The Job Creation Law, or the Omnibus Law on Job Creation, aims to improve the ease of doing business and boost the national investment climate. Bear in mind that as of the issuance of this article, this law has not yet been enacted. Even after the enactment, a minimum of 39 (thirty-nine) implementing regulations is required in the forms of Government Regulation, Presidential Regulation as well as Ministry Regulations. In this overview, EKONID presents a number of crucial points in regards to the law
Disclaimer: As of the issuance of this article, an official draft of the Job Creation Law has not yet been announced. This article is made based on the Job Creation Law Draft version of October 2020 taken from Hukumonline (http://pusatdata.hukumonline.com/pusatdata/detail/lt5e44b818ae3f4/rancangan-undang-undang-cipta-kerja-tahun-2020#). The below article is intended for informational purposes only, and does not constitute any legal positioning or advice. This document may be updated as the situation develops.
1. Improvement of Investment Ecosystems and Business Activities
| Issue | Contents of Omnibus Law |
|---|---|
| Application of Risk-Based Business Licensing | Changing the licensing approach from license-based to risk-based: - High Risk: requires NIB (Business Identification Number) and Permit; - Medium-Low Risk: Standard Certificate and NIB; - Low Risk: NIB is sufficient. |
| Forest zone | The Land Bank provides a minimum Land Object of Agrarian Reform (TORA) of 30%. |
| Simplification of Business Licensing per Sector, Ease of Investment and Requirements | - Regulated sectors: Maritime Affairs and Fisheries, Agriculture; Forestry; Energy and Mineral Resources; Nuclear Power; Industry; Trade, Guarantee of Halal Products, Public Works and Public Housing; Transportation; Health; Medicine and Food; Education and Culture; Tourism; Religious; Telecommunication and Broadcasting Post; Defense and Security. - Business Licensing in the Education sector only applies to Formal Education Institutions in Special Economic Zones. |
| Halal Certification | 1. Determination of product halalness by the Indonesian Council of Religious Scholars/“MUI” (including MUI in the province and MPU / Ulama Consultative Assembly in Aceh) - Conducted in the Halal Fatwa Session by MUI. - The decision on the halalness of the product is submitted by MUI to BPJPH as the basis for issuing the Halal Certificate. 2. Halal Certificate issued by Halal Product Assurance Agency/”BPJPH” no later than 1 working day (since the fatwa of the product's halalness). 3. Expanding Halal Inspection Agencies (can be done by Islamic organizations, state universities and private universities under religious institutions or Islamic foundations). 4. Halal certification for SMEs are free of charge. 5. For SMEs, the obligation to be halal-certified is based on the statement of the UMK actor (according to halal standards). 6. The government gives roles to Islamic organizations to prepare Halal Auditors. 7. The time required in the process of obtaining halal certification has been determined as a maximum of only 21 days. |
| Standardization of business licensing through the NSPK and Service Level Agreement (SLA) | 1. The central government and regional governments will continue to exercise licensing authority, according to their respective authorities based on Norms, Standards, Procedures and Criteria (NSPK). 2. NSPK shall be stipulated in Government Regulation (PP). 3. Simplification of licensing services and licensing services carried out electronically in accordance with the NSPK. 4. The application for a license is approved when the time limit mentioned in the Service Level Agreement (SLA) has passed. |
| Simplification of Business Licensing for Fishermen | Licensing for fishing boats through one gate in the Ministry of Maritime Affairs and Fisheries (integrating permits between ministries and institutions). |
2. Business licensing
| Issue | Contents of Omnibus Law |
|---|---|
| Ease of Basic Licensing (Spatial, Environment, Building) | - Suitability of space use activities (Digital National Spatial Planning “RTRW” / Detailed Spatial Plan “RDTR”); - Environmental approvals such as Amdal and UKL/UPL still exist for business activities that have an important (high risk) impact on health, safety, environment, and natural resource management activities, and are integrated into business licensing. - Building Approval and Certificate of Acceptability by using building technical standards (simple buildings following the prototype). |
3. Manpower
| Issue | Contents of Omnibus Law |
|---|---|
| Fixed Term Work Agreement (PKWT) | - PKWT compensation according to the work period of the worker / laborer. - PKWT can only be created for certain jobs and cannot be held for permanent work. |
