The Indonesian Investment Coordinating Board (BKPM) has recently issued a stern directive to several foreign-owned companies (PT PMA) in Bali, signaling a significant crackdown on businesses that may be operating as shell companies. The move is part of the government’s efforts to ensure compliance with investment and business operation regulations.
BKPM’s directive to PT PMA owners
In a letter from the BKPM addressed to the directors of various PT PMAs, the BKPM highlighted two critical concerns. Firstly, it noted that many companies use virtual addresses for business operations, particularly in Bali. Secondly, the BKPM pointed out that these companies have not realized their full investment plans as previously outlined.
The letter mandates that the companies must:
- Provide a physical address for their business operations in Bali and update their company data in the Online Single Submission (OSS) system within 30 days of receiving the letter. Failure to comply will result in the revocation of their business license.
- Realize a minimum investment of IDR 10 billion ($650,000) (excluding land and building costs) and report this in the Investment Activity Report (LKPM) for the third and fourth quarters of 2023. Non-compliance, especially if the investment realization is less than 50% of the total planned value, will also lead to license revocation.
Ensuring business legitimacy and investment realization
The BKPM’s actions are rooted in a broader governmental effort to ensure that foreign investments contribute meaningfully to the local economy. By enforcing these regulations, the BKPM aims to weed out shell companies that exist only on paper and do not engage in substantial economic activities. This move also aligns with Regulation Number 4 of 2021 regarding Guidelines and Procedures for Risk-Based Business Licensing and Investment Facilitation.
Steps for PT PMA owners to meet compliance
For PT PMA owners in Bali, this development necessitates immediate action to ensure compliance and avoid potential legal consequences. Companies are advised to:
- Establish a physical presence: Secure a physical address for the business if not already done. This move is crucial to demonstrate a tangible presence in the region.
- Investment realization: Review investment plans and expedite the realization process to meet the minimum requirement set by the BKPM.
- Update OSS records: Promptly update company data in the OSS system to reflect the new business address and investment details.
- Engage with legal experts: Consider consulting with legal and business experts to navigate the regulatory landscape and ensure all requirements are met efficiently.
The BKPM’s directive is not only a call for regulatory compliance but also an opportunity for foreign investors to reinforce their commitment to contributing positively to Indonesia’s economy, particularly in Bali. As the deadline approaches, PT PMA owners must act swiftly to align their operations with the BKPM’s requirements.