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Risk-Based Approach Online Single Submission System: The Migration Issues and What to Do

18 November 2021

CLIENT ALERT 2021

Amendment to the Investment List:

Issue: 2 July 2021

Andika Mendrofa
Partner
andika.mendrofa@mhmadvocates.com

Helena Sitorus
Counsel
helena.sitorus@mhmadvocates.com

Shanti Prameshwara
Associate
shanti.prameshwara@mhmadvocates.com

MacalloHarlin Mendrofa Advocates
Graha CIMB Niaga, 2nd Floor
Jl. Jend. Sudirman Kav. 58
Jakarta 12190, Indonesia
P +62 21 250 5858, +62 21 250 5959
F +62 21 250 5650
www.macalloharlinmendrofa.com


The Updates

The Government of Indonesia (“GOI”) has officially adopted the new online single submission (“OSS”) system, i.e., the risk-based approach OSS system (“OSS-RBA”) for the implementation of risk-based approach business licensing based on Government Regulation No. 5 of 2021 on the Risk-Based Criteria Business Licensing (“Business Licensing Regulation”).


Discussions
The OSS-RBA

The main function of the OSS-RBA is principally the same with the previous OSS system (“OSS 1.1”), i.e., to process and issue the business licensing through one integrated system. The OSS-RBA now categorizes the business licensing into four levels of risk, i.e., (i) low; (ii) medium-low; (iii) medium-high; and (iv) high risk (please see our client alert on Risk-Based Business Licensing here).

The main changes made on the OSS-RBA are as follows:

  1. Right of Access (Hak Akses)  

    The OSS system can be used if a right of access (hak akses) has firstly been obtained. Under the OSS-RBA, the right of access is attached to the concerned entity (not specifically to the individual as previously applied in the OSS 1.1) which means that if a company applies for the right of access, it will be under the company’s name, not under its director’s name.

  2. Business Licensing Process

    The OSS-RBA simplifies the business licensing process into one step process only in which a company will only be required to submit and fill in the company’s data and information, among other things, the company’s data, the general plan of business activities and business activities data, on the OSS-RBA. Further, the OSS-RBA will automatically direct the company to process the specific business licensing in accordance with its risk level of the business activities.

    Before being able to process the business licensing, the OSS-RBA will require the company to first obtain an approval or confirmation on a conformity of space utilization activities (kesesuaian kegiatan pemanfaatan ruang or “KKPR”). The KKPR is a new permit instrument introduced by the GOI to replace land utilization related permits (including location permit). However, until the issuance of this alert, it is still not clear on how effective and relevant the KKPR requirement should be complied with before processing the business licensing.

    As a reference, we set out a brief business licensing process based on the OSS-RBA as attached in Schedule 1 of this alert.

The Transition

As the result of implementation of the OSS-RBA, there are several key matters that may need to be considered and carried out, as follows:

  1. Right of Access and Data Migration

    It is advisable that a company who its right of access is still under its director’s name or individual’s name to re-apply for and obtain a new right of access so that the company will have one dedicated username and password.

    Although all data on the OSS 1.1 has automatically been migrated to the OSS-RBA, it will still be necessary for company who has obtained NIB and non-effective business license based on the OSS 1.1 to re-submit the data and information on the OSS-RBA to ensure that all (new) information required to be filled in on the OSS-RBA has been completed. Further, the existing business registration number (NIB) and business licenses will need to be re-issued with new formats by the OSS-RBA.

  2. Indonesia Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia or “KBLI”)

    The OSS-RBA has adopted most of the KBLIs issued in 2020 (“2020 KBLI”) – a small part of the 2020 KBLIs has not been adopted and is being reviewed to be included on the OSS-RBA. Accordingly, it is advisable for a company to check and if applicable, adjust its business activities with the correct 2020 KBLI on the OSS-RBA.

  3. Minimum Issued and Paid-Up Capital of a PMA Company

    The Investment Coordinating Board (BKPM) requires foreign investment (“PMA”) companies who have not met the minimum issued and paid up capital requirement of Rp10 billion to increase their capital up to at least that figure if the PMA companies (i) have not obtained an effective business license based on the OSS 1.1 and intend to continue the issuance process to obtain their business license on the OSS-RBA system; or (ii) have obtained an effective business license based on the OSS 1.1 and intend to expand their business and/or commercial or operational activities.


Conclusions

The OSS-RBA is new, and companies need to get used to this new system and shall make updates and adjustments as necessary. The OSS-RBA is expected to improve the ease of applying for the business licenses but on the other hand, the OSS-RBA certainly still needs to be upgraded and improved to avoid any potential bottleneck issues (e.g., the KKPR requirement).