Amendments to Law on Legislation Formation Challenged
Late last year on November 25, 2021, the Indonesian Constitutional Court ruled against the Government in its Decision No. 91/PUU-XVIII/2020 (the “Decision”) regarding the constitutionality and validity of Law No. 11 of 2020 on Job Creation (the “Job Creation Law”). The decision declares the Job Creation Law as “conditionally unconstitutional,” due to the absent legal basis on the formality of such law drafting (known as the omnibus method), for two years as of the date of the Decision.
As required under the Decision, the Parliament and the Government rectify the “conditional unconstitutional” nature of the Job Creation Law by amending Law No. 12 of 2011 on Legislation Formation (the “Legislation Law”) with Law No. 13 Year 2022 on Second Amendment to Law No. 12 of 2011 on Legislation Formation (the “2022 Amendment”). The 2022 Amendment was enacted on June 16, 2022. Five implementing regulations should be issued following the 2022 Amendment.
Recently, a petition formal and material review of the 2022 Amendment was filed to the Constitutional Court under case register number 69/PUU-XX/2022. In this petition, the petitioner seeks the review of the amended Article 64 paragraph (1b); Article 72 paragraphs (1a) and (1b); and Article 73 paragraphs (1) and (2) of the Legislation Law in the 2022 Amendment. The first hearing was held on August 24, 2022, while the second hearing is scheduled on September 8, 2022.
In addition to the introduction to the omnibus method on legislation formation, the 2022 Amendment sets out (i) clearer public’s participation and involvement in the legislation formation processes, (ii) electronic legislation formation, and (iii) rectification of errors in draft legislation after the legislation has been approved by the Parliament.We set out below the key provisions of the 2022 Amendment.
- Omnibus Method in Legislation Formation
Under the 2022 Amendment, the omnibus method is now introduced as a method for legislation formation which combines multiple laws into a single law. However, there are certain limitations as to when the omnibus method may be used as follows:
- to add new provisions to existing laws;
- to revise multiple laws that are related to each other and/or that are drafted to achieve the same objective; and
- to revoke multiple laws of the same type and hierarchy.
It is also important to note that all laws using the omnibus method may only amended and revoked using the omnibus method as well.
- Electronic Legislation Formation
With the 2022 Amendment, the Legislation Law now introduces electronic legislation as a method of lawmaking. Article 97B of the Legislation Law enables the electronic signing of laws through certified electronic signatures. In this context, the Legislation Law expressly declares that laws that are electronically enacted and signed are equally enforcable as laws that are enacted and signed conventionally.
- Strenghthening Public Participation
Although the Legislation Law prior to the 2022 Amendment already contained provisions to encourage public participation under its Article 96, the 2022 Amendment further strengthens by amending the said article. The 2022 Amendment promotes the overall public participation and public openness by enabling online public participation, creating easy public access to the academic script of a draft bill and the draft itself, as well as involving in public discussions and consultations with regard to the law drafting.
- Technical Errors Fix in Legislation Formation
The 2022 Amendment allows lawmakers to correct or rectify technical errors in a bill which has been approved by the People’s Representative Council (Dewan Perwakilan Rakyat or the “Parliament”) and the President. The correction requires consents from the chairman of the relevant Parliament committee and officers. If other errors are found after a law is enacted, such correction may be done by the ministry of secretariat affairs and the relevant ministry along with the relevant Parliament’s committee.
September 8, 2022
AKSET
Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com) or Clara Anastasia So (canastasia@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.
Amendments to Law on Legislation Formation Challenged
Regulatory Overhaul for P2P Lending Business Finally Issued
The Financial Service Authority (“OJK”) recently issued OJK Regulation No. 10/POJK.05/2022 dated July 4, 2022 on Information Technology Based Collective Financing Services (“POJK 10/2022”). POJK 10/2022 revoked the previous regulation, namely OJK Regulation No. 77/POJK.01/2016 of 2016 dated December 29, 2016 on Information Technology-based Lending Services (“POJK 77/2016”), which was originally introduced to quickly response to the then-growing Peer-to-Peer Lending (“P2P Lending”) industry. Now, due to increasingly complex development of the P2P Lending industry, a highly comprehensive regulatory framework is needed to safeguard the industry.
Since its inception, the P2P Lending industry in Indonesia saw remarkable growth, with factors such as digital revolution, public interest in new financial technologies and a huge potential market, all contributing to the industry’s upward momentum. However, the expedited growth of the P2P Lending industry also gave rise to its fair shares of issues, such as poor industry practices (i.e., debt collection, data protection, exorbitant interest rates) and more notably, a pervasive growth in illegal P2P Lending activities.
Over the years, the OJK has been committed to improving the P2P Lending ecosystem, closely monitoring its players and cracking down on illegal P2P Lending companies. To this end, the OJK has even enacted a moratorium on the issuance of new P2P Lending licenses, to ensure that a more mature legal framework is in place before further growth of the industry.
POJK 10/2022 represents a culmination of the OJK’s efforts to improve the P2P Lending sector. Provisions under this new regulation prove to be far more extensive compared to the previous regime, governing aspects of the industry that POJK 77/2016 was previously silent on. Additionally, POJK 10/2022 also codifies some of the more essential provisions and policies previously scattered under the OJK’s derivative regulations under one legal product. All in all, the issuance of POJK 10/2022 imposes more stringent standards on the P2P Lending industry as a whole. Although POJK 10/2022 provides a much-needed governance to the P2P Lending industry, the comprehensive set of rules and requirements also invites more questions and issues in regard to the implementation of the newly introduced provisions.
