The Directorate General of Taxation of Indonesia issued a new regulation to prevent the misuse of double taxation agreements and avoidance of taxes (“Directorate General Taxation No.PER-62/PJ/2009 of 2009 regarding Prevention of Misuse of Double Taxation Agreement (November 5, 2009) (“DG Tax 62/09”)). The definition of Avoidance of Double Taxation Agreement (“P3B”) is any agreement between Indonesia and other countries within the framework of preventing tax avoidance and evasion. The type of actions that consider as misuse of P3B amongst others e.g. (a) the transaction which does not have any economic substance however that transaction is designed in the framework to obtain the advantage of P3B; (b) the transaction with the scheme whose legal form is different from the economic substances for the purpose to obtain the advantage of P3B; (c) the income recipient is not the beneficial owner of the economic benefit. Further, the beneficial owner does not act as an agent, nominee or a conduit company. This regulation will come into force on January 1, 2010.
Archive for the ‘Law’ Category
Implementation of One Stop Services on Investment Licenses in Indonesia
December 16, 2009Investment Law Indonesia has mandated the establishment of One Stop Services (“OSS”). Following the implementation of OSS, the President has issued regulation on OSS (President Regulation No.27 of 2009). This regulation stipulates that the Coordinating Investment Body (BKPM) will be responsible for establishment OSS in local regions. Further, the Ministry of Industrial delegated its authority to BKPM on Industrial Business License (Izin Usaha Industri), Development License (Izin Perluasan), Industrial Zone Business License (Izin Usaha Kawasan Industri) and Development of Industrial Business Zone (Perluasan Kawasan Usaha Industri) (refer to the Ministry of Industrial Regulation No.147/M-IND/PER/10/2009). Also, the Minstry of Public Works delegated its authority to BKPM on business licenses on Public Works (refer to Ministry of Public Works No.24/PRT/M/2009). This condition reflects that the new cabinet has commitment to improve the Investment Climate particularly to establish OSS in Indonesia.
INVESTMENT LAW IN INDONESIA
February 26, 2009
Introduction
Indonesia has a New Investment Law No.25 of 2007 (April 26, 2007) (“Law 25/07”). The Law 25/07 supersedes both Law No.1 of 1967 regarding Foreign Investment (January 10, 2007) and Law No.6 of 1968 regarding Domestic Investment (July 3, 1968).
Law 25/07 integrates the previous investment laws and its implementing regulations to some extent, but affirmatively addresses some of the impediments frequently cited by foreign investors doing business in the country. Noteworthy changes including those relating to investment approval procedures, land titles, and incentives.
Law 25/07 introduces new issues e.g. Corporate Social Responsibility and Dispute Settlement mechanism – International Arbitration.
Law 25/07 also introduces one door-integrated services pursuant to licensing and non-licensing process. The process runs from the application stage until the issuance documents both licensing and non–licensing is conducted in one place.
Moreover, Law 25/07 introduces the regional autonomy whereas the regional autonomy has right, authority and obligation of an autonomous region to regulate and self-manage its affairs and the interests of the local communities in accordance with laws and regulations. (Art.30 Law 25/07).
Law 25/07 will be the main legal umbrella for investment in Indonesia. Law 25/07 becomes the pillars supporting the investment climate. The government offers various attractive packages including equal treatment of every investor by observing national interest, bureaucracy reform in investment services and fiscal incentives. It shows the efforts of the government to make the investment climate more attractive, competitive and fair.
The followings are highlights of New Investment Law:
1. Equal Treatment
Law 25/07 treats domestic and foreign investors equally.
- The principle that foreign and domestic investors are equal before law (Art.3(1)(d) Law 25/07);
- The principle that foreign and domestic investors shall have equal opportunity (Art.4(2) Law 25/07);
- All investors shall be treated equally (Art.6(1) Law 25/07); and
- Recognizes that bilateral agreements regarding investment may be made (Art. 6(2) Law 25/07).
Note that this does not limit the government rights to determine certain businesses are closed for foreign investments, or that there are certain conditions which must be met before foreign investors may invest in certain other businesses, e.g. the Negative List and unwritten policy by BKPM on the minimum capital requirements for establishment of the Foreign Investment Company in Indonesia (current policy, the minimum capital requirement is in the amount of USD 250.000).
