Investment Cluster – What You Need To Know[1]

On 2 November 2020, the President of the Republic of Indonesia enacted the Law No. 11 of 2020 on Job Creation (known as “Omnibus Law”). We set out below some crucial changes regulated under the Omnibus Law that have impacts on the investment law.

1. The central government provides taxation related facilities to an investor who conducts a new business or expands the business. To obtain the facilities, the investor should fulfill the following criteria:

• the business hires numerous labor
• the business is categorized as high priority
• the business is categorized as infrastructure development
• the business provides the technology transfer
• the business is categorized as pioneer industry
• the business is located in remote areas, underdeveloped areas, border areas or other areas deemed necessary
• the business preserves the environment
• the business carries out research, development and innovation activities
• the business is in partnership with micro, small, medium enterprises or cooperatives
• the business is an industry using capital goods or machinery or equipment produced domestically
• the business is categorized as tourism business development

The Omnibus Law requires all items above to be fulfilled in order to provide the investor with taxation related facilities. It remains to be seen how the government will address the implementing regulations on the above matters.

2. The Omnibus Law stipulates a new concept of business licensing processes by determining the risk of each business activity based on its hazard level and potential hazard value. There are 3 types of business licensing as follows:

• Low risk business activity. This requires a company to obtain a Business Identification Number (Nomor Induk Berusaha “NIB”) only to conduct the business activity.
• Medium low-risk business activity or medium high-risk business activity. This requires a company to obtain the NIB and standard certification. For the medium low-risk business activity, the standard certification is a statement of the company stating that it has fulfilled the requirements to operate the business. For the medium high-risk business activity, the standard certification is issued by the central or regional government based on their verification of the fulfillment of the requirements to operate the business.
• High risk business activity. This requires a company to obtain the NIB and business license. Please note that if the government is of the view that the company operating the high risk business activity needs business standardization, the company should also obtain the business standard certification and a product standard certification from the central or regional government.

This new business licensing concept is significantly different from the previous business licensing processes. It remains to be seen how the government will address and implement this new concept in the implementing regulations.

3. The Omnibus Law simplifies the business licensing processes by:

• issuing first approval on the suitability between the business activity and the spatial zone on its project location.
• simplifying the requirements to obtain the environmental approvals
• simplifying the requirements to obtain a building approval and a certificate of eligibility to function (sertifikat laik fungsi – SLF).

Please see our elaboration on the 3 items above under our “Legal Updates on Omnibus Law – Land Development Cluster”.

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Do let us know if you have any questions regarding the above. You may contact our Partner, Hamdi, at: s.hamdi@b-av.co. We are happy to help.

Best regards

BATAVIA ADVOCATORUM (B.Av)

[1] This publication is for general information only. Any use and belief on the material contained herein is at the user’s own risk. You should contact our lawyer to discuss the above issue further. B.Av’s publications are copyrighted and may not be reproduced without the express written consent of B.Av.