| Outsourcing | - Workers / laborers in outsourcing companies still receive protection of their rights. - In the event of a change in the outsourcing company, workers / laborers are guaranteed their work continuity and rights. |
| Minimum Wage (MW) | - MW must be stipulated at the Provincial level (UMP), while Regency/City MW still exists. - The MW calculation formula contains a variable of economic growth or inflation. - Wages above MW are determined by agreement. - MW that was set before this Law cannot be lowered. |
| Foreign Workers | Foreign Workers are only allowed for a certain position for a certain time and must have certain competencies, it is mandatory to use a Foreign Worker Plan (RPTKA). |
| Severance Pay | - Workers / laborers who experience layoffs still receive severance pay, long service pay and compensation pay for their rights in accordance with statutory regulations. - Workers / laborers who experience layoffs will receive compensation for layoffs of 25 times of their wages, which consists of 19 times borne by the employer and 6 times borne by the government through the Job Loss Guarantee Program. |
| Job Loss Guarantee Program | Organized by BPJS Ketenagakerjaan and the Government, and does not reduce the benefits of Work Accident Benefits, Death Benefits, Old Age Benefits, and Pension Benefits. |
| Working time | The provisions for fixed working hours are in accordance with Law 13/2003, and there are additional arrangements for working hours that are more flexible for certain jobs. |
4. Convenience, Protection, Empowerment of Cooperatives and MSMEs
| Issue | Contents of Omnibus Law |
|---|---|
| Cooperative's Number of founders | 9 (nine) persons |
| Cooperative's Members Meeting | Physical as well as online meetings are now allowed. |
| Cooperative System | Conventional and Syariah/Islamic systems are possible. |
| Cooperative Member Book List | Written and electronic |
| Registration for MSME | One off licensing registration, MSME no longer need notarial deed, Ministry Ratification and minimum IDR 50 Million paid capital for its establishment. |
| Incentives and facilities for SMEs | Guaranteed, in form of: - Fiscal and Financing Incentives for the development and empowerment of MSMEs. - Use of Special Allocation Funds to support development and empowerment of activities for MSMEs. - Providing facilitation services for legal assistance and protection for MSMEs. - Priority products / services for Cooperatives and UMK min. 40% in the procurement of government goods and services. - Provision of a place for promotion and business development of at least 30% for MSMEs in public infrastructure (rest area for toll roads, airports, terminals, stations, ports, etc.). - The government is obliged to provide guidance for MSMEs. |
5. Ease of Doing Business
| Issue | Contents of Omnibus Law |
|---|---|
| Immigration | - For pre-investment visits a Visit Visa can be used, and visa guarantees can be a deposit. - Expansion of the scope of permanent residence permits which can also be granted for second homes. |
| Intellectual Property Rights | - Acceleration of the patent process. - The application of compulsory patents can be done through imports. - Simplification and acceleration of Trademark Application processes. |
| Limited Liability Company (PT) | - Nuisance Permission Removal - Establishment of Micro and Small Enterprise by Individuals can be done by one person. - Simplification of process and reduction of cost for establishing a PT. - The Village Legal Entity (BUMDesa) shall be in the form of a legal entity. |
6. Support for Research and Innovation
| Issue | Contents of Omnibus Law |
|---|---|
| State-Owned Enterprise (BUMN) appointment | The Central Government can allocate a special assignment to BUMN to carry out public benefit functions as well as national research and innovation. |
| Establishment of Regional Research and Innovation Agencies | In order to carry out Research, Development, Assessment and Application, as well as Invention and Innovation that are integrated in the regions, the Regional Government forms a body. |
7. Land Acquisition
| Issue | Contents of Omnibus Law |
|---|---|
| Acceleration of National Strategic Projects | Acceleration of the land acquisition process for development in the public interest. |
| Land Management Rights (HPL) and Building Use Rights (HGB) | Land Management Rights (HPL) and Building Use Rights (HGB) Strengthening the implementation of Land Management Rights (HPL) and granting HGB above HPL can be extended and renewed after operation / operation worthy. Foreign natural persons residing in Indonesia and holding a residential permit can buy apartments on HGB Land. |