2. One Door Integrated Services
The Investment Coordinating Board (“Badan Koordinasi Penanaman Modal or BKPM”) is intended to be sole institution having the authority process the investment licenses (excluded certain businesses such as mining and oil and gas sectors, banking etc).The stop services will be provided through a delegation or assignment the power from an institution or an agency currently having licensing authority.
In order to implement One Stop Services (“OSS”), some of local regions have issued the local regulations and set up OSS unit/body.
3. Immigration Service Facilities
Law 25/07 provides the possibility of a 2 year temporary stay permit and re-entry permit for multiple entries for up to 2 years if the foreign investors fulfill the criterias.
4. Land Title
Law 25/07 now allows for an extended land ownership depending on the types of land rights and the criteria shall be met.
5. Tax-related incentives
The government grants equal treatment both foreign and domestic investment in the Capital Investment facilities.
The facilities will be provided to the investment company that is willing to expand the investment and invest in new capital investment.
Criteria of the investment expanding their investment or investing new capital will be granted certain facilities including (refer to Art.18 Law 25/07):
- income tax reduction;
- custom exemption to machineries, capital goods and tools;
- custom exemption on raw materials;
- VAT exemption;
- Accelerated amortization and depreciation; and
- Incentive on land and building tax.
The government also recently issued Government Regulations No.1 of 2007 regarding the Facility of Income Tax for Investment on Certain Business Sectors or Regions (January 2, 2007). The certain business sectors amongst others are: food processing industries, packaging industries, plastic goods industries, cement industries, furniture industries, seafood processing industries, etc. Furthermore, the Government also issued the following regulations e.g. Ministry of Finance No.16/PML/03/2007 regarding Granting Income Tax Facilities for Investment on Certain Business Sectors or Certain Regions, Directorate General of Tax No. Per 67/PJ/07 of 2007 regarding Procedure of Granting Income Tax for Investment on Certain Business Sectors and/or Certain Regions.
6. Nationalization and Expropriation
Government will not execute any nationalization action or take over the ownership rights of the investor, unless by law.
In the event government takes action of nationalization or takes over the ownership rights as mentioned above, then the government willl grant compensation, which amount will be specified based on the market value.
Market value is determined pursuant to the internationally-accepted methods adopted by an independent appraiser named by the parties.
If there is no consensus on the amount of compensation among the parties, the dispute shall be settled through arbitration.
7. Transfer and Repatriation
Law 25/07 confirms that foreign investors has rights to freely transfer and repatriate in foreign currency, relating to profits or proceeds liquidation or sale of investment, as long as taxes and other financial obligations payable to the Indonesian government have been satisfied (Art.8 Law 25/07). Further, the foreign investor is obliged to give reports on fund transfer.
8. Corporate Social Responsibility
The investors that manage unrenewable natural resources shall allocate funds progressively for the preservation of the area to attain the environmental and social standards as required by prevailing laws and regulations.
9. Development of Investment for Micro-Scale, Small-Scale, Medium-Scale Business and Cooperative Enterprise
The government specify the business sectors that are reserved for micro-scale, small-scale and medium-scale business and corporative enterprises, and those sectors open in cooperation with large-scale. Additionally the government will attempt to achieve the development of micro-scale, small-scale and medium-scale business through establishing partnership programs enhancing the capacity to compete.
Furthermore, the government encougares the development of the micro-scale, small-scale, medium-scale business and cooperative through partnership program, enhancement of capacity to compete, supporting innovation and market extension and wide distribution of information.
Recently, the government issued the Instruction of the President of the Republic Indonesia No.6 of 2007 regarding Policies to Accelerate Development of the Real Sector and Empower Micro, Small and Medium Enterprises (June 8, 2007) and Law 20 of 2008 regarding Micro, Small and Medium Scale Enterprises ( July 4, 2008).
10. International Arbitration for Investment Dispute
Law 25/07 specifically stipulates that any investment dispute involving the Indonesian government and foreign investors shall be resolved through an international arbitration agreed by the parties. Whilst the dispute emerges between government and domestic investors is reffered to arbitration or court.
