Tax Policies to Brace the Impact of COVID-19
Due to the COVID-19 pandemic, the Government of Indonesia predicts the Indonesian economic growth to only reach 4% or lower, subject to the period and severity of the pandemic in affecting or even paralyzing the economy. To anticipate the economic impact of the COVID-19 pandemic, the Government issued the Government Regulation in lieu of Law No. 1 of 2020 dated March 31, 2020 on the State Financial and the Stability of the Financial System Policies in Relation to the Handling of the Coronavirus Disease 2019 (COVID-19) Pandemic and/or Threats that Are Potentially Harmful to the National Economy and/or the Stability of the Financial System (“Perppu 1/2020”).
Perppu 1/2020 sets out policies that may be taken by the Government to anticipate the impact of COVID-19 pandemic to the state finance. In this Newsflash, we will focus on the tax aspects under Perppu 1/2020.
Under Perppu 1/2020, the Government has the authority to stipulate state financial policies, including taxation policies. The taxation policies include the adjustment of the corporate income tax rates, tax for trade through electronic system activities, extension of period for the fulfillment of taxation rights and obligations, and customs facilities.
- ADJUSTMENTS OF CORPORATE INCOME TAX RATE
As of 2010, under the Income Tax Law, the corporate income tax rate is stipulated at 25%. Through Perppu 1/2020, the Government lowers the income tax rates for domestic corporations and permanent establishments to be 22% for 2020 and 2021 and 20% for 2022 and the subsequent years.
A publicly-listed company that (i) trades at least 40% of its shares on the Indonesian stock exchange and (ii) meets certain criteria, is eligible for an additional 3% tax rate reduction (i.e., 19% for 2020 and 2021, and 17% for 2022 and the subsequent years). The criteria for companies that will be eligible for this lower tax rate will be further stipulated in a Government Regulation.
- TAX TREATMENT FOR TRADE THROUGH ELECTRONIC SYSTEM
Perppu 1/2020 reaffirms the Government’s intention in imposing taxes for e-commerce transactions., This intent was reflected in the recently-issued E-Commerce Regulation. Value-added tax (VAT) will be imposed on electronic transactions of Intangible Taxable Goods and/or Services from Outside Custom Areas into Custom Areas, while income taxes will be imposed on offshore merchants, service providers, and/or Organizers of Trade through the Electronic Systems (Penyelenggara Perdagangan Melalui Sistem Elektronik – better known as the Platform Provider) with significant economic presence in Indonesia.
Perppu 1/2020 stipulates similar certain quantitative thresholds with the E-Commerce Regulation, which, if fulfilled, will constitute the “significant economic presence” in Indonesia for offshore corporations. The details of the procedures by which the taxes will be imposed as well as the quantitative thresholds for a significant economic presence of an offshore entity will be set forth in a Minister of Finance Regulation.
- EXTENSION OF PERIODS FOR FULFILLMENT OF TAXATION RIGHTS AND OBLIGATIONS
The Government extends the periods for the fulfillment of taxation rights and obligations which due dates fall during the force majeure period of the COVID-19 pandemic, as follows:
- due dates for the submission of objections are extended by up to six months;
- due dates for the refund of tax overpayment are extended by up to one month; an
- due dates for the implementation of taxpayer rights in the form of issuance of letters by the Director General of Tax are extended by up to six months.
The force majeure period of the COVID-19 pandemic refers to the period stipulated by the Government through the Chairman of the National Board for Disaster Management (Badan Nasional Penanggulangan Bencana or “BNPB”). As at the date of this Newsflash, the BNPB has stipulated an emergency period due to the Coronavirus as of January 28, 2020 to May 29, 2020.
- CUSTOMS FACILITIES
Under Perppu 1/2020, the Minister of Finance has the authority to grant relief of or discount for import duties for the import of goods for the handling of COVID-19 and/or to deal with threats that are potentially harmful to the national economy and/or stability of the financial system. These facilities will be stipulated under Minister of Finance Regulation(s).
***
Perppu 1/2020 is valid as of March 31, 2020. However, in accordance with the Constitution and applicable laws, the House of Representatives (Dewan Perwakilan Rakyat or “DPR”) will decide on its next hearing whether to approve Perppu 1/2020 into a law. If the DPR decides to cancel Perppu 1/2020, then Perppu 1/2020 will immediately be cancelled.
April 8, 2020
Copyright © 2020 AKSET. All rights reserved.
Temporary Tax Incentives for Businesses Affected by COVID-19
In anticipation of the impact of the COVID-19 outbreak on the economic stability, productivity, and purchasing power, the Minister of Finance (the “MOF”) issued the MOF Regulation No. 23/PMK.03/2020 dated March 23, 2020 on Tax Incentives for Taxpayers Affected by the Coronavirus Outbreak (the “MOF Regulation”). The MOF Regulation sets out four types of tax incentives that may apply by certain taxpayers, as follows.
- Income Tax Incentives for Employees
The Government will bear the Article 21 Income Tax for April to September 2020 for employees who meet the following criteria:
- They are employed by an employer that engages in certain manufacturing and service business lines listed in Annex A of the MOF Regulation and/or is a Company with Ease of Import for Export Purposes (Kemudahan Impor untuk Tujuan Ekspor) facility (a “KITE Company”);
- They have the Tax Identification Numbers (NPWP); and
- They have the annual gross income of maximum Rp200 million.