Please see below for an overview of POJK 10/2022.
- Revamping of the Licensing Regime
Under the previous regime of POJK 77/2016, the entry policy for P2P Lending business required a P2P Lending Provider (“Provider”) candidate to register first before applying for a business license (at the latest, 1 year after being registered).
Back in 2016, P2P lending was a completely new industry in Indonesia. Despite that, the business had already attracted many players. POJK 77/2016 (along with its registration-licensing regime), to some extent, was intended to provide an interim governance to nurture the development of the industry while at the same time safeguarding its operation in Indonesia.
Now, similar to other more mature financial services, the new POJK 10/2022 revamped the industry’s entry policy regime by enforcing a sole-licensing regime as a requirement to conduct its business in Indonesia.
Although the licensing process and requirements are quite similar with the licensing phase under POJK 77/2016, POJK 10/2022 adds as follows:
- an obligation for a Provider to immediately carry out Electronic System Operator (ESO) registration within 30 (thirty) calendar days as of the issuance of business license by OJK;
- submission of additional required documents, such as copies of tax return form of the last 2 (two) years for individual shareholder candidates, business feasibility studies for the first 3 (three) years, confirmation from relevant supervisory authority in the country of origin of the foreign shareholders.
- Capitalization
Previously, POJK 77/2016 required a Provider to have a paid-up capital in the amount of at least Rp2,500,000,000 (two billion five hundred million Rupiah) at the time of licensing. Under POJK 10/2022, the amount is increased to at least Rp25,000,000,000 (twenty five billion Rupiah). POJK 10/2022 also requires the capital to be paid-up in full, cash, and stored in a form of time deposit.
Please note that this capitalization only applies for new Provider candidates, while existing licensed Providers, Providers which are in the licensing phase, and Providers which have returned their registration certificates and would like to resubmit its licensing application are exempted from this requirement.
- Minimum Equity
POJK 10/2022 introduces a minimum equity to the P2P Lending business whereby a Provider must at all times have equity of at least Rp12,500,000,000 (twelve billion five hundred million Rupiah). The implementation of this requirement is done through stages within 3 (three) years’ time, as follows:
- having at least Rp2,500,000,000 (two billion five hundred million Rupiah) within 1(one) year after the issuance of POJK 10/2022;
- having at least Rp7,500,000,000 (seven billion five hundred million Rupiah) within 2 (two) years after the issuance of POJK 10/2022; and
- having at least Rp12,500,000,000 (twelve billion five hundred million Rupiah) within 3 (three) years after the issuance of POJK 10/2022.
- Controlling Shareholder and Single Presence Policy
The P2P Lending industry now acknowledges the concept of a ‘controlling shareholder’ (Pemegang Saham Pengendali or “PSP”) which is defined as a legal entity, individual, or group company either: (i) owning at least 25% (twenty five percent) voting shares in a Provider; or (ii) owning less than 25% (twenty five percent) voting shares however can be proven to have any control, whether directly or indirectly, of the Provider.
A Provider is required to state at least 1 (one) PSP, whereby OJK may also decide a Provider’s PSP at its discretion. In the event that there are more than 1 (one) shareholders that fulfills the criteria as PSP, the Provider shall determine all of such shareholders as PSPs of the Provider.
Additionally, the regulation prohibits a party to be a PSP in more than 1 (one) conventional Provider or 1 (one) sharia-based Provider, whereby a party that has already been a PSP in more than 1 (one) conventional Provider and 1 (one) sharia-based Provider, is given 1 (one) year to adjust to the new provisions.
A licensed Provider must also report its determined PSP and any changes thereof to OJK within 6 (six) months since the enactment of the provisions. POJK 10/2022 further extends liability to the PSP of a Provider in certain conditions, such as in the event of a Provider being at loss due to PSP’s involvement in any tort conducted by the Provider.
- Necessary OJK Approval on Corporate Actions
Previously, there was only 1 (one) general clause which stipulates the requirements of OJK approval for corporate actions. Now, POJK 10/2022 expands on this by stipulating comprehensive provisions relating to corporate matters requiring OJK’s approval, namely:
- change of ownership;
- increase of paid-up capital;
- change of members of Board of Directors (“BOD”), Board of Commissioners (“BOC”), and Sharia Supervisory Board (Dewan Pengawas Syariah or “DPS”); and
- merger and consolidation.
Specifically, for point (i) above, POJK 10/2022 further elaborates on what constitutes a change of ownership of a Provider, which consists of changes to the following:
- Shareholders of a Provider that is not a public company (direct change of shareholders);
- Shareholders of the shareholders of a Provider that is not a public company (indirect change of shareholders);
- PSP of a Provider that is a public company; and
- PSP of the shareholders of a Provider that is a public company.
There are also additional requirements for a Provider after obtaining OJK approval on corporate matters, such as convening a General Meeting of Shareholders no later than 60 (sixty) working days as of the date of the OJK approval and submitting a report to OJK at the latest 10 (ten) business days as of the date of the GMS. Failure of comply to such provisions will result in various sanctions, such as the void of the OJK approval, written warning, limitation of business activities, and license revocation.