Investing in Indonesia
February 17, 2009
A. ESTABLISHING A FOREING INVESTMENT COMPANY
Investment in Indonesia is regulated mainly by New Investment Law No.25 of 2007 (April 26, 2007) (“Law 25/07”).[1] Law 25/07 integrates the previous investment laws and its implementing regulations to some extent, but deals with some of the bottlenecks frequently cited by foreign investors doing business in the country. Important changes include those relating to investment approval procedures, land titles, and incentives.
Law 25/07 introduces new issues such as Corporate Social Responsibility and Dispute Settlement mechanism. Law 25/07 also introduces one door-integrated services pursuant to licensing process. The process runs from the application stage until the issuance of documents of all necessary documents, everything can now be done.
Moreover, Law 25/07 gives regencies and cities the right, authority and obligation to regulate and self-manage investment approvals taking into account the interests of the local communities.
Law 25/07 also offers equal treatment of every investor by bureaucracy reform in investment services and fiscal incentives. It shows the efforts of the government to make the investment climate more transparent.
The limitation on Foreign Ownership
The foreign investors may be a corporate entity or an individual. In some sectors, the investors can own all shares of a foreign investment company (“PT Penamanan Modal or PT PMA”) with certain exceptions. However, the said PT PMA must divest a portion of shares to an Indonesian party within 15 years after commencing commercial operations. On the other hand, the foreign investor can establish a joint venture with Indonesian parties. The Indonesian parties at least own 5% at the time of establishment. In that case, the foreign company is not required to divest its shares to Indonesian parties within 15 years.
The foreign investors also must check the Negative List for the minimum percentage that can be held by foreigners in a company in certain sector in Indonesia.
Getting an Investment Approved
The Capital Investment Coordinating Board (“BKPM”) is the central authorized body receiving, reviewing and approving investment capital applications as well as monitoring approved projects.
The Foreign investors must submit an application form, so-called Model I, to BKPM. Various attachments must be submitted together with Model I including (a) a copy of the investors’ Articles of Association (or passport/identification card in the case of individuals), (b) flowchart of the production process or description of services, (c) power of attorney if the application is not signed and submitted by the investors themselves.
After obtaining BKPM approval, the applicant can establish a limited liability company by executing a Deed of Establishment (“DoE”) in the notary public. Then, this DoE shall be submitted to the Ministry of Laws and Human Rights (“MoLHR”) for approval. One of the requirements to obtain MoLHR approval that the investors must submit a proof that they have paid the issued capital.
The Company also has the obligation to register in the Company Registry maintained by Department of Trade. Moreover, the Company must apply the Letter of Domicile to Sub District (“Kelurahan”).
The Company must obtain a Taxpayer Registration Number (NPWP) and a taxable Entrepreneur Number (NPPKP) from the relevant tax office.
After the Company has been established, the Company must proceed immediately to take the following post formation steps:
Corporate Housekeeping
After the DoE has been approved by MoLHR, the PT PMA must take several corporate actions.
A first meeting of Shareholders, Directors and Commissioners must be held. The General Meeting of Shareholders (“GMS”) should confirm the appointment of the members of the Board of Commissioners (“BoC”) and the Board of Directors (“BoD”). The GMS together with BoD and BoC ratify all actions taken in PT PMA’s name prior to MoLHR approval of the DoE. Moreover, the Share Certificates, the Share Registry and the Special Register shall be prepared too.
After obtaining a BKPM Approval, PT PMA has the obligation to submit a report of Capital Investment Activities (“Laporan Kegiatan Penanaman Modal or LKPM”) to BKPM. PT PMA that has not yet obtained a Permanent Business License (“IUT”), shall submit a Semi Annual Report of LKPM to BKPM. PT PMA that has obtained IUT must submit an Annual LKPM. This report is in the standard form of BKPM. Furthermore, the copies of LKPM also must be delivered to the relevant government institutions, such as Department of Trade, Bank Indonesia or the Regional Office of the relevant technical department.
The Initial Investment Approval serves as a temporary operating license until PT PMA reaches the stage of commercial production. At that time, PT PMA shall apply for an IUT (“Permanent Business License”) to BKPM. Upon issuance of the IUT, PT PMA is authorized to conduct its activities for 30 years period.
