulation 16/2015 does not impact the investment facilities the government has already provided to date. Although the import duty exemption or reduction for activities in the construction, power plant and mining (coal contract of works) sectors is a new feature under BKPM Regulation 16/2015, these facilities have already been available under separate regulations.
However, BKPM Regulation 16/2015 indicates that the lead time to process an application for investment facilities is shorter, i.e.:
Application process: 5 business days (previously 7 business days) after a complete application has been submitted; and
Resubmission of application (if there are comments from BKPM): to be submitted within 5 business days after receiving comments from BKPM (previously 10 business days).
It is yet to be seen what would be the average lead time of applications for investment facilities after BKPM Regulation 16/2015 is fully enforced.
New Features
BPKM Regulation 16/2015 now:
Tries to codify several existing regulations on fiscal facilities that have not yet been stipulated in a BKPM regulation, e.g. (i) Minister of Finance Regulation No. 100/PMK.010/2005 on the Procedures of the Grant of Import Duty Exemption and/or Reduction and the Value Added Tax Exemption and/or Suspension on Import of Goods in the Framework of Coal Mining Industry Contract of Works and Agreement of Works, and (ii) Minister of Finance Regulation No. 176/PMK.011/2009 on the Import Duty Exemption on Importation of Machinery, Goods and Materials for the Development and Expansion of Industry in the Framework of Capital Investment as last amended by Regulation of Minister of Finance No. 188/PMK.010/2015.
Thus, it includes (within one regulation) import duty exemption or reduction for activities in the construction, power plants and mining (coal contract of works) sectors - it was previously governed under a separate regulation (please see details below).
Removes the provisions on BKPM issuing a recommendation letter for companies intending to apply for an income tax facility - the provisions on income tax facility are now governed under a separate regulation issued by the Ministry of Finance (although BKPM will still be involved).
Import Duty Exemption for the Import of Capital Goods
Eligible applicants: Companies at the stage of development, expansion or renovation/regeneration.
Eligible sectors:
Eligible goods:
Period of facility: 2 years and can be extended for another year (but the extension should not be longer than the project completion period). An extension application submitted after the expiry date can only be granted an extension period of 1 year less the period of delay in submitting the application.
Transfer or relocation: Subject to approval from the Directorate General of Customs and Excise.
Import Duty Exemption for the Import of Raw Materials for Production
Eligible applicants: Companies at production stage (have obtained business license to operate).
Eligible sectors: Industries that produce goods.
Period of facility:
For companies with less than 30% local content: 2 years and must be applied for no longer than 2 years after obtaining a business license. Companies that have not met their import quota by the end of the facility period can obtain a one-time extension for a period of 1 year.
For companies with at least 30% local content: 2 years and must be applied for no longer than 3 years after obtaining a business license to operate. Companies that have not met their import quota by the end of the facility period can obtain a one-time extension for a period of 1 year.
One issue that may give rise to concerns when applying for this facility is the requirement for applicants to sign a statement letter stating that the machinery that will process the raw materials is not encumbered with security. Previously, in practice, this statement would only be requested if the machinery would be transferred or re-exported. Thus, it appears that companies that have obtained loans to purchase the machinery and encumbered the machinery as security may not be able to comply with the application requirements. It is yet to be seen how BKPM will implement this requirement. Further clarification is needed.
Import Duty Exemption for the Import of Capitals Goods Used by Companies Engaged in the Construction and Development of Power Plants for Public Use
Eligible applicants: PT PLN (the national power company) or/and holders of electricity power supplier business licenses.
Additional requirements: Approval from the Director General of Electricity on the list of goods to be imported.
Period of facility: 2 years and can be extended for a maximum period of 12 months.
Transfer or relocation: Subject to approval from the Directorate General of Customs and Excise.
Import Duty Exemption or Reduction and Value Added Tax (VAT) Exemption or Deferral for the Import of Capital Goods Used by Companies with Mining Contract of Works (KK/PKB2B)
Eligible applicants: Companies holding mining contract of works with the government (KK/PKB2B).
Conditions of facility: Subject to the terms of the contract of works.
Additional requirements: A recommendation from the Director General of Mineral and Coal.
Period of facility: Subject to the terms of the contract of works. Generally it is given annually and will expire every 31st December of each year. Extensions of period will be subject to recommendation from the Director General of Mineral and Coal.
Transfer or relocation: Subject to approval from the Directorate General of Customs and Excise.
Hadiputranto, Hadinoto & Partners, Member of Baker & McKenzie International - 4th November 2015
Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)
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