| Establishment of a Land Bank | - Nuisance Permission Removal - Establishment of Micro and Small Enterprise by Individuals can be done by one person. - Simplification of process and reduction of cost for establishing a PT. - The Village Legal Entity (BUMDesa) shall be in the form of a legal entity. |
8. Economic Zones
| Issue | Contents of Omnibus Law |
|---|---|
| Special Economic Zones | - Expansion of activities in Special Economic Zones to include education and health services. - Proposing Special Economic Zones by a private business entity that must have mastered the land min. 50% - The Special Economic Zones administrator has the authority as licensing authority in Special Economic Zones based on the NSPK. - Local government obligations to support Special Economic Zones. - There are additional facilities for imports of consumer goods in non-industrial Special Economic Zones. - Employment incentives regulated in Government Regulation. |
9. Central Government Investment and the Ease of National Strategic Projects
| Issue | Contents of Omnibus Law |
|---|---|
| Central Government Investment | The formation of a Central Government investment management agency (Sovereign Wealth Fund / SWF) to manage and place a number of state funds and / or assets. SWF is an Indonesian legal entity that is fully owned by the Government. The SWF institution can carry out investments directly or indirectly, collaborate with third parties, or through the formation of special entities. Note: The SWF Institution's Initial Capital is set at minimum Rp. 15 Trillion in the form of cash and according to the results of the Government Investment Meeting, this Institution’s initial capital is USD 5 billion. |
Acceleration of National Strategic Projects
| The government provides land (land or forest areas) and all permits required in the implementation of National Strategic Projects of the Central Government, Local Government, BUMN, BUMD. Land acquisition can be carried out by the private sector (executing activities, if no government budget is available). |
10. Implementation of Government Administration to Support Job Creation
| Issue | Contents of Omnibus Law |
|---|---|
| Authority of Ministry and Institution and Regional Government | The authority of the Minister, Head of the Institution, or the Local Government as set out in the Act to exercise or form legislation, should be interpreted as an implementation of the authority of the President. |
| Presidential Discretion | Discretion can be carried out by the President in the national interest, provided that: according to the objectives, according to the Principles of Good General Governance, based on objective reasons, not causing conflicts of interest, and being carried out in good faith. |
Finally, the law also brings a few new impacts towards taxation as follows:
1. Investment Financing
a. Gradual reduction of corporate income tax rates: 22% (2020 & 2021) and 20% (2022 etc.).
b. Reduction of Public Companies' Income Tax rates (general rate - 3%).
c. Abolition of domestic income tax on dividends.
d. Certain income (including dividends) from abroad is not subject to income tax as long as it is invested in Indonesia.
e. Non-object of Income Tax:
- Share of profit / SHU cooperative,
- Haj funds managed by BPKH
f. Adjustment space of Article 26 Income Tax Rates on Interest.
g. Equity participation in the form of assets (inbreng) is not subject to VAT.
2. Taxpayer Compliance
a. Relaxation of Input Tax Crediting Rights for Taxable Entrepreneurs.
b. Re-organization of:
- Tax Administrative Sanctions,
- Interest Rewards.
3. Legal Certainty
a. Determination of the Tax Subject of the Person
- Personal:
- Indonesian citizens and foreigners living >183 days in Indonesia become Domestic Tax Subjects,
- Imposition of income tax for foreigners, who are domestic tax subjects with certain expertise, only on income from Indonesia,
- Citizens residing in Indonesia <183 days can become foreign tax subjects under certain conditions.
b. Delivery of coal, including delivery of taxable goods (BKP).
c. Consignment does not include delivery of taxable goods (BKP).
d. Non-object of income tax on the remaining funds of Social & Religious Agencies (as well as Educational Institutions).
e. Tax penalties that have been decided are no longer issued tax assessments on.
f. Issuance of Tax Collection Letter expires after 5 years.
g. A Tax Collection Letter can be issued to collect interest compensation not been awarded.
4. Fairness in doing business
a. Electronic Transaction Taxation:
- VAT collecting platform designation,
- Imposition of tax on foreign tax subject
b. Inclusion of NIK/ID number of buyers who do not have Taxpayer Number (NPWP) in the Tax Receipt/Faktur Pajak.