Employing People
PT PMA must apply for An Expatriate Manpower Utilization Plan (“RPTKA or Rencana Penggunan Tenaga Kerja Asing”) from the Department of Manpower (“DoM”) in order to employ expatriates. The RPTKA serves as basis for the expatriate to obtain their temporary stay permits (“KITAS”) and work permit (“IKTA”). DoM is required PT PMA who employs one expatriate must employ 3 local employees. So the percentage is 1:3 for expatriate : locals.
For a company with more than 10 employees, the Company must prepare the Company Regulations and registered with the Department of Manpower. If the Company has labor union, then the Collective Labor Agreement is required to be registered in Department of Manpower.
Moreover, Indonesia law recognizes both indefinite-term employment agreement and definite-term employment agreement. Before the Company hires the employees, the Company shall consider the advantages and disadvantages these types of agreements.
Importing Goods
PT PMA wishes to import capital goods/raw materials is required to have a Limited Importer License Number (“Angka Pengenal Import Terbatas or APIT”). The APIT is obtained through BKPM. Goods imported under an APIT are subject to a reduced withholding tax of 2.5% compared to the normal rate of 7.5%. This tax is a prepayment of income tax and is fully creditable. Under some conditions, an exemption from this tax is possible.
PT PMA may obtain favorable import duty reductions on imported production equipment, spare parts and raw materials that are not locally available. PT PMA must submit Master List application to BKPM or the Customs and Excise Office (in certain circumstances). After the Master List is approved, then PT PMA receives an import duty reduction on the item listed in the letter to a maximum 5% duty rate.
B.ESTABLISHING REPRESENTATIVE OFFICE IN INDONESIA
A Foreign Company could not establish a branch office in Indonesia for purpose of conducting the operational activities of its principal company such as trading or business transactions. In order to conduct those activities in Indonesia, a Foreign Company must establish an Indonesian legal entity. It is so-called a Foreign Investment Company or PT Penanaman Modal Asing (“PT PMA”).
Moreover, a Foreign Company that wishes to assess the potential market in Indonesia may establish a Representative Office and not a branch office.
There are several types of representative office currently allowed to be set up in Indonesia e.g.:
1. Foreign Company Representative Office (Kantor Perwakilan Perusahaan Asing);
2. Foreign Trade Company Representative (Perwakilan Perusahaan Perdagangan Asing); and
3. Construction Service Provider Representative Office.
Foreign Company Representative Office
A foreign company or a group of foreign companies may open a representative office in Indonesia to manage its interest, or to prepare the establishment and development its business in Indonesia (refer to Article 1 Presidential Decree No. 90 of 2000 jo Article 1 Decree of the Chairman of BKPM No.2001). A foreign company or a group of foreign companies must submit application to the Indonesia Investment Coordinating Body (“BKPM”).
A Foreign Company Representative Office’s (“Rep.Office”) activities are limited to the role of supervisor, intermediary, coordinator or manager of such foreign company group’s interest. Further a Rep.Office may not participate in managing the foreign company, its subsidiary or it branches in Indonesia and it’s not allowed to generated revenues from Indonesia. A Rep.Office may not engage in an agreement or transaction in the sale and/or purchase of goods and services with an Indonesian company or Indonesian nationals.
Foreign Trade Company Representative Office
A Foreign Trade Company (“FTC”) is established by a foreign company or a group of foreign companies to act as its representative in Indonesia. A FTC may be established as either: a selling agent; manufacturer agents; and/or a purchasing agent.
FTC is prohibited from conducting trades, transactions or sale activities which represent a full-blown transaction from beginning to the end (e.g. from submission of tender documents, signing of contract and settlement of claims) (refer to Art.4 Ministry of Trade Regulation No.10 of 2006 regarding the Procedure of Issuing the License of Foreign Trade Representative Office (March 29,2006) (“Permen 10/06”).
The scope of a Foreign Trade Company Representative Office is limited to the following (refer to Art.3 Permen 10/06): such as introduction and promotional activities, market research and supervision of domestic sale; and close of contract for and on behalf of the appointing foreign company with domestic companies relating to exports.
Foreign Construction Service Provider Representative Office
A Foreign Construction Service Provider that wishes to conduct construction activities in Indonesia must apply the Representative Construction Service Provider License from the Ministry of Public Works. This license is only valid for three (3) years and can be extended.
