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An Update on Business License by Omnibus Law

“The Omnibus Law changed on the business licensing from the classifications, requirements, to the process itself. The Environment aspect is will also be one of the approval documents, especially for the high-risk business activity.”

In order to attract investors and bolster investment, the Government through Omnibus Law simplifies the licensing process and investment requirements by amending some provisions and introduces new risk-based business licensing. The implementation of the Risk-Based Licensing removes the need to obtain multiple permits and only requires obtaining the “Business License” (Perizinan Berusaha) based on the risk assessment level of the business activity. This is expected to speed up the process for the Investment due to the process will be less time-consuming and more cost efficient. 

Business licenses will shift into a Risk-Based Licensing System and are classified based on each business activity’s potential risk level that will be determined by the scale of hazards that a business activity has the potential to create. The scale of the potential hazards will be determined by the following aspects: environment, health, safety and natural resources with considering the location of the business and business volatility risks. 

The government categorize new businesses activity into three classifications, as follows: 

  1. Low-risk business activity; 
  2. Medium-risk business activity; and 
  3. High-risk business activity. 

Business Licensing Requirements

As the Risk-Based business licensing requirements will follow the business risk classifications, as mentioned above. Omnibus Law determines the business licensing requirements for each level of risk classification as follows: 

  1. A business activity with low-risk assessment level will grant only a Business Identification Number (Nomor Induk Berusaha/ NIB) obtain through the Online Single Submission (OSS) System; 
  2. Medium-risk Business activity is divided into two categories, lower-medium risk and upper-medium risk. For companies with lower-medium risk business activity in addition to NIB will be required to provide a statement letter of fulfilment of business standards, while for upper-medium risk companies will have to obtain a business standards certificate from the central government; and
  3. High-risk business activity is required to obtain NIB and license in the form of an approval issued by the Central or Regional Government to perform their business activities. 

As part of the Government’s plan to simplifies business licensing all regional, under Omnibus Law it also eliminating the need to obtain a location permit and companies will only have to ensure that their business location conforms to the relevant Detailed Spatial Plan (Rencana Detail Tata Ruang or “RDTR”). Once the location serves to the RDTR, companies must input the business location coordinates to the Online Single Submission (OSS) system. 

There are 15 (fifteen) sectors that affected by the implication of the Risk Based Business Licensing implementation are as follows: 

  1. Forestry; 
  2. Agriculture; 
  3. Marine and fisheries; 
  4. Energy and mineral resources; 
  5. Industry; 
  6. Trade, legal metrology hal product assurance;
  7. Transportation; 
  8. Health, medicine and food; 
  9. Education and culture; 
  10. Tourism; 
  11. Nuclear Power; 
  12. Religious; 
  13. Post, telecommunication, and broadcasting; 
  14. Public work and housing; and 
  15. Defense and security. 

The government will implement Government Regulations for the detailed implementation of business licensing for each risk level.

Environmental Approval 

Under the Omnibus Law, the environmental permit is still one of the requirements to obtain a business license for companies with high-risk business activities. Still, the term has been changed into environmental approval which consists of the Decision on Environmental Feasibility of the Environmental Impact Analysis (Analisis Dampak Lingkungan or “AMDAL”) and Statement of Capability for Environmental Management Efforts and Environment Monitoring Efforts (Upaya Pengelolaan Lingkungan Hidup dan Upaya Pemantauan Lingkungan Hidup or “UKL-UPL”).  

For companies with a low-risk business activity are required with Statement of Environmental Management and Monitoring Capability (Surat Pernyataan Kesanggupan Pengelolaan dan Pemantauan Lingkungan Hidup/ “SPPL”). Before Omnibus Law, the regional government can provide environmental permits is now transferred to the central government. 

Companies Registration Law

Under the Omnibus Law, it removes the requirement for companies to register their corporate data to the Ministry of Trade, therefore the Company Registration Law now only required to obtain a NIB which also serves as a Company Registration Certificate that can be done through the OSS system.

The Government will supervise business activity to ensure the companies are complying with the right business license for conducting their business. The frequency of such inspections will depend on the business level of risk classification as determined by the Government.

Author: Sutria Puti Dwirahayu

Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas include Business Law.

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