- Lock-Up Period for Change of Ownership
POJK 10/2022 introduces a lock-up period whereby a Provider is prohibited from conducting any of the abovementioned forms of change of ownership that results in any (i) new shareholder, and/or (ii) change of PSP, within 3 (three) years since the date of the Provider’s business license from OJK.
- Limitation on the Funding Amount by Each Lender
POJK 10/2022 enforces a new limitation on the maximum amount of lending that each lender (and its affiliates) may provide, which is in the amount of 25% (twenty five percent) of the final lending position at the end of each month. Notwithstanding the aforementioned, please note that such maximum amount may be conducted in stages, as follows:
- 80% (eighty percent) of the final lending position at the end of the month, at the latest 6 (six) months after the enactment of POJK 10/2022;
- 50% (fifty percent) of the final lending position at the end of the month, at the latest 12 (twelve) months after the enactment of POJK 10/2022; and
- 25% (twenty five percent) of the final lending position at the end of the month, at the latest 18 (eighteen) months after the enactment of POJK 10/2022.
However, lenders in the financial services industry that is under OJK’s supervision may provide lending up to 75% (seventy five percent) of the final lending position at the end of each month.
- Fit and Proper Test
POJK 10/2022 now expressly requires that (i) PSP, (ii) BOD members, (iii) BOC members, and (iv) DPS members (for Sharia-based Providers) shall obtain approval from the OJK prior to their appointment through a fit and proper test. The fit and proper test shall be conducted based on OJK Regulation No. 27/POJK.03/2016 of 2016 on Fit and Proper Test for Main Parties of Financial Services Institutions.
- Introduction on the Necessity of Business Plan
The new POJK 10/2022 emphasizes the necessity of the Provider’s business plan. Business actions that are required to be included in the Business Plan under POJK 10/2022 are: (i) conversion plan into a sharia business model; (ii) entering into a cooperation; (iii) opening/closing a branch office, (iv) change of name and/or electronic system, (v) plan to change address, (vi) plan to change business model, (vii) plan to change ownership, (viii) increase of paid-up capital, (ix) plan to change members of BOD, BOC, and/or DPS, and (x) merger and consolidation plan.
- Prohibitions for Provider
Other than the previously regulated prohibition under POJK 77/2016, POJK 10/2022 also introduces several new prohibitions for the Provider, notably:
- Prohibition to represent lenders to provide lending and/or provide an automatic lending feature;
- Prohibition to give access to the members of BOD, BOC, DPS, and employees as well as their affiliates to act as lenders;
- Prohibition to give access to the members of BOD, BOC, DPS, and shareholders as well as their affiliates to act as borrowers;
- Prohibition to have any loan (i.e., bank loan, shareholders’ loan, and loan from other sources); an
- Prohibition to conduct any action which causes or enforces other financial services institutions under the supervision of OJK to violate and/or circumvent the laws and regulations.
- Other New Provisions Under POJK 10/2022
As a more comprehensive regulatory framework, POJK 10/2022 contains a myriad of new provisions, rules, and requirements relating to the P2P Lending business in Indonesia, such as:
- Corporate Governance. POJK 10/2022 now stipulates an extensive corporate governance requirements for a Provider, such as: (i) requirement to prepare good corporate governance guidelines; (ii) minimum numbers of BOD and BOC as well as DPS (iii) requirements for competence and qualifications for BOD, BOC and DPS; and (iv) internal audit requirements. Providers are required to comply with the requirements on the minimum numbers of BOD and BOC along with their competence and qualification within 1 (one) year since the enactment of POJK 10/2022.
- Relevant Requirements Relating to Human Resources. Under POJK 10/2022, a Provider must fulfill several requirements with regard to human resources, among others:
- Requirement for all BOD, BOC, and officials 1 (one) level under the BOD to obtain work competence certificate from an OJK registered certification institution in the fintech industry. Such certification must be obtained within 1 (one) year since the enactment of POJK 10/2022;
- Requirement for a Provider to have special workforce to develop, change, and erase the Provider’s electronic system;
- Criteria for the utilization of foreign workers by a Provider; and
- Restriction on the types of business activities that a Provider may allocate parts of work, namely related to funding assessment and/or information technology.
- Business and Operational Activities. POJK 10/2022 sets out extensive rules and requirements concerning the business activities and operation of a Provider, among others:
- a Provider may only be in the form of a limited liability company;
- POJK 10/2022 further sets out the types of business activities of a Provider, dividing them into conventional and sharia models and acknowledging 2 (two) types of lending, namely productive and multifunction (multiguna);
- the use of the payment methods of escrow account, fund account, and virtual account or payment gateway is similarly regulated under POJK 10/2022. However, POJK 10/2022 stipulates a specific maximum period for the fund placement in an escrow account, i.e., 2 (two) working days for the lender and 1 (one) working day for the borrower.
- Sharia-based P2P Lending. POJK 10/2022 recognizes the concept of Sharia-based P2P lending, which in essence, P2P lending conducted based on provisions of Islamic law in accordance with fatwa and/or statements of conformity with sharia from Dewan Syariah Nasional Majelis Ulama Indonesia. Additionally, POJK 10/2022 also provides the possibility of conversion from conventional P2P lending to sharia-based P2P lending. As it is already possible to convert, POJK 10/2022 now expressly prohibits conventional Provider to conduct sharia-based P2P Lending activities and must stop all marketing of sharia-based P2P Lending products. Consequently, Providers conducting concurrent sharia-based and conventional P2P Lending activities must settle any outstanding rights and obligations within 6 (six) months since the enactment of POJK 10/2022.
