Business Licensing, Ease of Business, and Investment Incentives Regulation in IKN Amended

August 30, 2024

The development of the Nusantara Capital City (Ibu Kota Nusantara or the “IKN”) requires support from the Government in various aspects, including the certainty of regulations for the implementation of business activities in IKN. The Government recently issued Government Regulation No. 29 of 2024 on the Amendment to the Government Regulation No. 12 of 2023 (“GR 12/2023”) on Granting of Business Licensing, Ease of Business, and Investment Benefits for Entrepreneurs in the Nusantara Capital City (“GR 29/2024“). The background of the issuance of GR 29/2024 is to adjust the arrangements for the implementation of preparation, development, and relocation of the IKN.

In this Newsflash, we specifically discuss the key points of GR 29/2024.

♦ Basic Requirements for Business Licensing

In accordance with Article 8 of GR 12/2023, the basic requirements for business licensing for entrepreneurs shall include:

conformity of spatial utilization activity;
an environmental approval; and
a building approval and a worthiness certificate.

Based on the provisions above, Article 10(1) of GR 12/2023 (as amended by GR 29/2024) provides environmental approvals are issued based on:

an environmental feasibility decision, for businesses and/or activities that are required to be equipped by an environmental impact analysis document or an environmental management and monitoring effort; and/or
a statement of capability for environmental management, for businesses and/or activities that are required to be equipped by a statement of capability for environmental management and monitoring.

Article 10(2) of GR 12/2023 (as amended by GR 29/2024) stipulates that the granting of environmental licenses shall be conducted by the IKN Authority.

Further, Article 13(3) of GR 12/2023 (as amended by GR 29/2024) provides additional provisions on the sources of funding for the assignment of a certified or accredited institution or professional expert for verification of the granting basic licensing requirements and/or sectoral business licenses for certain risk levels in the IKN, as follows:

the state revenue and expenditure budget,
the IKN revenue and expenditure budget, and/or
other legitimate sources in accordance with provisions of laws and regulations.

♦ Granting of Land Titles

The provisions regarding the land titles in IKN are also amended in GR 29/2024. Previously, provisions regarding land titles in IKN were set out in Presidential Regulation No. 75 of 2024 on Acceleration of the Development of the Nusantara Capital (“PR 75/2024”). Please see our newsflash regarding PR 75/2024 in the following link: (https://aksetlaw.com/news-event/newsflash/acceleration-of-development-of-nusantara-capital/).

Article 16 of GR 12/2023 (as amended by GR 29/2024) stipulates that land in the IKN shall be stipulated as state property (Barang Milik Negara or “BMN”) and Assets under the control of the IKN Authority (Aset Dalam Penguasaan Otorita IKN or the “ADP”).

Furthermore, for the land that is included as the ADP shall be granted to the IKN Authority with the Right to Manage (Hak Pengelolaan or an “HPL”). Please also note that Article 16(5) of GR 12/2023 (as amended by GR 29/2024) adds several authorities to the IKN Authority, including the authority to conduct planning, security and maintenance, administration, supervision, and control.

In addition to the above, Article 18 of GR 12/2023 (as amended by GR 29/2024) provides new provisions regarding land titles. It stipulates that the IKN Authority provides assurance of the tenure period for land titles through the first cycle and may grant a second cycle to business actors. Please see below for the details of the cycles of the land titles:

In relation to the above, Article 18(4) of GR 12/2023 (as amended by GR 29/2024) stipulates that the IKN Authority shall conduct an evaluation 5 (five) years after the granting of the first cycle of rights to assess the fulfillment of the following requirements:

The land is still being properly utilized and managed in accordance with its condition, nature, and the purpose for which the rights were granted;
The holder of the rights still meets the qualifications to be a rights holder;
The conditions for granting the rights are being met by the rights holder;
The land use is still in accordance with the spatial planning; and
The land is not indicated to be abandoned.

It is further regulated that within 10 (ten) years before the expiration of the first cycle of the rights, an entrepreneur may apply for the granting of the rights for a second cycle as stated in the table above.

♦ Employment of Foreign Workers

GR 29/2024 also adds new provisions regarding the provisions of employment of foreign workers. Articles 22(2a) and (2b) of GR 12/2023 (as amended by GR 29/2024) stipulate that entrepreneurs who conduct business activities in the IKN may employ foreign workers for certain positions in accordance with the applicable laws and regulations. Further, each entrepreneur who employs foreign workers is required to:

appoint an Indonesian citizen as a companion worker for the foreign worker;
provide education and job training for the companion worker of the foreign worker in accordance with the qualifications of the position held by the foreign worker; and
repatriate the foreign worker to their country of origin after the expiration of their employment contract.

♦ Housing and Residential Areas

Regarding the provisions on housing and residential areas, GR 29/2024 primarily amends the regulations concerning incentives for entrepreneurs who are going to fulfill balanced housing obligations in the IKN area.

Article 25 of GR 12/2023 (as amended by GR 29/2024) stipulates that business actors in the field of housing and residential areas who have not yet fulfilled the balanced housing obligations in other regions may fulfill these obligations in the IKN area with taking into account the detailed plans and spatial planning of the IKN. This may be done by applying to the Head of the IKN Authority, with the option to either develop balanced housing in the IKN area or pay a conversion fee for balanced housing fulfillment.

The application must be equipped with a self-declaration of the obligation to fulfill balanced housing and must be copied to the Ministry of Public Works and Housing and the Ministry of Home Affairs. The Head of the IKN Authority shall determine the implementation of the balanced housing obligation and report the results at least once a year to the Ministry of Public Works and Housing and the Ministry of Home Affairs.

These entrepreneurs shall be provided with incentives in the form of:

Assistance with housing development programs;
Tax relief for low-cost housing in accordance with the provisions of laws and regulations;
Assistance with infrastructure, facilities, and public utilities;
Facilitation of land acquisition for housing development and its expansion;
Support for accessibility to balanced housing locations within the IKN area;
Exemption from the Land and Building Acquisition Duty (“BPHTB”);
Temporary relief from Land and Building Tax (“PBB”); and/or
Awards for achievements in the field of balanced housing.

The exemption from BPHTB and the temporary relief from PBB shall also apply to consumers and shall be proposed by the Head of the IKN Authority.

♦ Special Regional Tax Incentives and Special Revenues

GR 29/2024 also amends provisions regarding tax incentives and special revenues, as well as implementation of investment activities. Article 26 of GR 12/2023 (as amended by GR 29/2024) stipulates that the IKN Authority is authorized to provide special tax incentives and special revenues for the IKN, as well as facilitate the provision of land, infrastructure, and facilities for investment activities in the IKN. Further, as regulated under Article 67 of GR 12/2023 (as amended by GR 29/2024), the special regional tax incentives and special revenues for the IKN consist of:

Incentives in the form of reductions, reliefs, or exemptions from the special regional taxes of the IKN; and
Incentives in the form of reductions, reliefs, or exemptions from the special revenues of the IKN.

Article 68 of GR 12/2023 (as amended by GR 29/2024) stipulates that the facilitation, provision of land, and infrastructure for the implementation of investment activities as mentioned above shall consist of:

Provision of land or locations for entrepreneurs;
Provision of infrastructure and facilities;
Ensuring investment comfort and security; and/or
Facilitating access to a ready and skilled workforce.

We will keep you updated with the latest information and regulations in relation to the development of the IKN in due course.

AKSET

Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com), M. Raehan A. Fadila (mfadila@aksetlaw.com), or Arthur Basa Okuli Nainggolan (anainggolan@aksetlaw.com) for further information.

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