The Indonesian government passed the Job Creation or ‘Omnibus’ Law in 2020 to provide more jobs as well as a measure to recuperate from Covid-inflicted consequences.
To further facilitate the investment climate in Indonesia, the government issued Regulation No. 5 of 2021 on Risk-Based Business Licensing to simplify licensing procedures according to the risk classification. Moreover, in GR 5/2021, ex-ante licensing (satisfying all requirements in advance) is effectively superseded by ex-post licensing (verifying all the requirements afterward).
This article will elicit the specifics and key updates regarding the acquisition of Risk-Based Business License in Indonesia through Online Single Submission (OSS) system in 2021.
OSS 2021: Understanding Key Changes
Business licensing has been amended as part of the Omnibus Law framework. The Online Single Submission (OSS) system, which basically merges all business licensing procedures electronically under Government Regulation Number 24 of 2018 (“GR 24/2018”), was just implemented a few years ago by the Indonesian government.
However, under Government Regulation Number 5 of 2021 on the Implementation of Risk-Based Company Licensing (“GR 5/2021”), the government adopted a new method of granting business licenses with the goal of simplifying licensing procedures for a variety of industries. As a result, GR 5/2021 will take effect in lieu of the present GR 24/2018.
In addition to GR 5/2021, the Indonesian government has revised OSS v1.1 to OSS Risk-based Approach (OSS RBA) as of July 2, 2021. The following table summarizes the major differences between OSS v1.1 and OSS RBA:
|Items||OSS v1.1||OSS RBA|
|Licensing System||There is no formal licensing system in place. All business operations are given the same level of consideration.||OSS system will examine and classify business activities into the following categories:
|Incentives and Facilities||Businesses may apply for Tax holidays, Tax Allowance, and Investment Allowance via OSS.||Businesses may apply for Tax Holidays, Tax Allowance, Investment Allowance, and special schemes for companies in Special Economic Zone (SEZ) via OSS|
|Supervision||Businesses are monitored through annual Investment Activity Report (Laporan Kegiatan Penanaman Modal, LKPM) submission.||Businesses are monitored through:
|OSS Software Architecture||Uses monolithic architecture.||Uses Microservice architecture with AIConnect and information service system.|
OSS 2021: Getting Risk-Based Business License via OSS
In general, the process to obtain Risk-Based Business License is comprised of the following stages:
Getting Access to OSS System
Applicants can register at https://ujicoba-uuck.oss.go.id/ and get access to the OSS system, as an individual or as a corporate organization.
For an individual applicant, it is a must to provide the following data:
- ID card number for Indonesian citizen
- Passport numbers for foreigners
For an business entity, the application must contain the following information:
- The type of business entity
- Company name
- Company’s Taxpayer Identification Number (Nomor Pokok Wajib Pajak, NPWP)
- Business Legalization decree number from the Ministry of Law and Human Rights
- ID Card/Passport number of a company director/manager
Complete The Business Data
The next stage after gaining access to the OSS system is to give business or corporate data, which comprises the following information:
- Company profile
- 5-digits of Business Field Classification Number (Klasifikasi Baku Lapangan Usaha Indonesia, KBLI)
- Capital structure
- Proposed Business location
- Type of Custom Identification Number (Angka Pengenal Usaha, API)
- Number of employees
- Product or services
Business Licensing Process Risk Analysis
Following the conclusion of the registration procedure, the OSS system will assess the applicant’s business and assign it to one of four risk categories based on GR 5/2021.
Spatial and Environmental Approval
Obtaining approval on The Suitability of Spatial Use Activity (Kesesuaian Kegiatan Pemanfaatan Ruang, KKPR) is required at this stage and can be done without having to file another application. The proposed business location will be verified and confirmed/rejected online by the Ministry of Agrarian Affairs by cross-checking the proposed business location against the relevant spatial plan.
Issuance of the Business License
The risk-based business license procedure for Low-Risk enterprises is concluded when the OSS issues your NIB, but for Medium-Low Risk and Medium-High Risk businesses, a Business/Product Standard Certificate is required in addition to the NIB. For High-Risk businesses, a NIB, a Business Permit, and a Business/Product Standard Certificate are required.
Incentives and Facilities
Eligible firms can use OSS to apply for tax holidays, tax allowances, import duty exemptions, and other benefits. Learn more how to get Indonesia tax incentives via OSS.
How Can Cekindo Help?
As a one-stop solution for business ancillary services, Cekindo offers comprehensive services like company incorporation, legal services, accounting, and much more.
Prior to incorporation, Cekindo also helps foreign investors in conducting due diligence and market research activities. Our consultants assist investors in obtaining required licenses for a broad range of businesses and make sure your company duly complies with legal regulations, including the new GR 5/2021. When the business becomes operational, we can help you with conducting HR services, accounting and tax, and various other business services.