Is There Any Provision About Minimum Capital for Foreign Investors in Indonesia?

Daftar Isi

“Investment rate and minimum capital provisions are aimed to small and large enterprises including Foreign Investors (PMA).”

The enactment of the Online Single Submission Risk-Based Approach (OSS RBA) brings a shift for business licensing in Indonesia and terms about investment rate are no exception. These matters are specifically regulated by The Investment Coordinating Board Regulation Number 4 of 2021 concerning Guidelines and Procedures for Risk-Based Business (hereinafter stated as BKPM Regulation 4/2021). This regulation regulates that investment rate is divided into micro, small, medium, and large enterprises.

Definition

Micro Enterprises

Micro enterprises are productive businesses owned by individual persons and/or individual business entities that meet the criteria of micro-enterprises as provided in Indonesian Law. (Article 1 number 2 Government Regulation Number 7 of 2021 concerning Relaxation, Protection, and Empowerment of Cooperatives and Micro, Small and Medium-Sized Enterprises (Government Regulation 7/2021)).

Small Enterprises

Small enterprises are productive economic businesses standing alone, done by individual persons or business entities not constituting subsidiaries or not constituting company branches owned, controlled, or becoming direct or indirect portions of Medium or Large Enterprises that meet the criteria of small enterprises as intended in Indonesian Law (Article 1 number 3 Government Regulation 7/2021).

Medium Enterprises

Medium Enterprises shall be productive economic businesses standing alone, done by individual persons or business entities not constituting subsidiaries or not constituting company branches owned, controlled, or becoming direct or indirect portions of Small or Large Enterprises with the number of net assets or annual sales proceeds as provided in Indonesian Law (Article 1 number 4 Government Regulation 7/2021).

Large Enterprises

Large Enterprises shall be productive economic businesses done by business entities with the number of net assets or annual sales proceeds larger than that of Medium Enterprises, including state-owned or privately owned national businesses, joint ventures, and foreign businesses that conduct economic activities in Indonesia (Article 1 number 4 Law Number 20 of 2008 concerning Micro, Small, and Medium Enterprises).

Investment Rate and Start-Up Capital

Micro, Small, Medium Enterprises (UMKM)

The amount of start-up capital for UMKM is regulated on Article 11 paragraph (2) BKPM Regulation 4/2021, in which each scale of the enterprise are allowed to deposit its capital as follow:

Micro Enterprises are allowed to deposit start-up capital maximal 1 trillion rupiahs.
Small Enterprises are allowed to deposit start-up capital from 1 trillion rupiahs until 5 trillion rupiahs;
Medium Enterprises are allowed to deposit start-up capital from 5 trillion rupiahs until 10 trillion rupiahs.

All those amounts do not include land and buildings in business locations.

Large Enterprises

According to Article 12 paragraph (1) BKPM Regulation 4/2021, foreign investors shall be classified as large enterprises. Therefore, foreign investors are obligated to follow the minimal investment rate provision.

The Provision of Investment Rate and Minimal Capital for Foreign Investor

Article 12 paragraph (2) BKPM Regulation 4/2021 regulates that foreign investors are allowed to invest their capital more than 10 trillion rupiahs per 5 digits of Indonesia Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia or KBLI) (exclude lands and buildings).

However, there is a number of exception regarding the minimum investment rate on some business activities as follow (Article 12 paragraph (3) BKPM Regulation 4/2021):

Business Activity on Large Trading
The minimum capital investment rate per first four digits on Indonesia Standard Industrial Classification shall be more than 10 trillion rupiahs exclude land and building.

Business Activity on Food and Beverage Service
The minimum investment rate per first two digits on Indonesia Standard Industrial Classification per two locations shall be more than 10 trillion rupiahs exclude land and building.

Business Activity on Construction Service
The minimum investment rate per first four digits on Indonesian Standard Industrial Classification shall be more than 10 trillion rupiahs exclude land and building in one business activity.

Industrial Business Activity
The minimum capital investment rate for the industrial activity that produces products with different first five digits on Indonesia Standard Industrial Classification on one type of production shall be more than 10 trillion rupiahs exclude land and building.

Business Activity on Construction and Property Development

1. The minimum investment rate for property in the form of a whole building or an integrated housing complex shall be more than 10 trillion rupiahs include land and building; or
2. The property unit that is not in one whole building or one integrated housing complex shall more than 10 trillion rupiahs exclude land and building.

Capital Provision for Foreign Investors (PMA)

Besides the provision regarding the minimum investment rate, foreign investors shall also comply with the paid in and issued capitals provisions which obligate foreign investors to divest their capital of more than 10 trillion rupiahs unless stipulated otherwise by the law (Article 12 paragraph (6) and (7) BKPM Regulation 4/2021).

However, those rated investment and capital provisions are exceptional for representative offices and foreign business entities (Article 13 BKPM Regulation 4/2021).

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Author: Bima Satriojati