- Funding Quality of Provider. POJK 10/2022 now introduces rates of funding quality of Providers into current loans (lancar), loans with special attention (dalam perhatian khusus), non-current loans (kurang lancar), doubtful loans (diragukan), and non-performing loans (macet). Further implementation of this provision will be regulated by the OJK.
- Debt Collection. POJK 10/2022 stipulates a general guideline on debt collection in the event of a defaulting borrower through the use of a warning letter to such borrower. POJK 10/2022 also stipulates that Providers may enter into a cooperation with certain qualified third parties, such as those with certifications, to conduct debt collection to its borrowers. Further implementation of this provision will be regulated by the OJK.
- Reporting to OJK. Similar to the previous regime, a Provider is required to conduct regular (which consists of monthly and annual reporting) and incidental reporting to OJK. However, Providers are now required to submit an annual financial statement audited by public accountant. Other activities also require a Provider to submit a report to OJK, for example: (i) branch opening; (ii) change of name and Electronic System; (iii) change of domicile; and (iv) change of business model. In addition, POJK 10/2022 now also provides a more extensive set of template forms for submission of reports and/or approval applications to OJK in its Appendix.
- Cooperation with Government Agencies and Third Parties. POJK 10/2022 governs on the cooperation between a Provider and third parties, either financial or non-financial institutions, including in relation to the cooperation on data sharing. POJK 10/2022 also opens the possibility for Providers to enter into a cooperation with government agencies to support government programs to become a distribution partner for state securities (surat berharga). However, such cooperation can only be for securities offering in the primary market.
- Electronic System, Technical Requirements, and Personal Data Protection. There are several key-items stipulated in POJK 10/2022 relating to the applicable requirements for the Electronic System used by the Providers in performing its business activities, among others: (i) the obligation to own, control, and operate the Electronic System; (ii) prohibition on the number of Electronic System owned by a Provider; (iii) data submission obligation to fintech lending data center maintained by OJK through system integration; (iv) the obligation to have Electronic System processing record; and (v) relevant security requirements for the Electronic System. Personal data protection-wise, POJK 10/2022 adopts a similar approach to the personal data protection provisions adopted in other financial services regulations and still relies on a consent of data subject as the primary legal basis for personal data processing activities.
- Further Provisions by OJK. Several matters under POJK 10/2022 will be regulated further by OJK, namely on licensing procedure and mechanism; types of business activities, lender and borrower; risk management; escrow account, virtual account, fund account, and other means of fund transfer; cooperation; data and information processing; lending quality; reporting procedure and mechanism, success rate of repayment (tingkat keberhasilan bayar/TKB), and debt collection.
POJK 10/2022 is in force as of the date of its enactment, July 4, 2022. The new regulation revokes POJK 77/2016 in its entirety and Article 30 letter a of OJK Regulation No. 4/POJK.05/2021 of 2021 dated March 17, 2021 on Risk Management in for the Use of Information Technology by Non-bank Financial Institutions (“POJK 4/2021”). However, the provisions under the previous regime’s implementing regulations still apply so long as they do not contradict to the new POJK 10/2022.
We note that while POJK 10/2022 provides a more extensive regulatory framework for the P2P lending business industry, there are still some aspects that remain unregulated under the POJK 10/2022. In the near future, we expect that OJK will issue more guidelines and legal products to supplement the effective implementation of POJK 10/2022.
Please look forward to our next articles within the series, where we will provide more in-depth elaboration on the notable changes under POJK 10/2022.
July 20, 2022
AKSET
Please contact Abadi Abi Tisnadisastra (atisnadisastra@aksetlaw.com), Alfa Dewi Setiawati (asetiawati@aksetlaw.com), Noor Prayoga Mokoginta (nmokoginta@aksetlaw.com), Clara Anastasia So (canastasia@aksetlaw.com), Caleb Nathanael Sitorus (csitorus@aksetlaw.com), M. Satria Kasmaliputra (mkasmaliputra@aksetlaw.com), and Ammarsyarif G. Goenawan (agoenawan@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.
POJK 10 2022 on P2P Lending
Hard Deadline for the Registration of Private Electronic System Operator
Back in May 2021, Minister of Communication and Informatics (MOCI) issued Regulation No. 10 of 2021 which partially amended MOCI 5/2020 that came into force on May 21, 2021. Particularly on the electronic system registration requirement, the amended MOCI 5/2020 stipulates a transitional provision which requires a Private Electronic System Operator (Private ESO) to comply with the registration requirements at the latest 6 (six) months after the operation of Risk-based Approach Online Single Submission (OSS RBA) licensing system (the “OSS System”) became effective.
The requirements for a Private ESO to register its electronic system in the database maintained by MOCI is governed under the Government Regulation No. 71 of 2019 on the Operation of Electronic Systems and Transactions (“GR 71/2019”) and MOCI 5/2020. Both local Private ESO and foreign Private ESO (off-shore) that provide its electronic system to the users within Indonesian jurisdiction are subject to the registration requirement.
As a follow up to the registration requirements, MOCI had just set a hard deadline for Private ESO (local or off-shore) to comply with such registration requirement by issuing Circular Letter No. 3 of 2022 dated June 14, 2022 on the Effective Date of the Registration of Private Electronic System Operator (“Circular Letter 3/2022”). Below we highlight some notable provisions under Circular Letter 3/2022.
