According to the Regulation issued by State Minister for Public Works Number 28/PRT/M/2006 Year 2006 (“Minister Regulation”), it is allowed for the representative of foreign construction legal entities (“Foreign Entities”) to conduct their business in Indonesia after fulfilling some requirements.
Foreign entities mean the representative from construction legal entities that conduct its business in Indonesia which will be responsible for all actions taken by construction legal entities.
Article 2 of Minister Regulation states that before the Foreign Entities conduct their business in Indoneasia, it is required to obtain the License for the Representative of Foreign Construction Legal Entities in Indonesia (Izin Perwakilan Badan Usaha Jasa Konstruksi Asing) (“License”). Moreover, the License can be obtained after the Foreign Entities receive the classification and qualification in the form of certificate. After the Foreign Entities receive the License, those entities are able to provide their services and able to make an agreement with the third parties, which the agreement must be signed on behalf of the holding company. Moreover, the Foreign Entities are allowed to handle the high risk and/or high technology and/or high cost construction projects through joint operation.
Based on Article 6 paragraph 2, the application for License must be fulfilled together with the Foreign Entities’ information such as:
- company profile;
- description for type of business;
- copy of certification for Foreign Entities issued by authorized body and legalized by the company’s embassy in Indonesia;
- statement letter from Indonesian Embassy from the holding company’s country; and
- tax number.
Moreover, the Foreign Entities is obliged to pay the administration fee in the amount of US$ 5,000 (five thousand United States dollars) for type of business as the consultant and US$ 10,000 (ten thousand United States dollars) for type of business as the contractor.
After the Foreign Entities receive their License, the Foreign Entities has the following obligations:
- comply with all regulation in Indonesia and provide annual report with regards to the implementation of the projects within a year;
- make sure the transfer of knowledge to local entities is obtained;
- submit the information of their partners and or the sub-contractors;
- submit the experts’ name who work in the construction’s site.
According to Article 11, the license which is given to the Foreign Entities will be expired within 3 (three) years, therefore the license must be extended by the Foreign Entities. In the event the Foreign Entities does not extend their license 90 (ninety) days after the expiration, the License cannot be extended.
The sanctions for the violation of the provisions of the Minister Regulation, the Foreign Entities can be imposed with administrative sanctions. The administrative sanctions for the violation of the Minister Regulation are in the forms of:
- written warning which can be divided into 2, first warning and second warning;
- suspension of License;
- revocation of License.