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An Update Regulation Related To COVID-19 Pandemic: Regulation of The Government in Lieu of Law Number 1 of 2020

“The purpose of Perppu 1/2020 is to mitigate the impact of the pandemic under the framework of rescuing health, national economy, and recovery of the affected business.”

Currently, the world has been suffered from the spread of Corona Virus Disease 2019 (“COVID-19”) that brought health risks to the community and caused fatalities for those infected in the world, including Indonesia. COVID-19 pandemic has also impact and threaten Indonesia’s economic growth, macroeconomic, and financial system instability due to the decline of domestic economic activities and state revenue whose priority first in handle the COVID-19 pandemic.

Therefore, Indonesian Government together with Committee for the Stability of Financial System (“Komite Stabilitas Sistem Keuangan” or “KSSK”) and relevant Institutions had conducted Regulation of The Government in Lieu of Law Number 1 of 2020 on State Financial And The Stability Of The Financial System Policies To Handling Of The COVID-19 Pandemic and/or Threats That Are Potentially Harmful To The National Economy and/or The Stability Of The Financial System (“Peraturan Pemerintah Pengganti Undang-Undang” or “Perppu 1/2020”).

The purpose of Perppu 1/2020 is to mitigate the impact of the pandemic under the framework of rescuing health, national economy, and recovery of the affected business. Perppu 1/2020 has stipulated several extraordinary provisions within the state financial sector including the sector of taxation, regional finance, and financial sector as highlighted below:

Authorities and Policies Implementation by Financial Services Authority (“Otoritas Jasa Keuangan” or “OJK”)

Authorities

In according to support implementation of KSSK authorities in controlling financial system stability problems, OJK has been granted with the authorities to:

  1. Issue a written order to financial services institution in the event of conduct merger, consolidation, acquisition, integration and/or conversion.
  2. Determine exemption for certain parties from the obligation to implement disclosure principles in the capital market sector for prevention and control of financial system crisis.
  3. Determine provisions on the information technology utilization in the organization of General Meeting of Shareholders or other meetings that conducted by financial services industries based on laws and regulations.

Sanctions

  1. Any person who deliberately disregards, not fulfill, not implement or inhibit the implementation of OJK’s authorities as stated above, convicted with minimum imprisonment 4 (four) years and fine in the amount of Rp10.000.000.000,00 (ten billion rupiah) or maximum imprisonment 12 (twelve) years and fine in the amount of Rp300.000.000.000,00 (three hundred billion rupiah).
  2. If the violation is conducted by corporation, it convicted with fine in the amount of minimum Rp1.000.000.000.000,00 (one trillion rupiah).

Authorities and Policies Implementation by Bank Indonesia

In according to support implementation of KSSK authorities in controlling financial system stability problems, Bank Indonesia has been granted with the authorities to:

  1. Provide short-term liquidity loan or short-term liquidity financing based on sharia principle to Systemic Banks or banks other than Systemic Banks.
  2. Provide special liquidity loan (“Pinjaman Likuditas Khusus” or “PLK”) to Systemic Banks that have difficult in liquidity and do not fulfill requirements to grant short-term liquidity loan or short-term liquidity financing based on sharia principles that guaranteed by the Government and granted based on KSSK’s Decree.
  3. Purchase long term Government Bond and/or Government Sharia Commercial Paper/Securities in primary market for handling financial system problems that harm the national economy, including aforementioned Bond or Sharia Commercial Paper/Securities that issued with certain purposes for COVID-19 pandemic.

Moreover, this provision is purposed as a funding source for the Government since Law Number 23 of 1999 and its lieu on Law Number 3 of 2004 and Law Number 6 of 2009 concerning Bank Indonesia, had prohibited Bank Indonesia to purchase any kind of long-term Government Bonds in primary market.

Authorities and Policies Implementation by LPS

In according to support implementation of KSSK authorities in controlling financial system stability problems, LPS has been granted with the authorities to:

  1. Conduct preparation for handle and increase preparation intensity with OJK to handle Bank’s solvability problems.
  2. In the event that LPS is expected to have liquidity difficulties in handling failed Banks, LPS is authorize to conduct some following actions:
    a. sale/repo of Government Securities that owned by Bank Indonesia;
    b. issuance of bonds;
    c. give loan to other parties; and or
    d. give loan to the Government.
  3. Formulate and implement deposit insurance policies for customers by considering the source of fund and/or allotment of deposits along with the amount of guaranteed value that regulated by Government Regulation.

Furthermore, the implementation of LPS’s authorities as aforementioned would be regulated by Government Regulation.

Policies In The Taxation Sector

a. Adjustment to the Income Tax tariffs for domestic corporate taxpayer and permanent establishments (“Bentuk Usaha Tetap”), in the form of tariffs reduction as 22% (twenty two percent) applied in 2020 and 2021 Tax Year and 20% (twenty percent) applied in 2022 Tax Year.
Furthermore, for publicly listed limited-liability company that its amount of paid-up shares traded in Indonesia Stock Exchange at least 40% (forty percent) could obtain 3% (three percent) reduction lower than aforementioned tariffs;
b. Taxation treatments for Trade Through Electronic System (“Perdagangan Melalui Sistem Elektronik” or “PMSE”);
c. The time extension for implement rights and fulfilling tax obligations; and
d. Give authorities to the Minister of Finance to grant customs facilities which are exemption or relief of import duties, in order to handle emergency conditions as well as to recover and reinforce the national economy.

Author: Kristalia Andiani Puteri

Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas include capital market and financial services.

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+62- 21 50806536  | +62 – 811 877 216 | info@gaffarcolaw.com | www.gaffarcolaw.com

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