- Hard Deadline for the Registration of Private ESO
Circular Letter 3/2022 sets out a specific deadline for Private ESO to comply with the registration requirement under GR 71/2019 and MOCI 5/2020. Point 5 letter a of Circular Letter 3/2022 requires Private ESO to register its electronic system at the latest 6 (six) months since January 21, 2022 -- thus, making the deadline to be on July 20, 2022, at the latest. The registration shall be carried out through the new OSS System at https://oss.go.id. If the Private ESO does not register within the specified timeframe, MOCI may impose administrative sanction against the Private ESO by blocking the access to their relevant electronic system in Indonesia.
- Re-Registration Requirement for Registered Private ESO
Circular Letter 3/2022 also requires Private ESOs that registered its electronic system and obtained ESO Certificate prior to the enactment of MOCI 5/2020 (November 24, 2020) to re-register their electronic system through the new OSS System.
For explanation on the scope of ESO, registration process, documents submission, or otherwise our summary to GR 71/2019 and MOCI 5/2020, please read our article here.
July 11, 2022
AKSET
Please contact Abadi Abi Tisnadisastra (atisnadisastra@aksetlaw.com) and Noor Prayoga Mokoginta (nmokoginta@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.
Hard Deadline for the Registration of Private Electronic System Operator
KPPU Introduces Competition Compliance Program for Businesses
On March 24, 2022, the Indonesia Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha or “KPPU”) issued its first regulation in 2022 on Competition Compliance Program (“Reg. 1/2022”). As its title implies, Reg. 1/2022 aims to improve compliance of businesses towards the compliance regulatory regime in order to create a healthier competition ecosystem in the market.
Essentially, Reg. 1/2022 encourages businesses to develop a “Competition Compliance Program”, namely series of programs, activities and guidelines codified into a document that is integrated into a business’/companies’ policies.
We set out below key provisions under Reg. 1/2022.
- Contents of Competition Compliance Program
Businesses may now prepare, draft and register their Competition Compliance Programs to the KPPU, which shall contain at least:
- code of ethics;
- Competition Compliance Guidelines; and
- training, socializations and other activities done in the implementation of the Competition Compliance Program
The Competition Compliance Program itself may be adjusted based on the needs of the business and must be adapted to accommodate the industry that the business operates in. It is also important to note that while this Competition Compliance Program is not mandatory, it does reward participation with certain benefits, which will be further described below.
- Registration and Reporting
Businesses with existing Competition Compliance Programs and those without may register such Programs to the KPPU. Upon approval from the KPPU, the Competition Compliance Program shall be valid for 5 (five) years.
As mentioned above, registration of a Competition Compliance Program is optional. However, upon registration, businesses are also obligated to report the implementation of the Competition Compliance Program.
The KPPU will then evaluate the implementation report, and may give certain recommendations towards the Competition Compliance Program of a Business. Reg. 1/2022 does not stipulate the frequency of these reports, nor does it prescribe any sanctions towards non-compliance towards the reporting obligations/KPPU recommendations.
- Benefits
Participation in the Competition Compliance Program rewards businesses with certain intangible benefits, such as improved trust from consumers/investors, good reputation of the business, etc. However, Article 5 (4) of Reg. 1/2022 provides that businesses with registered Competition Compliance Programs may receive reduced sanctions in the event that it is found to be in violation of competition regulations. However, the criteria and amount of reduction is not specified.
May 13, 2022
Please contact Alfa D. Setiawati (asetiawati@aksetlaw.com) or Caleb K. N. Sitorus (csitorus@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.
KPPU Introduces Competition Compliance Program for Businesses
Moratorium of Crude Palm Oil Export
On April 27, 2022, the Minister of Trade Republic of Indonesia (the “MoT”) issued Decree No. 22 of 2022 on Temporary Export Ban on Crude Palm Oil, Refined, Bleached and Deodorized Palm Oil, Refined, Bleached and Deodorized Palm Olein, and Used Cooking Oil (“Decree 22/2022”). Decree 22/2022 sets for a temporary ban (moratorium) of the export of Crude Palm Oil (“CPO”), Refined, Bleached and Deodorized Palm Oil (“RBD Palm Oil”), Refined, Bleached and Deodorized Palm Olein (“RBD Palm Olein”), and Used Cooking Oil (“UCO”) .
The reason for such moratorium is the scarcity of palm oil products in Indonesia. In light of this, the MoT previously issued (i) Decree No. 11 of 2022 on the Stipulation of Maximum Retail Price for Cooking Oil to set the maximum retail price of cooking oil, and (ii) Decree No. 170 of 2022 on Stipulation of Distribution Rates for Domestic Market Obligation and Domestic Price Obligation in order to optimize the availability of domestic Oil Products.
Decree 22/2022 stipulates that any exporter who violates the moratorium is subject to relevant sanctions in accordance with applicable laws and regulations, which may include revocation of business licenses.
Decree 22/2022 is subject to monthly reviews and may be revoked if the scarcity of palm oil products is resolved.
Decree 22/2022 becomes effective as of April 28, 2022.
April 28, 2022
Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com) or Ivan Tjahjadi (itjahjadi@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.
