The OSS system was launched last week (mid-July 2018), although there are still teething issues with the system, and the system has limited coverage at this time. However, ultimately all licensing processes will be streamlined and will be easier under the OSS system.
There is a substantial mindset change with the new OSS system. Rather than the government monitoring compliance prior to licenses being issued, the OSS system assumes that companies will self-assess and will ensure compliance; with the ultimate sanction being that a noncompliant company's registration will be frozen, and dealings with the government and third parties will be delayed or will become more difficult until there is compliance.
Oss System Overview
We have had a briefing with the government on the OSS system and processes. Acknowledging that there are still teething issues, the following points should be noted:
- Nature of System - Self-Assessment: With the OSS system, the government is placing more trust in investors, advisers and especially notaries, and companies are expected to be more proactive with and ensure their own compliance. Business licenses are now issued with an obligation to fulfill certain commitments/obligations. Business licenses will only be effective after all commitments/obligations imposed to enable the holders to conduct commercial activities are fulfilled. The intent is that when obligations are fulfilled, it will be recorded in the OSS system, so relevant government agencies are aware of compliance. The OSS system will not issue an additional document to confirm the effectiveness of any license. As an example, to speed up the business/foreign investment process, a company will be established first by obtaining the Ministry of Law and Human Rights (MOLHR) approval for the establishment, and then it will obtain its foreign investment approval/business license from the OSS system. What this means is that appropriate advice needs to be obtained first, any necessary discussions should be held with the Capital Investment Coordinating Board (BKPM) if there is any uncertainty, and a self assessment of the appropriate business licenses, capital, investment plan etc. should be done.
- NIB - Essential Identification: As and when relevant sectors are covered by the OSS system, new businesses must register with the OSS system. Eventually existing business entities will need to register also with the OSS system. Upon registration, a Business Identity Number (Nomor Induk Berusaha/"NIB") will be issued. The NIB will serve as an "identity card" for business entities. The NIB will subsume some other licenses and registrations that previously had to be obtained by a business. The NIB can now serve as the Company Registration Certificate (TDP), the Importer Identification Number (API) and the customs access right (hak akses kepabeanan). The NIB will be valid as long as the business entity operates. So a company having an NIB will have fewer licenses to renew.
- Mandatory Registration: The OSS system applies to all business entities, and is intended in the future to capture all sectors and to be integrated with all other government agencies. Some sectors are not yet covered by the OSS system (e.g., finance sector, and mining, oil and gas sector), and some government agencies are not yet integrated. Also currently a limited number of government agencies' online systems are integrated, e.g., the MOLHR (AHU) online system, the Population and Civil Registration (Dukcapil) online system, the INSW and the Ministry of Employment online system.
- OSS Monitoring Teams: As the OSS system is more of a self assessment/compliance system rather than the government checking upfront compliance before issuing licenses, government agencies are restructuring their workforces to form OSS monitoring teams. As the OSS system is integrated with more government agencies, noncompliance by a business entity could lead to the NIB number being "suspended or revoked" or to the business licenses being suspended or revoked, with notifications being sent to other government agencies. While government agencies have been cross checking compliance for other government agencies for the past three years, the OSS system is intended to be the ultimate tool to ensure all compliance is up to date with all government agencies.
- Regulatory Changes: Indonesian agencies (including BKPM) need to issue technical guidance on using the OSS system, and amend their existing regulations/decrees etc. to conform with the OSS regulation.
What you need to know
The following are some immediate pointers:
- Clients should get familiar with the OSS system and what it covers. The OSS system is a licensing system only at this time, and reports (such as the foreign investment realization report (LKPM) and representative office reports), other reports and filings still need to be made with relevant government agencies.
- Given the emphasis on self-assessment and compliance, clients may need to beef up their compliance departments, and ensure that there is training and that reports, filings and registrations are done in time and are updated. Failure to do so could hamper a company's operations ̶ for instance in the future, a failure to submit financial statements in a timely manner may result in imports being stopped. The era of multiple and independent government agency systems is coming to a close.
- New business entities must commence using the OSS system to the extent possible.
- Existing licensed businesses are not immediately required to register themselves in the OSS system (to obtain an NIB). However, registration will be required for any license renewals that are currently, or in the future will be, issued through the OSS system. Progressively all business entities will be in the OSS system.
- For existing business entities, we advise doing a prompt compliance check and that any deficiencies should be rectified before applying for an NIB from the OSS system. This is to ensure that there is no immediate compliance issue, once registered in the OSS system ̶ which could then result in the NIB being suspended or revoked, government agencies being alerted and perations affected.
- Clients must monitor the OSS system site to determine upgrades in the OSS system and the coverage of the OSS system, as it is progressively rolled out to more and more sectors and agencies.