Operating a foreign investment company in Indonesia involves understanding and complying with various regulations. One of the key aspects of these regulations is the PT PMA reporting requirements.
These requirements, while detailed, are crucial in ensuring that your company aligns with Indonesian laws and standards. They’re going to help you navigate the compliance landscape more effectively.
One of the key PT PMA reporting requirements is the LKPM (Investment Activity Report).
1. LKPM (Investment Activity Report)
The LKPM is a periodic report that details the progress of investment and any issues faced by businesses. It tracks the progress of investment realization and any problems encountered. Also known as Laporan Kegiatan Penanaman Modal, this report is crucial for business entities in Indonesia.
Business actors report the LKPM online through the Online Single Submission (OSS) system. This applies to each permit or business activity and location. This means that if your business entity operates in multiple locations or has multiple permits or business activities, each one will require a separate LKPM report to be submitted through the OSS system.
Comprising two main components, the LKPM includes:
- LKPM for the construction or preparation stages. This is for business activities that are not yet in production or commercial operation.
- LKPM for the operational or commercial stages. This is for business activities that are already producing or operating commercially.
Submission of the LKPM takes place every 3 (three) months (quarterly) with the following due date:
- Q1 prior to 10th April
- Q2 prior to 10th July
- Q3 prior to 10th October
- Q4 prior to 10th January
Officials with the authority to verify and evaluate the LKPM have the right to request a further explanation from the business entity. They may also ask for improvements to be made to the LKPM.
If the business entity does not make the requested improvements, it will be considered as a failure to submit the LKPM.
Key Components of the LKPM Report
LKPM shall be submitted which includes the following information:
- Investment Realization. This refers to the actual investment made, denoted in the currency specified in the business license.
- Labor Realization. This includes the total number of Indonesian and foreign workers, excluding the board of commissioners and board of directors.
- Production Realization. This covers the total production output, including the value of exports.
- Partnership and Other Obligations. These are obligations related to the implementation of the investment. They are applicable to both individual business actors and business entities, and may include:
- 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 who will replace the foreign employee
- Corporate social responsibility
- Environmental management obligations
- Company Issues. This section should detail any problems or obstacles encountered during the implementation of activities. This could include issues related to land, labor, or other challenges deemed necessary to report. It should also include the efforts made to address these issues, proposed solutions, and an update on the progress of the project.
Penalties for Failure to File the LKPM
Business actors are required to submit the LKPM report regularly. Failing to do so can lead to consequences. If a business actor does not submit the LKPM report for two consecutive periods, this is considered a minor violation.
Minor violations are taken seriously. They can lead to sanctions. The sanctions for not submitting the LKPM report can take the form of written warnings. These can be a first, second, or even third warning.
- The first written warning is given within a period of 30 (thirty) days.
- The second written warning is given within 15 (fifteen) days.
- The third written warning is given within a period of 10 (ten) days. This warning is sent via the OSS System. Additionally, the business actor is notified about this warning through electronic mail.
Business actors are required to:
- Responding to warning letters through the OSS System; and/or
- Carry out the fulfillment of obligations, responsibilities, and other provisions in accordance with the laws and regulations.
Companies are required to submit the LKPM according to a specific reporting period. If they fail to do so, BKPM will send a warning letter to the company. If a company does not respond to 3 (three) consecutive warning letters, it may face serious consequences. These can include sanctions like the cancellation or revocation of the company’s licenses.
For more info on the Filing of an LKPM, please click here.
2. Annual Tax Return
The annual tax return is based on the Director General of Tax regulation Number Per-01/PJ/2016. This regulation outlines the procedure for Annual Tax Reporting.
The annual tax return, also known as SPT (Surat Pemberitahuan Tahunan), covers one fiscal year or part of a fiscal year. It includes both individual income tax returns (annual tax reporting 1770, 1770 S, 1770SS) and company annual income tax returns (SPT 1771 and SPT 1771/$). Corrections to the annual tax return are also included under this regulation.
The annual tax return must be reported by the end of the fourth month following the end of the fiscal year. This deadline is stated in Article 9 Paragraph 2 of the Minister of Finance Regulation Number 243/PMK.03/2014 jo. Number 9/PMK.03/2018 Regarding Annual Tax Return.
If the director is unable to submit the annual report, they can delegate this responsibility to an authorized person. This delegation must be done in accordance with the power of attorney as per the applicable tax law. This is outlined in Article 7 Paragraph 2 of the Minister of Finance Regulation Number 243/PMK.03/2014 Regarding Annual Tax Return.
Companies that fail to submit their annual tax return on time may face penalties. According to Law No. 6 of 1983 jo. Law No. 28 of 2007 on the General Provisions and Procedures of Tax, the tax authority can issue a warning letter and impose a penalty. The penalty amount is Rp1.000.000,- (one million Rupiah).
Compliance with PT PMA Reporting Requirements
Adhering to the PT PMA reporting requirements is an essential part of operating a foreign investment company in Indonesia. By submitting the LKPM and the Annual Tax Return in a timely manner, you can avoid penalties and ensure your company’s smooth operation.
Remember, staying informed and up-to-date with these requirements is the first step toward successful compliance. If you have any questions or need further assistance, don’t hesitate to reach out to our team.
