It is a must to Foreign Investment Company (PMA Company) in Indonesia to secure Principle License from the Indonesia Investment Coordinating Board (Badan Koordinasi Penanaman Modal or “BKPM”). However, getting the Principle License does not necessarily grant any permission for PMA Company to start commercial activities, because the Principle License only applies for preparation phase.
Therefore, as stated on the Head of Indonesia Investment Coordinating Board No. 15 of 2015 on Licensing and Non Licensing Procedures (“BKPM Regulation No.15/2015”), every PMA Company that wants to start its operation/commercial phase should get Permanent Business License (Izin Usaha Tetap or “IUT”) from the BKPM.
What is IUT and Why PMA Company Need it?
Under BKPM Regulation No.15 of 2015, IUT is defined as compulsory license given by the BKPM for PMA Company which wants to start its production/operation on goods or service except determined otherwise by the law and regulations.
Obtaining IUT is important, not only to get permission to start their commercial activities but also to obtain more facilities from the BKPM, for example: import facilities, tax relief and so forth. Every related governmental institution always asks IUT if the PMA Company comes to their institution for applying every further license for operation. IUT also always be one of requirements if the PMA Company wants to participate in a business tender.
How To Obtain IUT and What are The Requirements?
To obtain the IUT, the PMA Company should fulfill several requirements from the BKPM, the following are the most important things:
a) Fulfill the investment realization plan
One of the most important requirements is, the PMA Company must already fulfill its investment realization in the amount of more than IDR 10,000,000,000 (ten billion Indonesian rupiah). This realization excludes building and land investment and applies for the following criterias:
- Applies for 1 business sub-category in 1 (one) project location in 1 (one) regency/city;
- Applies for 1 business sub-category for 1 (one) business category in 1 (one) regency/city, outside the industrial sector.
Those mean, if the PMA Company has more than 1 business sub-categories and/or in more than 1 regency/city, than the investment realization must twice of IDR 10,000,000,000.
Please be informed that to prove that the PMA Company already fulfilled the investment realization, the BKPM often requires the PMA Company to attach their Audited Financial Report, purchase order or any other proofs that shows that such of realization.
b) Submit the IUT application before the expiration of Principle License
Please be noted that PMA Company cannot apply for IUT if the Principle License is already expired as stipulated in Article 13 paragraph 4 of the BKPM Regulation No.15 of 2015. In case of the Principle License was expired before submitting the IUT application, then the PMA Company needs to renew or submit new Principle License first to the BKPM.
c) Attach the latest Investment Capital Realization Progress (the “LKPM”)
When the PMA Company is still on preparation phase (during the Principle License period), the PMA Company has an obligation to report their investment realization quarterly. Through this LKPM, the BPKM will know the consistency of the PMA Company in realizing their investment. Therefore, always keep the LKPM because this will be essential documents when applying IUT.
d) Recommendation from other government institutions or Appointment Letter (if required)
For some business, such as Multi-Level Marketing Business (MLM), Palm Oil, Alcohol industry, and so forth, the BKPM will request the recommendation from related ministry on the readiness of the PMA Company to start commercial phase. Moreover, for trading business (as major distributor), BKPM will require Appointment Letter as Major Distributor and so forth.
The application of IUT can be submitted by online through BKPM SPIPISE Account and will be issued at the latest 6 (six) days after the application is stated correct and complete by the BKPM system.
HOW CAN SMART LEGAL CONSULTING HELP YOU?
Smart Legal Consulting is an Indonesian Corporate Legal Services firm. We assist investors in establishing their business in Indonesia through various forms of investment as well as securing investment and corporate licenses for their business.
If you have any question about PMA Company or want to book a consultation for assistance, you can arrange a meeting with our SMART Legal Consulting at: