General Overview on Indonesian Licensing Reformation

The Indonesian government has recently launched Government Regulation No. 24 Year 2018 regarding the Electronic Integrated Business Licensing Service (“PP No. 24/2018”), which introduces a new era of licensing through the system called Online Single Submission ("OSS").

PP No. 24/2018 has been effective in force since 21 June 2018 and since then, Investment Coordinating Board ("BKPM") as the institution which issued investment licensing has stopped issuing the licenses. It is reinforced by legal opinions issued by the Attorney General's Office Republic of Indonesia through Letter of Kejagung No. B309/2018 which the opinion mentioned that any licenses issued by BKPM after PP No. 24/2018 is enacted are void by law. Thus, all investors shall apply for business licenses through the OSS system.

OSS is an online-based service for business licensing in Indonesia, which will become a one-stop service for licensing system replacing the previous licensing service system. Under the OSS era, the applicant (or investor) will be able to apply for a business license, and commercial and/or operational license to the OSS institution.

Pursuant to PP No. 24/2018, an OSS institution defines as a non-ministerial institution that conducts governmental affairs in the investment coordinating field. Although PP No. 24/2018 does not clarify specifically what the institution is, BKPM Regulation No. 6/2018 defines that OSS Institution is managed and operated by BKPM. However, the system will be temporarily managed under the Coordinating Ministry of the Economy[1] until the system is well established to be later managed and operated by BKPM.

Besides the OSS system, PP No. 24/2018 also introduces Business Identity Number (“NIB”). Prior to securing business licenses, commercial licenses, and/or operational licenses, the company is required to obtain NIB via the OSS system. A NIB is a 13-digit secure number that will serve as the identity of a business and which can be used in order to apply for business licenses, commercial licenses, and/or operational licenses via the OSS.[2]

Furthermore, in the matter of stages in obtaining licenses, the government has divided it into three stages, which are registration, granting the business license, and granting the commercial or operational license. To be able to obtain the business license and commercial and/or operational license; the investor shall fulfill commitments that will be further regulated under minister regulation. For certain business activities, OSS will issue the business license, a commercial or operational license that has not yet been effective until the investor or company can fulfill the commitments required by the relevant authority or Ministry.

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The license that has been reformed particularly in the sector:[3]

1. electricity;
2. agriculture;
3. LHK;
4. PUPR;
5. marine and fisheries;
6. health;
7. medicine and food;
8. industry;
9. trading;
10. transportation;
11. communication and information technology;
12. finance;
13. tourism;
14. education and culture;
15. higher education;
16. religious;
17. employment;
18. police;
19. cooperatives and SMEs; and
20. nuclear

The sector that is not regulated under PP No. 24/2018 as aforementioned is carried out based on the applicable regulation based on each sector. The business sectors that are not mentioned are in the sector of mining and banking.

What is Business Identity Number (Nomor Induk Berusaha/"NIB")?

Pursuant to Article 1 Number 12 PP No. 24/2018, NIB is the identity of the company/investor issued by the OSS institution after the company/entrepreneur has registered themselves into the OSS system.

NIB also applies as Company Registration Certificate (TDP), Import Identification Number (API), and Custom Identification Number (NIK), as well as automatically register to the Social Security for Health and Manpower (BPJS Kesehatan dan BPJS Ketenagakerjaan) participants if the company has not yet registered under BPJS.[4] This NIB will valid insofar as the company is operating the business pursuant to the prevailing laws[5].

NIB is obtained online which required the company (or can also be applied by a third party such as a notary or agency) to submit the application through the OSS website. To be able to get the NIB, the company shall have the following documents:

1. Deed of Establishment which has been approved by the Ministry of Law and Human Rights Republic of Indonesia;
2. The copy of the identity of shareholders, directors, and/or commissioner; and
3. Tax Identification Number ("NPWP") of the company. In case the company has not yet obtained the NPWP, the OSS system can process the issuance of the NPWP’s number[6]

As mentioned earlier that NIB also applies to TDP, API, and NIK. In this article, we will describe the new arrangement of TDP, API, and NIK under the OSS era as below.