A relevant employer shall notify the relevant Tax Office to enjoy this incentive. The employer shall pay the Article 21 Income Tax that is borne by the Government in cash to the relevant employees.
- Import Tax Incentives
As an incentive for taxpayers that engage in certain manufacturing business lines listed in Annex F of the MOF Regulation and/or are KITE Companies, the Government will not collect the Article 22 Income Tax for all imports up to September 2020. The relevant taxpayers shall apply for the Confirmation Letter of Non-collection of Article 22 Income Tax for Import to the relevant Tax Office. The incentive shall be granted as per the date of issuance of the Confirmation Letter.
- Income Tax Installment Incentives
Taxpayers that engage in certain manufacturing business lines listed in Annex F of the MOF Regulation and/or are KITE Companies are also eligible for a 30% discount on their monthly Article 25 Income Tax installments. The relevant taxpayers shall notify the deducted installment amounts to the relevant Tax Office. This incentive will be granted until the tax period of September 2020.
- Accelerated VAT Refunds
The fourth tax incentive granted under the MOF Regulation is by way of accelerated Value Added Tax (“VAT”) refunds for low risk taxable enterprises. This incentive is granted for taxpayers that (i) engage in certain manufacturing business lines listed in Annex F of the MOF Regulation or are KITE Companies; and (ii) have submitted their VAT Returns with an overpayment amount of maximum Rp5 billion. The accelerated refund will be granted for the VAT Returns submitted until the tax period of September 2020.
April 8, 2020
Copyright © 2020 AKSET. All rights reserved.
Data Protection and Privacy: How a Company Should Handle its Employees’ Personal Data during COVID-19 Outbreak
Many organizations in Indonesia are quickly initiating a number of initiatives to anticipate and minimize the growth of COVID-19 outbreak as well as to ensure the health and safety of their employees. The most obvious one is work-from-home policy. The COVID-19 outbreak is putting remote work at a totally unprecedented scale.
However, remote work may not always be possible for all employees. Some organizations have rotation policy, which requires employees to take shift in between working-from-home and working-from-office. Employees in certain type of business or industries, such as hospitality businesses, bank front-liners or health care professionals that must be physically present to work. For employees that have to attend office, organizations normally have a new health assessment policy such as collecting employees’ body temperature for those who have to work on-premise as well as requiring employees to alert organization on any occurrence of the symptoms, disclosing travel records and employee’s close contact.
Unquestionably, the above measures will involve data handling activities, which most likely will also include employee’s personal data. Handling employees’ data diligently are essential for the organizations to demonstrate their commitment to comply with the prevailing regulations. In light of that, below are several notes that an organization should consider in handling their employees’ data during the COVID-19 outbreak pursuant to Indonesia’s personal data protection regime.
- Which data constitute Personal Data?
Personal Data, in essence, is any data relating to an identified or identifiable natural person – directly or indirectly.
The scope of Personal Data includes the employees’ basic identity, such as name, gender, address, etc. This is also likely to include not-so-obvious data which may allow a person to be indirectly identified. Common examples of such data, in this case, are – including but not limited to, (i) location information, such as travel records, transportation means, live-location data; (ii) health-related data, including body’s temperature, symptomatic occurrence information; to even (iii) information about the employee’s close contacts, for instance, whether one has been in contact with infected or People under Supervision.
- How should an organization collect the employees’ Personal Data?
First and foremost, do it with the appropriate lawful ground – considering the following:
- An organization who intends to rely on consent may consider that one of the elements of lawful consent is “freely given”. Oftentimes, consent is considered to not be given freely in an employment relationship due to the power imbalance between the 2-sides.
- Legitimate interest to ensure safety and health of the organization may likely be more appropriate provided that the processing is carried out proportionally and under a strict necessity basis.
- Performance of an employment contract may be relevant under the conditions that ensuring the safety and health of the organization is stipulated in the employment contract or company regulation.
- In an emergency, the protection of the employee’s vital interest may be the relevant ground in processing employee’s Personal Data – for instance, sharing with health professionals.
Furthermore, the organization ought to limit the collection to only Personal Data that are relevant and necessary to the purposes of the processing. If the purpose is to manage the risk and ensuring the safety and health of everyone on-premise, the organization – for instance – may go as far as collecting information about the employees’ close contacts in the last 14 (fourteen) days. However, if the purpose is to only ensure employees are complying with self-isolation policy, employer may only need to focus on collecting live-location data regularly.
Similarly, organizations shall also limit and inform the scope of the processing, i.e., analyzing, sharing, and/or disclosing, to what is proportionate with the relevant purposes.
- What Can an Organization Do With the Collected Personal Data?
After Personal Data is collected, an organization need to further consider how to handle or process those data. For such purpose, it is important to understand the concept of being proportionate. When the purpose of processing is to ensure the safety and health of everyone on-premise, recent travel records may be of relevancy to be collected and analyzed to determine an appropriate course of action. However, it should be noted that any different treatment to the employees shall not be discriminatory.
It is also reasonable to inform identified cases within the organization. However, as the purpose is only to keep everybody informed and aware, anything beyond anonymous information (for example, naming or identifying one individual) may likely be viewed as disproportionate and excessive – unless there is a justifying reason for such decision.
An organization may also store Personal Data for a certain period for a purpose. For example, when an organization identifies that it is necessary to store collected Personal Data for a follow-up action (e.g., to test a suspected employee after a self-isolation period).
- To Whom and When an Organization is Allowed to Share the Collected Personal Data?