Decree of Ministry of Public Works No. 28 of 2006 has actually replaced the former regulation, Decree of Ministry of Public Works No. 50 of 1991; however, as no implementing regulations related to the new regulation has been issued, in practice the older regulation is still applicable.
This type of Representative Office is only allowed to conduct projects in Indonesia through the Joint Operation with locals. This Joint Operation is only permitted to join the tender and conduct the Government projects funded by the Foreign Aid, projects in the frame of Foreign Investment and Domestic Investment as well as the projects funded by private funds.
[1] The Law 25/07 supersedes both Law No.1 of 1967 regarding Foreign Investment (January 10, 2007) and Law No.6 of 1968 regarding Domestic Investment (July 3, 1968).
Legal Implication of Mixed Marriage in Indonesia
January 3, 2009Two persons who are subject to different laws, one is an Indonesian citizen and other is a foreign citizen, wish to get married, is called “Mixed Marriage” pursuant to Art. 57 of Law No.1 of 1974 regarding Marriage (January 2, 1974) (“Law 1/74”). There are certain legal issues arising in a Mixed Marriage.
General Property Rights After Marriage
Law 1/74 stipulates the basic rule regarding property acquired after marriage, i.e., that any property acquired by either spouse during the marriage is to be held jointly. As a result, the consent of both spouses is required prior to either spouse transferring, pledging or taking any other action in respect of such joint marital property.
However, the property obtained by one spouse as a gift or inheritance, in which case such property remains the exclusive property of that spouse, unless the parties determine otherwise.
In order to negate the general rule of joint property, the marriage couple may enter a prenuptial agreement. The said agreement stipulates that all property acquired by either spouse during the marriage remains the separate property of the spouse.
Land Rights After Marriage to A Foreign Citizen
A foreigner who obtains a Right of Owner (“Hak Milik”) on land as result of marriage has obligation to release such rights within a period of one year as of the date such right is obtained. If the said foreigner fails to fulfill this obligation, then the land would fall into the State’s possesion. This provision also applies to Right of Cultivation (“Hak Guna Usaha”) and Right of Building Utility (“Hak Guna Bangunan”).
Therefore a foreign spouse’s ownership rights in the joint property of the marriage any lands rights acquired by the Indonesian partner (except by inherintance) would automatically result in the foreigner having ownership rights, in consequence triggering the divestment requirement. The Indonesian spouse of a foreign citizen still has the rights over the lands, if the Indonesian spouse:
a. Enters into a prenuptial agreement stipulating that during the marriage all property would remain under the exclusive ownership of obtaining spouse, so that there would be no joint property. This prenuptial agreement must be in notarial deed form and executed prior to the effective date of the marriage.
b. Obtains the property as a gift or inherintance.
In absence of the above-mentioned, such land rights fall into the State’s possesion. However, it may be possible to convert such rights to Rights of Use (“Hak Pakai”) by submitting a request to the Sate. Hak Pakai is a land title that foreginers may hold, however the cost of converting the existing title to Hak Pakai may be prohibitive.
Women’s Business Transactions After Marriage
After marriage, a woman still retains the right to perform any type of legal act in her own right. But she shall be obtained approval from her spouse for any dealing with the joint property of the marriage pursuant to Law 1/74.
Shares in The Company
The Indonesian citizen who marries a foreigner also technically loses their right to hold shares in ‘ordinary’ privately held Indonesian limited liability companies. Only Indonesian is permitted to hold shares in privately held the Ordinary Indonesian companies (non foreign investment companies). So, the said shares shall be transferred to a qualified Indonesian national within one (1) year.
A share acquired after marriage by an Indonesian national married to a foreigner is the joint property of the couple, i.e., the foreigner has certain (although limited) ownership rights in the share. So, because of the marriage relationship the share is no longer owned (solely) by an Indonesian.
The Establishment Foreign Investment Company in Indonesia
December 30, 2008The first thing to do for foreign investors to establish companies in Indonesia is to check whether their line business is line with Government Regulations No.111 of 2007 in lieu with Government Regulation No.77 of 2007 regarding the Business Sectors that close and open with requirements for foreign investors. It is so-called the Negative List.