Moratorium of Crude Palm Oil Export
End of Relaxation Period for Competition Regulations Enforcement
As the Covid-19 Pandemic has begun to ease up, the Indonesian Competition Supervisory Commission (Komisi Pengawasan Persaingan Usaha or “KPPU”) determined to end the Relaxation Period for Monopolistic Practices and Unfair Business Competition and Supervision of Partnerships to Support National Economic Recovery (“Relaxation Period”) through KPPU Regulation No. 2 of 2022 on the Revocation of the Relaxation Period dated April 1, 2022 (“Reg. 2/2022”).
The Relaxation Period was first introduced through KPPU Regulation No. 3 of 2020 dated November 9, 2020 (“Reg. 3/2020”) as a means to support collaboration in businesses to curb the economic effects of the Covid-19 Pandemic.
Under Reg. 3/2020, businesses may enjoy the following benefits:
- Utilization of state budget for the procurement of medical supplies or services and to distribute social aid and safety nets from the Government to the public;
- Use of dominant positions in order to manage Covid-19 or to improve the economic ability of the business (subject to KPPU approval); and
- Extension of period for the submission of a Merger, Consolidation or Acquisition by 30 (thirty) days (making the notification period a total of 60 (sixty) days); and
- Extension for the period of written warnings for Partnership supervision into 30 (thirty) days.
With the issuance of Reg. 2/2022, the Relaxation Period has ended, and Reg. 3/2022 revoked.
Reg. 2/2022 will be enacted 30 (thirty) days after its enactment. Thus, businesses must ensure that their Merger, Consolidation and Acquisition notification complies to the initial 30 (thirty) day period that was effective before the Relaxation Period.
April 20, 2022
Please contact Alfa D. Setiawati (asetiawati@aksetlaw.com) or Caleb K. N. Sitorus (csitorus@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.
End of Relaxation Period for Competition Regulations Enforcement
Updated Requirements and Procedures on Old-Age Benefit Program
The Minister of Manpower (“MOM”) recently issued a new regulation governing the Old-Age Benefit (Jaminan Hari Tua or “JHT”) Program, i.e., MOM Regulation No. 2 of 2022 dated February 2, 2022 on Procedures and Requirements for the Payment of the Old-Age Benefit Program (“Regulation 2/2022”). Regulation 2/2022 will be effective from May 2, 2022 and revokes MOM Regulation No. 19 of 2015 dated August 19, 2015 (“Regulation 19/2015”) on the same matter.
The JHT Program is one of several social security programs under the Employment Social Security (the “BPJS Ketenagakerjaan”). The JHT Program will be given in a form of cash, when a JHT Participant reaches the retirement age, passes away, or suffers from permanent disability. In this regard, a JHT Participant is every employee, including a foreign worker who has worked for at least 6 (six) months in Indonesia and who already paid the premium.
In regard to the persons entitled to receive the JHT, there is no difference between Regulation 2/2022 and Regulation 19/2015: both regulations state that the JHT shall be paid out to Participants who (i) have reached the retirement age, (ii) are permanently handicapped or (iii) pass away. However, a key difference is that Regulation 2/2022 adds a caveat for Participants who resign or whose employment is terminated—such Participants must reach the age of 56 (fifty-six) before being eligible for the JHT payment. We elaborate on this and other key provisions of Regulation 2/2022 below.
- JHT for Participants Reaching Retirement Age
The JHT will be paid out to Participants when they reach 56 (fifty-six) years of age, and/or have permanently stopped working due to:
- resignation;
- termination; or
- departing Indonesia permanently (applicable only for foreign workers).
As noted above, for Participants that stop working due to resignation or are laid off/terminated, they will only be eligible to receive the JHT benefits after reaching the age of 56 (fifty-six) years old. Previously, such conditions were not governed under Regulation 19/2015. Under Regulation 19/2015, Participants who resigned or whose employment was terminated would receive the JHT payment after a 1 (one) month waiting period.
- Participants Who Suffer Permanent Handicap
Participants who suffer from permanent handicap are also eligible for the JHT benefits before reaching the retirement age. However, they are only entitled to JHT 1 month after the relevant Participant is declared permanently handicapped. To claim for these benefits, the relevant participant must submit their (i) BPJS Ketenagakerjaan Card, (ii) Certificate of the examiner and/or advisory doctor and (iii) KTP or other identity card.
- Participants Who Pass Away
In cases where JHT Participants pass away, the benefits will be given to the heirs (the widow/widower, or children; if any). Otherwise, the benefits will be given to the Participant’s relatives in linear blood relation, siblings, in-laws, or other parties appointed under the participant’s testament.
The new requirement under MOM Reg. 2/2022, particularly the requirement to reach the age of 56 to enjoy JHT benefits for some Participant categories, seems to complicate access to benefits for workers, as they may have to potentially wait for years to receive JHT if they resign or are laid off. The regulation has also been met with considerable backlash from the public, calling for the revocation of MOM Reg. 2/2022. With pressure from the public, we anticipate that there will be some developments surrounding this regulation.
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February 15, 2022
Please contact Thomas P. Wijaya (twijaya@aksetlaw.com) or Danang W. Dwinanto (ddwinanto@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.