NIB as Business Registration Certificate/TDP

The obligation of business registration has been mandated since 1982 by Law No. 3 Year 1982 regarding Mandatory Company Registry (“Law No. 3/1982”). The purpose of the business registration is to record the information of the company and as the official source for all parties regarding the identity, data, and/or any other information as listed in Company Register in order to guarantee the business certainty.

Since TDP has reformed into NIB, as consequence, the Minister of Trade issued a new regulation on TDP which is, Minister of Trade Regulation No. 76 Year 2018 regarding Company Registration (“Permendag 76/2018”). Under such regulation, it is mentioned that the company shall obtain NIB through an OSS institution which is also valid as TDP[7]. A company that has NIB shall include, install, or put the NIB in a place that is easily read and seen by the public, such as on signboards and company documents.[8]

The following provisions are also applied to NIB as TDP[9]:

1. NIB is the ratification of TDP;
2. NIB as TDP will be valid insofar as the validity of the NIB itself; and
3. OSS institution is the place to register a company registration;

Referring to the transitional provisions of Permendag No. 76/2018, it is mentioned that the company that already has TDP based on the previous regulation is required to register the company registration in accordance with Permendag No. 76/2018 no later than two years after the issuance of the Permendag No. 76/2018 which will be the due date on July 20, 2020.

NIB as Importer Identification Number/API

Minister of Trade is issued Minister of Trade Regulation No. 75 Year 2018 regarding Importer Identification Number (“Permendag No. 75/2018”) as the implementation of PP No. 24/2018. Pursuant to this regulation, some previous provisions are changed as follows:

1. Previously, either BKPM, the Directorate of General, or the Head of Province Office can issue the API. Now, API is issued by OSS Institution as NIB. However there is exceptional that (i) API-U to import foreign banknotes; and (ii) API-P for the business entity or contractor in energy, oil and gas, mineral and other natural resources which run the business based on the partnership agreement with the government of Republic of Indonesia are issued by Directorate of General on behalf of Ministry of Trade until both of API are regulated under OSS Institution;
2. The validity of API is no longer regulated. Previously, the validity of API is regulated for five years since the issuance of the API and shall do re-registration at the latest 30 (thirty) working days after the expiration date;
3. Permendag No. 75/2018 is no longer regulated and the director of the company can appoint and grant power of attorney to the person who can sign import documents on behalf of the company. Previously, the director of the company can assign a person by power of attorney to sign day-to-day import documents on behalf of the company;
4. On the new regulation, API can be temporarily revoked if the importer who owns API does not (i) report the import realization; (ii) inform correct information or data on the application of API; (iii) be responsible for the imported goods; (iv) obey to the applicable law in import sector; and if importer; and (v) misusing import documents and letters relating to imports. However, the API can be reactivated if the importer has reported the import realization. Meanwhile, the API shall be temporarily revoked for one year if the importer violates the provisions paragraph (ii) until (v) as mentioned above; and
5. NIB as API can also be revoked if the importer who owns API (i) carries out business and/or activities that are not in accordance with the NIB that applies as an API and/or (ii) null and void based on the court decision that has binding legal force. The company that still has the intention to do the import activity can re-apply for API after two years since the revocation of the API.

Furthermore, on the transitional provision, it is regulated that an importer who has obtained API based on previous regulation shall register to OSS Institution to get NIB which is also valid as API within 6 (six) months since the issuance of Permendag 75/2018 which is the due date on 20 December 2018.

NIB as Custom Access

The company that has NIB issued by the OSS system and has valid custom access is treated as the company that has done the custom registration. The custom access is only valid for importers and/or exporters.[10] Furthermore, on the transitional provision, the Custom Access issued before the enacted of the PMK 71/2018 is declared as valid until the expiration of such license.

[1] Article 105

[2] Article 24 and Article 25 PP No. 24/2018

[3] Article 84 - 89 PP No. 24/2018

[4] Article 26 and Article 28 PP No. 24/2018

[5] Article 25 (2) PP No. 24/2018

[6] Article 23 PP 24/2018

[7] Article 3 Permendag No. 76/2018

[8] Article 5 Permendag 76/2018

[9] Article 27 PP No. 24/2018

[10] Article 2 and 3 PMK No. 71/2018