At times, Personal Data sharing may be necessary to ensure the safety and health of, not just everyone within the organization, but also for the good of the public. Information relating to identified cases within the organization might be relevant and/or required to be shared to third parties.
Indonesia has several laws and regulations relating to the prevention of infectious disease and epidemic. Such regulation may be relevant in this case as COVID-19 can be categorized as infectious disease and it has also been declared as an epidemic by World Health Organization. This regulation can serve as a legal basis for the sharing of data/information relating to any identified or suspected case of COVID-19 within the organization (which also includes the employees’ Personal Data) to the Health Authority.
Such applicable laws and regulations include the following procedures:
- Health Authority is entitled to collect, gather, and process health data/information in order to stop the outbreak of an infectious disease.
- An organization is obliged to report the occurrence of infectious disease within its organization to regional Health Authority.
- The applicable regulatory framework only stipulates the timeline for an organization to report to the Health Authority, i.e., promptly within 24 (twenty four) hours upon obtaining the knowledge of any identified or suspected case of the infectious disease.
Furthermore, although the applicable regulatory framework only stipulate data sharing to health authority, it is also relevant to share such information to other third parties, such as clients/vendors or building management. This sharing activities might be necessary so that such third parties can manage risk and take necessary action to ensure its safety promptly.
As with the content, there is no provision which explicitly list down the required information to be shared. In this regard, it is important to remember to keep it under a strict necessity and proportionality basis. For instance, it might be relevant to inform clients/vendors with the name of the suspected employee(s) which recently interacted with them, so they can manage and take measurements within their organization. However, it might be excessive to provide details of the employee to building management when the purpose is only to inform identified cases. Besides, the organization shall also ensure that the receiving party will provide adequate protection towards the data.
- Good Governance of Personal Data During the Covid-19 Outbreak
Ensure the Personal Data collected from the employees are accurate
The accuracy of data is paramount in any type of processing. With COVID-19 outbreak, it is even more crucial to process accurate data to ensure the safety and health of everyone, in or outside of the organization.
When collecting employees’ Personal Data, an organization must ask the employees to provide accurate and valid data and information about themselves, e.g., recent travel records, honest information on close contact with an infected person. Accordingly, an organization may impose disciplinary actions if the employees refuse or provide untrue information, as appropriate in accordance with laws and regulations and company regulation.
Update the organization’s records of Personal Data processing
The organization must keep track of its Personal Data processing activities at all times, including those related to measures taken to prevent the spread of COVID-19. An international best practice is to record the types of collected Personal Data, every relevant purpose of processing, the scope of intended-activities, recipient (if relevant), list of processors (if relevant), retention schedule, and general description of security measures implemented.
Ensure the security, integrity, and confidentiality of the data
Personal Data should always be processed and maintained with proper technical and organizational measures to prevent any data breach, theft, and/or leakage. Implementing a proper technical measure is to keep the data in a secure electronic environment, in accordance with applicable regulations. Further, a standard practice of good organizational measure is to have an internal policy/guideline which governs how Personal Data is handled. Since we are dealing with sensitive information during this outbreak, it is always better to limit the person with the knowledge to the data as necessary as possible, on a need-to-know basis.
Responding to the employees’ request with regard to their Personal Data rights
As a data subject, each employee has Personal Data rights. At times like this, an organization should thrive to grant employee’s Personal Data rights as much and as appropriate as it can. Indonesia, in this regard, provides data subject with right to confidentiality of the data, to file a complaint, to obtain access to rectify, to obtain access to historical records of the data, and to request the erasure of data under certain conditions.
- What to do with the Collected Personal Data After You are Done?
The collected Personal Data ought to only be used for informed purposes and kept for the necessary period to achieve such particular purposes. Indonesian applicable regulation provides a minimum retention period of 5 (five) years after the purposes have been achieved. Notwithstanding, to prevent any unwanted data leakage or misuse, it is always better to store it in a format which does not allow any direct identification during such retention period, e.g., through pseudonymization. Once such period elapses, delete it.
***
During this trying time, the safety of the people should be the most important concern for each organization – and that includes, not just health, but also the safety of the privacy, private life, and Personal Data of the employees.
April 6, 2020
Copyright © 2020 AKSET. All rights reserved.
COVID-19: OJK Relaxes Requirements for Bank’s Asset Quality Assessment
Amid the Coronavirus Disease 2019 (“COVID-19”) outbreak in Indonesia, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan - “OJK”) issued The OJK Regulation No. 11/POJK.03/2020 of 2020 effective on March 16, 2020, on National Economic Stimulus as A Countercyclical Impact Policy Spread Of Coronavirus Disease 2019 (“OJK Reg. 11/2020”). This OJK Reg. 11/2020 is enacted to anticipate the disruption that may occur in the banking industry by relaxing certain requirements on banks’ asset quality assessment concerning borrowers affected by COVID-19. OJK Reg. 11/2020 entered into force as of March 16, 2020 and will be effective until March 31, 2021.
One of the key mandates of OJK Reg. 11/2020 is that it enables banks to implement certain policies that support the stimulus for economic growth, particularly for borrowers affected by the COVID-19 outbreak, including micro, small and medium enterprises (collectively, the “Affected Borrowers”).
Key policies contained in OJK Reg. 11/2020 are as follows:
- Determination of Affected Borrowers
OJK Reg. 11/2020 defines an Affected Borrower as a borrower that faces difficulty fulfilling its obligations to banks because the borrower or its businesses are affected (directly or indirectly) by the COVID-19 outbreak. The Affected Borrowers may be involved in any of these business sectors: tourism, transportation, hospitality, trade, processing, agriculture, and mining. In determining policies to define an Affected Borrower, OJK Reg. 11/2020 requires such policies to be enacted by banks to consist of at least: (a) the criteria to constitute an Affected Borrower, and (b) the sectors that are affected by COVID-19.
- Determination of Bank’s Asset Quality Assessment
OJK Reg. 11/2020 provides certain leniency for banks in determining their asset quality in the forms of:
- debts (for conventional banks),
- financing (for sharia banks or sharia business units), or
- other provision of funds (for conventional banks, sharia banks or sharia business units) (all of which, collectively, the “Loan”)
given to any Affected Borrower in the amount of up to Rp10,000,000,000 (ten billion Rupiah) or less.
The quality assessment of the Loan will be determined only based on the timely payment of either the Loan’s principal and/or interest (for conventional banks), or the margin or the profit share or ujrah (for sharia banks or sharia business unit). Whereas in ordinary time, the quality assessment of any Loan as a bank’s asset is determined by a borrower’s business prospects, a borrower’s performance, and a borrower’s ability to pay.
- Credit Restructuring Policy
- Any Loan of an Affected Borrower that is restructured will be classified Current (Lancar). In respect of a borrower with the Current status, banks are only required to set a 1% (one percent) provision of the amount of the restructured Loan for their loan-loss reserves in relation to that particular borrower. This provision aims at improving the banks’ soundness level.
- For Rural Banks (BPR), a restructured Loan is excluded from the application of the credit restructuring accounting treatment as referred to in the Indonesian Banking Accounting Guidelines (Pedoman Akuntansi Perbankan Indonesia “PAPI”).
- New Loans for Affected Borrowers
Banks may provide new Loans to any Affected Borrower. The credit assessment for such new Loan as the banks’ asset will be determined separately from the Affected Borrowers’ existing Loans. For any new Loan with a principal amount of up to Rp10,000,000,000, its credit assessment will be determined only based on the timely payment of either the Loan’s principal and/or interest (for conventional banks), or the margin or profit share or ujrah (for sharia banks or sharia business unit). This is a more lenient requirement compared to the standard determining factors, namely a borrower’s business prospects, a borrower’s performance, and a borrower’s ability to pay. For any Loan with a principal amount above Rp10,000,000,000, its quality assessment shall be determined by the standard formula stipulated under the relevant OJK Regulation concerning Quality Assessment of Assets for Commercial Banks.
- Reporting Requirements
Banks that provide the above stimulus shall report to OJK based on the respective Banks’ positions at the closing month report for their closing positions at the ends of April 2020, June 2020, September 2020, December 2020, and March 2021. The form of the report is attached to OJK Reg. 11/2020. Reports shall be delivered in the form of hardcopy to OJK no later than the end of month following each of the abovementioned reporting months.
COVID-19: OJK Relaksasi Persyaratan atas Penetapan Kualitas Aset Bank
Di tengah penyebaran wabah Virus Corona 2019 (“COVID-19”) di Indonesia, Otoritas Jasa Keuangan Indonesia (“OJK”) menerbitkan Peraturan OJK No. 11/POJK.03/2020 tahun 2020 yang mulai berlaku pada 16 Maret 2020 tentang Stimulus Perekonomian Nasional Sebagai Kebijakan Countercyclical Dampak Penyebaran Coronavirus Disease 2019 (“POJK 11/2020”). POJK 11/2020 diberlakukan dalam rangka mengantisipasi hambatan yang mungkin terjadi dalam industri perbankan dengan menerapkan kebijakan tertentu untuk penetapan kualitas aset bank terkait debitur yang terkena dampak COVID-19. POJK 11/2020 diterbitkan pada tanggal 16 Maret 2020 dan akan berlaku hingga 31 Maret 2021.
Salah satu amanat dari POJK 11/2020 ini adalah untuk memberikan kewenangan kepada bank untuk dapat menerapkan suatu kebijakan stimulus untuk mendukung pertumbuhan ekonomi, terutama untuk debitur yang terdampak penyebaran COVID-19, termasuk debitur usaha mikro, kecil, dan menengah (secara bersama-sama “Debitur Terdampak”).
Kebijakan penting dalam POJK 11/2020 adalah sebagai berikut:
- Penetapan Debitur Terdampak
POJK 11/2020 menetapkan bahwa Debitur Terdampak merupakan debitur yang mengalami kesulitan untuk memenuhi kewajiban pembayaran kredit kepada bank karena debitur atau usaha debitur terdampak (secara langsung ataupun tidak langsung) dari penyebaran COVID-19 pada sektor ekonomi antara lain pariwisata, transportasi, perhotelan, perdagangan, pengolahan, pertanian, dan pertambangan. Dalam menerapkan kebijakan yang mendukung stimulus pertumbuhan ekonomi ini, POJK 11/2020 mensyaratkan Bank memiliki pedoman penetapan Debitur Terdampak, yang paling sedikit memuat: (a) kriteria Debitur Terdampak, dan (b) sektor yang terkena dampak COVID-19.
- Penetapan Kualitas Aset Bank
POJK 11/2020 memberikan kelonggaran tertentu untuk bank dalam menetapkan kualitas aset berupa:
- kredit (untuk bank umum konvensional),
- pembiayaan (untuk bank umum syariah atau unit usaha syariah), dan/atau
- penyediaan dana lain (untuk bank umum konvensional, bank umum syariah atau unit usaha syariah) (secara bersama-sama “Kredit”)
yang diberikan kepada Debitur Terdampak dengan plafon paling banyak Rp10.000.000.000 (sepuluh miliar rupiah).
POJK 11/2020 mengatur bahwa penetapan kualitas Kredit akan hanya didasarkan pada ketepatan pembayaran pokok atas pokok Kredit dan/atau bunga (untuk bank umum konvensional), atau margin atau bagi hasil atau ujrah (untuk bank umum syariah atau unit usaha syariah). Di mana dalam kondisi normal, kualitas Kredit sebagai aset bank ditetapkan berdasarkan prospek usaha debitur, kinerja debitur, dan kemampuan membayar debitur.
- Kebijakan Restrukturisasi Kredit
- Kualitas Kredit dari suatu Debitur Terdampak yang direstrukturisasi akan diklasifikasikan Lancar sejak dilakukan restrukturisasi. Dalam hal Debitur berstatus Lancar, bank hanya diwajibkan untuk menetapkan penyisihan umum 1% (satu persen) dari jumlah Kredit yang direstrukturisasi sebagai bentuk pemenuhan kewajiban penyisihan penilaian kualitas aset. Ketentuan ini bertujuan untuk membantu mempertahankan dan memperbaiki tingkat kesehatan bank yang ditinjau salah satunya berdasarkan risiko Kredit bank tersebut.
- Untuk Bank Perkreditan Rakyat (BPR), Kredit yang direstrukturisasi dikecualikan dari penerapan perlakuan akuntansi restrukturisasi kredit yang ditetapkan dalam Pedoman Akuntansi Perbankan Indonesia (“PAPI”).
- Pemberian Penyediaan Dana Baru untuk Debitur Terdampak
Bank dapat memberikan Kredit baru kepada Debitur Terdampak. Penetapan kualitas kredit atas Kredit baru tersebut sebagai aset bank dilakukan secara terpisah dari Kredit Debitur Terdampak yang telah diberikan sebelumnya. Untuk Kredit baru dengan plafon paling banyak Rp10.000.000.000,00 (sepuluh miliar rupiah), penetapan kualitas Kredit akan didasarkan oleh ketepatan pembayaran pokok atas pokok Kredit dan/atau bunga (untuk bank umum konvensional), atau margin atau bagi hasil atau ujrah (untuk bank umum syariah atau unit usaha syariah). Hal tersebut merupakan persyaratan yang lebih longgar dibandingkan dengan faktor penilaian kualitas Kredit pada kondisi normal seperti: prospek usaha debitur, kinerja debitur, dan kemampuan membayar debitur untuk membayar. Untuk Kredit baru dengan plafon lebih dari Rp10.000.000.000,00 (sepuluh miliar rupiah), penetapan kualitas Kredit akan ditentukan sesuai dengan ketentuan peraturan OJK mengenai penilaian kualitas aset.
- Persyaratan Pelaporan
Bank yang menerapkan kebijakan pendukung stimulus di atas harus melaporkan laporan posisi akhir bulan Bank tersebut kepada OJK untuk posisi akhir bulan April 2020, Juni 2020, September 2020, Desember 2020, dan Maret 2021. Format laporan tersebut terlampir dalam Lampiran POJK 11/2020. Laporan disampaikan secara luring kepada OJK paling lambat akhir bulan berikutnya setelah posisi bulan laporan.
***
April 2, 2020
Copyright © 2020 AKSET. All rights reserved.
Temporary Entry Restriction to Foreigners Due to Covid-19 Outbreak
On March 2, 2020, the Indonesian Government announced the first confirmed cases of coronavirus disease (officially named Covid-19) in Indonesia. Since then, hundreds of patients have been observed and the total number of confirmed positive cases has continued to rise.
Due to the continued Covid-19 outbreak, the Government has decided to instill new immigration policies in an attempt to contain the Covid-19 spread within the Indonesian territory. These policies are implemented through the issuance of the Minister of Law and Human Rights (the “MOLHR”) Regulation No. 11 of 2020 dated March 31, 2020 on Temporary Restriction for Foreigners in Entering the Territory of the Republic of Indonesia (the “Regulation”).
This Regulation revokes the two previous regulations which stipulates the same regarding the immigration related policies due to the outbreak of Covid-19, namely:
- The MOLHR Regulation No. 7 of 2020 dated February 28, 2020, on the Granting of Visas and Stay Permits to Prevent the Corona Virus Outbreak; and
- The MOLHR Regulation Number 8 of 2020 on the Temporary Suspension of the Visit Visa and Visa-on-Arrival as well as Emergency Stay Permits.
We set out below key points of the implemented policies based on the Regulation which may significant for foreign nationals who will visit Indonesia or are in Indonesia.
- Travel Restrictions
- As of 12.00 a.m. on April 2, 2020, the Government temporary travel restrictions came into force. Any foreign national is preventing from entering or transiting through, Indonesia unless he or she is otherwise exempt.
- The exemptions are for foreign nationals who meet the following criteria:
- A holder of a Limited Stay Permit (Izin Tinggal Terbatas) and a Permanent Stay Permit (Izin Tinggal Tetap);
- A holder of a Diplomatic Visa and an Official Visa;
- A holder of Diplomatic Stay Permit (Izin Tinggal Diplomatik) and an Official Stay Permit (Izin Tinggal Dinas);
- A humanitarian aid worker;
- A flight, sea, or land transportation crew member; or
- An employee in a national strategy project.
In addition, the exempted foreign nationals who wish to visit Indonesia shall fulfill the following requirements:
-
- they have to provide a health certificate issued by relevant health authorities from their respective countries in English;
- they have stayed for 14 (fourteen) days in a country declared free from the coronavirus; and
- they have to provide a statement of willingness to be quarantined for 14 (fourteen) days by the Indonesian Government.
- Emergency Stay Permits
The Government will automatically issue an Emergency Stay Permit (Izin Tinggal Keadaan Terpaksa) to any foreign nationals currently in Indonesia who hold (i) a Visit Stay Permit (including those who entered Indonesia with Visa Exemption, Visa on Arrival, or Visit Visa); or (ii) a Limited or Permanent Stay Permit that expires and can no longer be extended. This issuance will be conducted without any requirement for any application to the immigration office and it is free of charge.
There are currently no established timeframes for the travel restriction under the Regulation and the policies above are subject to the future changes regulated by the Government.
***
April 2, 2020
Copyright © 2020 AKSET. All rights reserved.
Employee Protection and Business Sustainability on the Prevention of Covid-19
On March 17, 2020, the Minister of Manpower (the “MOM”) issued her Circular Letter No. M/3/HK.04/III/2020 on the Employee Protection and Business Sustainability on the Prevention of COVID-19 (the “Circular Letter”).
Through this Circular Letter, the MOM requests all the Governors in Indonesia to apply the following measures to protect employees and to sustain businesses.
- Infection Prevention and Countermeasures of COVID-19 in Workplace
The Governors are requested to develop and supervise the implementation of laws and regulation related to the Occupational Health and Safety Measures (K3) and to register and report any COVID-19 case to the relevant institutions. The Governors shall instruct each employer to anticipate the COVID-19 outbreak at the workplace by implementing measures such as hygiene obligation into the K3, implementing the Health and Safety Supervising Committee, and optimizing the function of the work safety service.
The Governors shall emphasize that each employer must immediately develop a plan in facing the COVID-19 outbreak to lessen the infection risk in the workplace and to sustain the businesses.
- Wage Protection during COVID-19 Outbreak
Any employee that is unable to work because:
- he or she is categorized a Person under Supervision (Orang Dalam Pengawasan) based on a doctor statement for the maximum of 14 (fourteen) days or more in compliance with the standards issued by the Ministry of Health, or
- he or she is a suspect of the COVID-19 infection and is quarantined or isolated based on a doctor statement,
is entitled to receive the full wages during the quarantine or isolation periods.
If an employee is unable to work because he or she is infected by the COVID-19 as evidenced by a doctor statement, he or she is entitled to received the wages as accordance to the prevailing laws and regulations.
For employers, the Circular Letter simply states that if an employer is unable or restrained to conduct its business based on the respective regional government policy, which in turn results in all or some of the workers being unable to work, in considering the business sustainability, such employer may amend or adjust the wage amounts and the means of payment based on a mutual agreement between the employer and the employees. This is nothing but a repetition of the relevant provisions of the Manpower Law (Law 13 of 2003).
In this context, please note that the Circular Letter does not allow employers to reduce wages without the consents of the employees. While this is disappointing for employers, please note that the Manpower Law restricts an employer from reducing the amounts of wages without the consent of the employee.
***
April 1, 2020
Copyright © 2020 AKSET. All rights reserved.
OJK Eases Up on Annual Report Obligation and General Meeting of Shareholders
As the Coronavirus Disease (“COVID-19”) represents an unprecedented challenge to business operations and compliance requirements, and to minimize the spread requires limitation to public meetings and gatherings, the Indonesian Financial Services Authority (“OJK”) responsively issued 2 (two) letters, namely: OJK Circular Letter No. S-88/D.04/2020 dated March 16, 2020 on the Handling and Controlling of the COVID-19 (“OJK Letter 88/2020”) and OJK Circular Letter No. S-92/D.04/2020 dated March 18, 2020 on the Relaxation on the Report Obligation and the Implementation of General Meeting of Shareholders (“GMS”) (such letter, “OJK Letter 92/2020”).
- Guidance for Capital Market Industry Players
The OJK Letter 88/2020 provides a set of guidance for capital market industry players on their daily operational activities considering the outbreak of COVID-19 as to minimize the spread of such virus in Indonesia.
This guidance covers as follows:
-
- Daily operational must be adjusted as to minimize face-to-face communication, without hindering any services to the public, by maximizing indirect communication facilities. Notification of this adjustment must be made to the employees, customers, and business partners through mass media and other normal communication means.
- Procedures and guidelines on working from home policies must be immediately determined, based on the applicable laws and regulations, government-issued guidelines, company regulation, or other common practice. This working from home policy must be implemented in such a way that it does not obstructs the provision of service.
- Improve the sanitary level on workplace and customer service facilities.
- Suspend all business travels within the territory of Republic of Indonesia, especially to the regions with confirmed case of COVID-19, based on the most-updated data and information from the Ministry of Health.
- Meetings and other events to be carried out through video conference, webinar, email and/or Whatsapp group.
- Obligations to render services to the public must still be carried out, such as, among others: settlement on securities transactions, custodian services, customer service for collective investment contract, services to potential issuer or public company, securities administration, reporting to OJK, and public announcements.
