There is a report that must be submitted by the investors which is is a foreign investment activity report or known as “LKPM”. This is a mandatory pursuant to the Article 5 Point c BKPM Chairman Regulation Number 5 Year 2021 on Guidelines and Procedures for Supervision of Risk-Based Business Licenses.
The obligation to submit LKPM is for all of the business ow which comprises of an individual, business entity, representative office, and foreign business entities that carry out business activities and/or activities in certain fields (“Business Actor”). However, the LKPM’s obligation does not apply for (i) micro–Business Actor; and (ii) upstream oil and gas business, banking, institutions non-bank finance, and insurance.
The LKPM is reported online through Online Single Submission (OSS) system for each permit (or business activity) and/or location periodically with the following conditions:
- small scale business and Representative office (in this case KP3A and KPPA) shall submit the report every 6 (six) months within 1 year reporting or per semester with following provision:
- Semester I prior 10th of July
- Semester II prior to 10th of January in the following year
- medium and large-scale business shall submit the report every 3 (three) months (quarterly with the following provision:
- Q1 prior to 10th April
- Q2 prior to 10th July
- Q3 prior to 10th October
- Q4 Prior to 10th January
- Construction representative office (BUJKA), Representative office of foreign electric power support services and head of foreign business entity shall submit the report at latest on 10th of January in the following year
The officials who have authority to verify and evaluate the LKPM may request for an explanation from the Business Actor or request an improvement toward the LKPM. If the Business Actor does not make any improvement as requested, it will be deemed not submitting the LKPM.
What needs to be reported in LKPM?
LKPM shall be submitted with the detail of the company which includes to:
- the realization of investment with the currency as provided in the business license;
- realization of labor which comprises of the total of Indonesian and foreign worker, excluding the board of commissioners and board of directors;
- realization of production including export value;
- partnership obligation and other obligation related to the implementation of Investment submitted by business actors individuals and business entities, including but not limited to the obligation of:
- divestment (if required by applicable law);
- social security of employment (BPJS Ketenagakerjaan);
- partnership with small, medium, and enterprise (SME) (if required by applicable law);
- training for Indonesian worker companion which will replaced the foreign employee;
- corporate social responsibility;
- obligation of environment’s management
- problems of the company. It can be filled with problems and/or obstacles/obstacles that arise in the implementation of activities, such as land issues, labor issues, and other problems deemed necessary to be reported as well as the efforts that have been made as well as suggestions/proposed solutions, as well as an explanation of project progress.
For the realization of the investment, there are two components that needs to be reported which are the working capital and fix capital. The explanation of both components is elaborated as follow:
- Working capital is filled in if there is an increase in the realized value of the expenditure of raw or auxiliary materials, land/building/vehicle rental costs, employee salaries/wages, operational costs (electricity, water, telephone), company overhead costs.
- The fix capital consists of:
- Land acquisition is the cost of purchasing land and the cost of land maturation (land clearing, cut and fill, etc.) in the project location.
- Construction of buildings including renovation or addition of new buildings that do not have an impact on increasing production capacity.
- Procurement of equipment/facilities/machinery including replacement/addition of new machines/equipment which does not have an impact on production capacity according to Business Licensing, both imported and local purchases including environmental pollution prevention equipment, machine/equipment purchase price plus shipping and installation costs