Updated Requirements and Procedures on Old-Age Benefit Program
Increased Quarantine Period Under Decree 1/2022
On January 1, 2022, the Head of the Covid-19 Management Task Force (“Covid-19 Task Force”) issued Decree No. 1 of 2022 on Entry Point, Quarantine Location and RT-PCR Requirement for Indonesian Nationals Travelling Overseas (“Decree 1/2022”) which imposes various new travel protocol aimed at curbing the spread of Covid-19 and its new variants. The notable provisions of Decree 1/2022 are as follows:
- Entry Points
Entry into Indonesia, whether by air, sea or land, may only be done through designated entry points, as follows:
Airports
- Soekarno Hatta, Banten;
- Juanda, East Java; and
- Sam Ratulangi.
Seaports
- Batam, Riau Islands;
- Tanjung Pinang, Riau Islands; and
- Nunukan, North Kalimantan.
Cross Border Posts
- Aruk, Kalimantan;
- Entikong, West Kalimantan; and
- Motaain, East Nusa Tenggara.
- Reverse Transcription Polymerase Chain Reaction Tests and Quarantine Provisions
Under Decree 1/2022, Indonesian nationals that have travelled overseas shall, upon arrival within Indonesia, conduct quarantine for a period of 14 x 24 hours if their place of departure: (i) is confirmed to have community transmission of the new Omicron variant; (ii) is geographically close to countries with community transmissions of the Omicron variant; and (iii) has over 10,000 confirmed cases of the Omicron variant. If arriving from places other those with the above criteria, Indonesian travelers shall only be subjected to a quarantine period of 10 x 24 hours. We note, however, that the Government is considering to shorten the periods to 10x24 hours and 7x24 hours respectively. We will inform any change immediately.
The quarantine protocols (which include the Reverse Transcription Polymerase Chain Reaction (“RT-PCR”) tests) shall refer to Circular Letter issued by the Covid-19 Task Force. Currently, the latest Covid-19 Task Force Circular Letter which regulates quarantine protocol may be found in Covid-19 Task Force Circular Letter No. 26 of 2021 dated December 26, 2021 on Health Protocols for International Travel During the Covid-19 Pandemic Period.
Decree 1/2022 also designates a number of Centralized Quarantine Locations for each of the entry points. However, these Centralized Quarantine Locations are reserved only for:
- Indonesian Migrant Workers returning to Indonesia and staying for a minimum of 14 days;
- Students returning to Indonesia after completing their education/study assignment overseas;
- Government Employees returning to Indonesia after completing a work trip; and
- Indonesian representatives in international competitions or festivals
Decree 1/2022 remains in force until December 31, 2022, with the caveat that it may be amended as necessary if any errors/inconsistencies are discovered.
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January 3, 2022
Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com) or Caleb K. N. Sitorus (csitorus@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.
Increased Quarantine Period Under Decree 1/2022
Harmonized Tax Law Amends Provisions on Income Taxes
Law No. 7 of 2021 dated October 29, 2021 on the Harmonization of Taxation Regulations (“Law 7/2021”) amends several existing regulations on the taxation law and introduces several new regulations. Law 7/2021 amends, among others, Law No. 7 of 1983 dated December 31, 1983 on Income Taxes as amended several times, lastly by Law No. 11 of 2020 dated November 2, 2020 on Job Creation (collectively, the “Income Tax Law”). This Newsflash specifically discusses the changes of the Income Tax Law under Law 7/2021.
For your reference, our other Newsflash relating to Law 7/2021, specifically on the changes of General Taxation Provisions may be accessed, and changes to Excise Law may be accessed here.
Below, we set out the summary of the important provisions of Law 7/2021 relating to the Income Tax Law.
- Individual Income Taxes
Law 7/2021 introduces a new individual income tax rate whereby individual taxpayers with a taxable income of more than Rp5 billion shall be subject to 35% income tax. For ease of reference, below is the comparison of individual income tax rates governed under the Income Tax Law and Law 7/2021:
| Rate | The Income Tax Law | Law 7/2021 |
| 5% | Up to Rp50 million | Up to Rp60 million |
| 15% | More than Rp50 million but not exceeding Rp250 million | More than Rp60 million but not exceeding Rp250 million |
| 25% | More than Rp250 million but not exceeding Rp500 million | More than Rp250 million but not exceeding Rp500 million |
| 30% | More than Rp500 million | More than Rp500 million but not exceeding Rp5 billion |
| 35% | N/A | More than Rp5 billion |
Law 7/2021 stipulates that the new provisions on individual income tax rates above shall be effective from the 2022 fiscal/tax year.
- Corporate Income Taxes
Under Law 7/2021, a new rate for corporate income tax is also introduced. Previously, the Income Tax Law provided that the rate of corporate income tax would be 20%. Starting from the 2022 fiscal/tax year, Law 7/2021 provides that the corporate income tax rate is set at 22%. This new rate is also applicable to a Permanent Establishment (in Indonesian, Bentuk Usaha Tetap or BUT).
Law 7/2021 also reduce the applicable corporate income tax reduction to be 3% instead of 5% for public companies that meet certain criteria.
- Income Tax for Benefits-in-Kind
Under the Income Tax Law, benefits-in-kind (“BIKs”) are non-tax deductible for employers and for employees receiving the BIKs. The examples of BIKs that are provided by employers to employees include provision of cars, housing, education, meals, and other BIKs necessary to carry out employee’s works.
Law 7/2021 stipulates that BIKs may be tax deductible for employers and taxable for employees. Consequently, such requirement would shift the tax obligation from employers to employees receiving BIKs. Note that Law 7/2021 exempts the following BIKs from being taxable: (i) foods and beverages to employees, (ii) BIKs in certain areas, (iii) BIKs that must be provided for work-related matters (e.g., safety work equipment, uniforms), (iv) BIKs funded by state budget, regional state budget, or village budget, or (v) certain BIKs with certain limitations.