- Letters communication to OJK can be submitted via email to the Executive Head of Capital Market Supervisory: hoesen@ojk.go.id (cc: septiana@ojk.go.id and fakhri.hilmi@ojk.go.id).
- Annual Report Submission
As stipulated under OJK Regulation No. 29/POJK.04/2016 on Annual Report of Issuer or Public Company, publicly listed companies must submit an annual report (along with, among others, audited annual financial statement) to OJK at the latest by the end of the 4th month after the end of financial year.
With the issuance of the OJK Letter 92/2020, OJK extends the deadline for publicly listed companies for annual financial statement report and annual report submission for 2 (two) months after the original deadline.
This extension also applies for: (i) the evaluation report of Audit Committee on the performance of rendering audit service on annual historical financial information of issuers and publicly listed companies and (ii) annual financial statement of other capital market industry players such as, among others, IDX, KSEI, KPEI, Securities Companies, Securities Administration Bureau, Mutual Funds, and Collective Investment Contracts in the form of Real Estate Investment Trust and Assets-Backed Securities.
- Implementation of the Annual General Meeting of Shareholders
Extension of AGMS period
OJK Regulation No. 32/POJK.04/2014 on the Planning and Performance of General Meeting of Shareholders of Public Companies (“OJK Regulation 32/2014”) requires publicly listed companies to carry out AGMS at the latest by 6 (six) months after the end of the financial year.
With the issuance of OJK Letter 92/2020, OJK extends such deadline by 2 (two) months.
Implementation of E-GMS
With the issuance of OJK Letter 92/2020, OJK allows publicly listed companies to hold a GMS – whether annual GMS or other GMS (i.e. to discuss material transactions, transaction with conflict of interest) – using a mechanism of electronic proxy by using e-GMS system as currently being prepared by the Indonesia Central Securities Depository (Kustodian Sentral Efek Indonesia – “KSEI”).
As a follow up to OJK Letter 92/2020, on March 24, 2020, KSEI through a video conference with relevant stakeholders demonstrated the implementation of e-proxy and e-voting in a system called ‘eASY®‘, in relation the proposed implementation of e-GMS (the “Platform”).
Below is the brief summary of the process of e-GMS through the Platform:
- GMS Announcement
GMS announcement will be carried out through the Platform by sending an announcement (along with the supporting document, and the link to the document and information on the GMS) by blasting emails to the registered recipients as determined by relevant publicly listed company and KSEI.
According to KSEI, there will be a validation period of 14 (fourteen) days from the date of GMS announcement to the date of the GMS invitation – although it will be not implemented during the early stage.
Detailed information that must be completed are as follows: (a) type of meeting (i.e., AGMS/EGMS); (b) meeting date; (c) date of invitation; (d) record date; (e) start meeting hour; (f) end meeting hour; (g) address; (h) country; (i) province; (j) name of the notary, etc.
- GMS Invitation
GMS invitation will be carried out by sending a notification to the shareholders through the Platform and relevant publicly listed company shall upload the agenda(s) of the GMS. The agenda must be made in 2 (two) languages, namely Indonesian and English language. The supporting document as well as the link to the document and information on the GMS can be attached to the GMS announcement.
Through the Platform, the publicly listed company can blast e-mails to the list of shareholders as determined by the said publicly listed company and KSEI.
According to KSEI, there will be a validation period of 21 (twenty-one) days from the date of GMS invitation to the date of GMS– although it will be not implemented during the early stage.
- GMS
Physical GMS will still be held - attended by the appointed BAE and shareholders or their Proxies (to be defined below).
The quorum for attendance and voting will be calculated by those who are attending the GMS physically and via video conference (with prior registration through the Platform).
Simultaneously with the physical GMS, the GMS can be started when the publicly listed company clicks the 'e-meeting call' button on the Platform. On the screen, the parties can see, among others, the GMS agenda and its discussion, live streaming screen, and a chat room. The participants or the proxies can accept or reject the agenda of GMS by clicking 'accept', 'reject', or 'abstain' button on each agenda. These data then will be stored by the KSEI database, these data will be processed not later than d+1 from the meeting date at 12 noon.
- Proxies
For this e-GMS system, the shareholders may appoint proxies as follows:
-
- Individual
Shareholders can provide power of attorney to individual proxy who has been registered in the AKSes facility (electronic information access facility maintain by KSEI). If the individual proxy does not have the access to the AKSes facility, the relevant shareholder can input e-mail addresses, and an e-mail notification will be automatically sent to the individual proxy requesting to create a user ID at AKSes.
-
- Independent Proxy
Shareholders may appoint the Independent Proxy as its proxy for the e-GMS. The Independent Proxy is the BAE as appointed by the relevant publicly listed company at the latest prior to the GMS invitation.
-
- Account Holder Proxy
Shareholders may appoint its account holder (Custodian or Securities Companies) as its proxy for the e-GMS. The appointed account holder will register the vote to the KSEI database on the Platform by d-1 from the meeting date at 12 noon.
Lastly, KSEI also prepares to issue a decree of KSEI's directors regarding the implementation of the ‘eASY® system which will be expected to be released within this week. The first e-GMS using the ‘eASY® system will be held on May 13, 2020.
***
March 26, 2020
Copyright © 2020 AKSET. All rights reserved.
Does Covid-19 Outbreak Excuse Performance of Obligations?
