capital investment registration

Principle Business License Replaced with Capital Investment Registration

  • InCorp Editorial Team
  • 22 March 2018
  • 5 minute reading time

The Investment Coordinating Board in Indonesia (BKPM) has just made effective of the new changes on January 2, 2018, regulated under BKPM Regulation No. 13 of 2017 (BKPM Reg. 13/2017). This new regulation concerning the Guidelines and Procedures for License and Investment Facilities, has now taken effect at the Central One Stop Services Office of BKPM only. It will soon come into full force at different regions on July 2, 2018. Therefore, existing BKPM regulations for the same subjects will then become invalid.

In this article, we will summarize some of the significant amendments on licensing and investment procedures and regulations come from BKMP Reg 13/2017.

Capital Investment Registration in Indonesia

With effective from January 2, 2018, Principle License (Izin Prinsip, or IP) will no longer be valid. Even though the change might seem mainly cosmetic – the term of Principle License as such is now replaced with Capital Investment Registration (Pendaftaran Investasi, or PI) – there are several changes that will shape your business differently.

The change in the regulation does not concern only Principle License as also Permanent Business License is replaced with  Business License (Izin Usaha, or IU).

Obtaining a Principle License – the former license, was crucial for a foreign-owned company in Indonesia. It was valid for one year during which a company was supposed to realise its investment plan of 10 billion rupiah.

In fact the Principle License served as the initial permission from BKPM to allow foreign company to invest before they could receive the Permanent Business License and truly start a business in Indonesia. However, with the new regulation, a company can directly apply for Business License.

Principle License vs. Investment Registration

The replacement of Principle License with Investment Registration is beneficial to most foreign investors. The effort by BKPM is to facilitate a more effective registration process (as compared to the previous lengthy bureaucratic process), and make investments less difficult for foreigners.  

This breakthrough mark taken by BKPM is the sequel of the implementation of Presidential Regulation No. 91/2017. The following lists the primary changes:

BEFORE – Principle License

Entrepreneurs were supposed to apply for Principle License before the legal establishment of entity in Indonesia, and signing of the Article of Association and obtaining Deed of Establishment. After obtaining Principle License, it was mandatory to realize the investment (IDR 10 billion) before running the business.

AFTER – Capital Investment Registration

Capital Investment Registration might be obtained before or after the establishment of a legal entity. It is determined by the signing of Article of Association and Issuance of Deed of Establishment.

Even though it is necessary for businesses to certain extent, if a legal entity meets the following criteria, it is obliged to apply for Capital Investment Registration before the entity establishment.

  • Business activities requiring physical construction
  • Business fields with the possibility to obtain Capital Investment facility according to the applicable regulations
  • Business activities that will potentially cause damage or pollution to the environment
  • Business activities related to natural resources, stated defense, energy and infrastructure
  • Business activities subject to certain sectoral requirement in accordance to prevalent regulations

One noteworthy piece of information is that trading or management consulting businesses or their related activities do not require the capital investment registration. They can directly apply for Business License. Thus, the company is ready to commence a business.

Good News for Investors

Head of BKPM, Thomas Lembong, commented that with the new regulation came into place at the beginning of 2018, there will be target growth of 10-14% (y/y) of domestic and foreign direct investments in Indonesia in the same year—particularly for service and e-commerce sectors.

With the mechanism of registration upgraded by BKPM, the process of issuance of Capital Investment Registration will be accelerated greatly with increased efficiency. The whole process of Capital Investment Registration takes only one working day, much shorter than the time needed for the application of Principle License, which previously took three working days.

On A Final Note

There will be a series of innovations and improvements coming from BKPM—especially through digitalization—in an effort to speed up and simplify the process for investment licensing matters, in order to achieve the paperless investment licensing and support the single submission online program.

Speak to our experts at Cekindo now if you have any questions regarding the recent revision of BKPM regulations.

old version:

Principle License Capital Investment Registration
– Necessary for businesses to certain extent. However, if a business meets the following criteria, it is obliged to apply for Capital Investment Registration before the entity establishment.It is required to apply for only when business investments meets such criteria:

  • Business activities requiring physical construction
  • Business fields with the possibility to obtain Capital Investment facility according to the applicable regulations
  • Business activities that will potentially cause damage or pollution to the environment
  • Business activities related to natural resources, stated defense, energy and infrastructure
  • Business activities subject to certain sectoral requirement in accordance to prevalent regulations

One noteworthy piece of information is that trading or management consulting businesses or their related activities do not require the capital investment registration.
Principle License use SPIPISE as its registration system Registration system is upgraded to NSWI
Valid for 1 to 5 years depending on the business nature Valid for 1 to 5 years depending on the business nature
Presentation at BKPM is mandatory, including an interview session No presentation is required. However, a short interview to answer questions to BKPM is necessary

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Get in touch with us.

Lead Form

Disclaimer: The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind.

We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials.

We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.

Frequent Asked Questions

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.