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December 15, 2021
Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com), or Thomas P. Wijaya (twijaya@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.
Harmonized Tax Law Amends Provisions on Income Taxes
Minister of Home Affairs Issues PPKM Instruction for Christmas and New Year
The Minister of Home Affairs (the “MOHA”) has just issued the latest directive regarding Public Activity Restrictions (Pemberlakuan Pembatasan Kegiatan Masyarakat or “PPKM”) in MOHA Instruction No. 67 of 2021 dated December 13, 2021 on Enactment of Level 3, Level 2 and Level 1 Corona Virus Disease 2019 (“Covid-19”) PPKM in Java and Bali Areas (“Instruction No. 67/2021”). Instruction No. 67/2021 is the final PPKM policy for the year as it will be effective from December 14, 2021 until January 3, 2022 and revokes the Government’s initial plan to enact a Level 3 PPKM all over Java and Bali during the Christmas and New Year holidays.
Similar with other iterations of PPKM policies, areas in Java and Bali will be assigned a specific level—the determination of each area’s level depends on the Covid-19 management efforts and vaccine administration rates for the area. Point 1 of Instruction No. 67/2021 confirms that DKI Jakarta is at the Level 1 status, with the limitations for the public activities as set out below:
| No. | Activity | Description |
| 1. | Activities in the Office* | · 75% Work from Office (“WFO”) capacity for Non-Essential sector;
· 100% WFO capacity for Essential Sector in offices dealing with public while 75% WFO capacity for Essential Sector in offices dealing with administrative activities; · 100% WFO capacity for capital markets, information technology, communication, non-quarantine hotels, exports and export support industry; and · 100% WFO capacity for Critical Sectors. |
| 2 | Educational Activities | · Limited face to face learning/long distance learning may be held based on Minister of Education and Cultural Affairs, Minister of Religion, Minister of Health and MOHA Joint Decree No. 03/KB/2021, No. 384 of 2021, No. HK.01.08/MENKES/4242/2021, No. 440-717 of 2021 on Guidelines for the Implementation of Education During Covid-19; and
· SDLB, MILB, SMPLB, MALB and PAUD are exempted from the above and have their own respective limitations. |
| 3 | Activities in Daily Necessities Sector | · Supermarkets and similar stores selling daily necessities may operate at 100% capacity;
· Pharmacies and drugstores may open for 24 hours; · Community markets not selling daily necessities may operate at 100% capacity; and · Street vendors are allowed to open. |
| 4 | Dining Activities in Public Places | · Food stalls may open for dine in until 22.00 WIB at 75% capacity;
· Indoor or outdoor restaurants/cafes may open until 22.00 at 75% capacity; and · Restaurants/cafes that open at night may open from 18.00 until 00.00 at 75% capacity. |
| 5 | Activities in Shopping Malls | · May operate at 100% capacity;
· Children under the age of 12 must be accompanied by parents; and · Play centers may open, provided that parents must disclose their addresses and phone numbers for tracing purposes. |
| 6 | Activities in Cinemas | · Cinemas may operate at 70% capacity and only people who are categorized as “green” or “yellow in the PeduliLindungi App are allowed to enter;
· Children under the age of 12 must be accompanied by parents; and · Restaurants/Cafes within a cinema may open at 75% capacity with a maximum dine in duration of 60 minutes. |
| 7 | Construction Activities | May operate at 100% capacity. |
| 8 | Religious Activities | Communal religious activities may be held throughout the duration of Level 1 PPKM at 75% capacity. |
| 9 | Activities in Public Facilities | · May operate at 75% capacity;
· Children under the age of 12 must be accompanied by parents; and · Odd-even policy enacted on the road leading to the venue from Friday 12.00 until Sunday 18.00. |
| 10 | Arts, Cultural, Sports and Social Activities that May Amass Crowds | · Wedding receptions may operate at 75% capacity;
· Art/culture/sports/social locations may operate at 75% capacity; and · Gyms/fitness centers may operate at 75% capacity. |
| 11 | Activities in Modes of Transport | · Public/Mass Transport, Taxis and Rental Cars may operate at 100% capacity; and
· Ojek (motorbike taxis) are to implement more stringent health protocols. |
*Office sectors are divided to the Non-Essential, Essential and Critical Sectors. Essential Sectors include financial, banking, capital markets, information technology, communication, non-quarantine hotel and export/export support sectors. Critical Sectors include health, safety and order, disaster management, energy, logistics, post, transportation and distribution, food and beverage (including for farms and animals), fertilizers and petrochemical, cement and construction materials, national vital objects, national strategic projects, construction and basic utilities sector.
For DKI Jakarta, the Governor has previously issued Decree No. 1430 dated December 2, 2021 on the Enactment of Covid-19 PPKM Level 3, which refers to the Government’s previous plan to impose Level 3 PPKM for Java and Bali areas. We anticipate that a new decree will be issued to conform to the policies under Instruction No. 67/2021.
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December 15, 2021
Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com) or Caleb K. N. Sitorus (csitorus@aksetlaw.com) for further information.
Disclaimer:
The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
Any links contained in this document are for informational purposes and are available and relevant at time this publication is made. We provide no liability whatsoever in respect of any information or content in such links.