- General
With the outbreak of the novel corona virus disease (now known as the “Covid-19”) and the restrictions or limitations imposed by Governments in various countries, it is imperative for Indonesian companies to revisit all of their agreements to ensure if the companies have any valid excuse for non-performance of their obligations under the relevant agreements.
This Brief provides a general guidelines on non-performance of agreements due to unforeseen events and force majeure under Indonesian laws. Please note that this Brief shall not be considered legal advice in any particular circumstance. Legal advice must be sought for any particular circumstance.
Indonesia is a civil law jurisdiction. So, all the rules and regulations are codified, including the rules and regulations on agreements or contracts.
The provisions on agreements (including excuses for non-performance of agreements) are primarily governed in the Indonesian Civil Code (the “Code”) that we inherited from the Dutch when Indonesia became independent in 1945. There are certain laws and regulations that may be relevant to specific agreements or contracts such as construction services contracts, employment contracts, and the like. We do not discuss these specific agreements in this Brief.
- Certain Principles under the Code
Freedom of Contract
Under Article 1338 of the Code, parties are free to determine their rights and obligations in an agreement (subject to applicable laws and regulations and norms and customs), including the provisions relating to non-performance of obligations under the agreement. So, parties are permitted to set out any and all provisions regarding non-performance of obligations and the excuses therefor.
In addition to the above, Article 1338 of the Code expressly provides that an agreement may not be withdrawn or amended without the consent of the parties thereto.
Explicit Terms
Article 1342 of the Code provides that if a provision of an agreement is clear and express, no parties are allowed to interpret, or depart from, such provision. So, if the wording of an agreement is clear and express, no party is allowed to interpret or depart from the meaning of such wording.
- Excuses of Non-Performance; Unforeseen Events and Force Majeure
Under Article 1244 of the Code, a force majeure may be an excuse for non-performance under an agreement. Below is an unofficial translation of Article 1244 of the Code:
“If there is any reason for such, is debtor shall be liable for costs, damages and interests if the debtor is unable to prove, that the non-performance or the late performance of such obligation, is caused by an unforeseen event, for which the debtor is not responsible and the debtor does not act in bad faith.”
Based on the above, in order for a party to argue this Article the following elements must be met:
- the event is unforeseen and may not be predicted at the time the agreement is entered into;
- the event is not caused by the party; and
- the party acts in good faith.
In addition, Article 1245 of the Code provides that no liability arises if the non-performance is due to a force majeure or an accident so that (a) the debtor does not perform, or is late in performing, his obligation, or (b) the debtor performs an action that the debtor is not permitted to do. An unofficial translation of Article 1245 of the Code is as follows:
“The debtor needs not compensate for costs, damages or interests, if a force majeure or an accident prevented him from giving or doing an obligation, or because of such reasons he committed a prohibited act.”
The Code does not provide the definitions (or examples) of the ‘unforeseen event’ in Article 1244 of the Code, or the ‘force majeure’ and the ‘accident’ in Article 1245 of the Code. In general, however, it is understood that the elements noted in (i), (ii) and (iii) above need to be met to claim the ‘unforeseen event’ in Article 1244 of the Code, or the ‘force majeure’ and the ‘accident’ in Article 1245 of the Code. For the purpose of this Brief, all these events are called force majeure.
- Typical Force Majeure Events in Agreements
Normally, agreements will include or set out certain events to qualify as force majeure. As noted above, under Article 1338 of the Code parties are free to determine the types of force majeure. Force majeure events typically include wars, acts of God, riots, natural disasters, governmental acts, and so forth.
In any event, on the basis of Articles 1244 and 1245 of the Code, when a force majeure clause is not specifically provided in an agreement, a party should still be able to declare that it cannot perform its duties or obligations under the agreement on grounds of force majeure subject to the conditions set out in Articles 1244 and 1245 of the Code.
- Is Covid-19 a Force Majeure Event?
In our view, the Covid-19 outbreak is certainly unforeseen. No party is able (acting in good faith) to predict whether (or when) the Covid-19 is going to occur. So, if a party is prevented from performing its obligation under an agreement due to the Covid-19, and such party does not cause the Covid-19, and the party acts in good faith, such party should be able to claim force majeure. Accordingly, such party should be excused under Articles 1244 or 1245 of the Code.
Furthermore, any government acts following the Covid-19 (e.g., any lockdown or any travel restriction) which prevents a party from performing its obligations under an agreement, and such party does not cause the said government act, and such party acts in good faith, then such party should also be able to claim force majeure. Accordingly, such party should also be excused under Articles 1244 or 1245 of the Code.
However, if an agreement expressly excludes virus outbreaks or any pandemic or any Government action related thereto, then no party should be able to claim a force majeure event due to the Covid-19 outbreak. Consequently, the parties must continue to perform their respective obligations under the relevant agreements.
- What to do next?
We set out below the steps that a party should take in view of the Covid-19 outbreak in order to claim a force majeure event and seek an excuse for non-performance:
- To make a list of agreements of a party and to identify the obligations that the party has to perform thereunder and the deadlines for such performance;
- In consultation with the in-house counsel or an external counsel, to identify if there is any force majeure clause in the agreements, and to determine if there is any limitation of force majeure events;
- To immediately thereafter notify the other party or parties of any non-performance due to the Covid-19 if there are no limitations on force majeure events; and
- To take all actions to mitigate and reduce any loss to the party and the other party or parties.
***
March 24, 2020
Copyright © 2020 AKSET. All rights reserved.