Then, the Foreign Investors shall apply for Initial Investment License to the Indonesia Coordinating Investment Board (“BKPM”). After BKPM approves the application, the Foreign Investors go to the Notary Public to draw up the Deed of Establishment (“DoE”). Then, the Foreign Investment Company (“PT PMA”) shall arrange the Domicile Letter to the Sub-Regency (“Kelurahan”). The next step is applying the Taxpayer ID Number (“NPWP”). The said PT PMA opens the bank account and transfer the capital to that account. The copy of transfer receipt is one of the required documents to apply the Legalization of DoE in Ministry of Laws and Human Rights (“MoLHR”). Further, PT PMA applies the Company Registry (“TDP”) to the Ministry of Trade.
For further details you may contact me or check www.bkpm.go.id
“Work for Hire” – Music Industry
February 25, 2008Have you heard about “Work for Hire”? This term usually uses related to the copyrights. The creator is either a person or a group who creates songs or computer programs. That creator has rights on copyrights of his work. Moreover, that creator can conduct exploitation on its work and of course he can get money from that.
Well. the “Work for Hire” is happened when the creator produce a work however his work does not have copyrights. How can this happen? It’s legal based on laws and regulations, the respective copyrights will not fall into the creator BUT on the person who employs the creator. Laws treats the creator as if the creator did not involve in any process of the works. The employer has the respective rights.
For example is in MUSIC INDUSTRY. The musicians shall be very careful when sign the contract with the label “Work for Hire”. Because they do not have any rights on their works. The musician signs the contract with a company to create a jingle song for its commercial product advertisement. Usually on this kinda contract, the company wants to have the full rights of that song because of the commercial reason. Further, that contract will be stated “Work for Hire”. So, the company will have the full rights on that jingle. On the other hands, the respective musician will not receive any royalties from his work.
Please note that the “Work for Hire” is different to the transfer of ownership of works. For example the musician produces a song then sells it to the recording company or other musicians. In this case, the musician still have rights on its song. This is called LICENSING. The user shall pay the royalty to the respective musician.
The difference of Work for Hire and Transfer of Ownership. By transferring ownership to anyone or any companies, the creator may prepare a written agreement with anyone or any companies regarding the time period of the rights of ownership of that song can be used. After the time period is finished, the creator can get back the copyrights of his works. While the Work for Hire, the creator can not have any rights at all on his work. The contract with label of work for hire shall be avoided.
The requirement of work for hire as follows e.g. the copyrightable work shall be considered as work for hire if the creator is one of the employees and create that works pursuant to his working relationship. For example: The fashion magazine employs a photograher. The respective photographer creates pictures for the fashion pages . That fashion magazine will have copyrights on his work. If he is not the employee of that company, then there shall be a written contract which explicitly stipulates that the work will be conducted for the Work for Hire. If the status of employee is not permanent, thus it shall be a written contract to describe that the work shall be conducted under “Work for Hire”. Usually the musicians under this circumtance. When the musicians receive contracts with title “Work for Hire”, they shall be carefull because they will not have the copyrights of their works.
Can Foreigners Own Apartment in Indonesia?
November 14, 2007
In late 90s, Indonesia Laws regarding land has been amended. New laws are now permitted the foreigners to purchase apartments in Indonesia if the building has a strata title status.
Moreover, the foreigners can not hold the strata title of ownership of the apartment. The foreigners only can hold the right of use of the apartment.
Government Regulation 41 of 1996 regarding Ownership of Residences by Foreign Persons Domiciled in Indonesia (“Law 41/96”) clearly stipulate that the foreigner can hold the right of use of apartment with certain conditions e.g. the said foreigner is given benefit to Indonesia. Moreover, the right of use is only given for 25 years and can be extended for other 25 years.
There are two (2) ways for foreigners to have property in Indonesia. The following scenarios are e.g.:
1. CONVERTIBLE LEASE AGREEEMENT: There is a way for foreigners to purchase property in Indonesia by signing the convertible lease agreement with the developer company. This agreement entails that the foreigner may purchase apartment, but the title is still held in the name of the developer. This lease agreement is for a definite period.
The transfer provision: This Convertible Lease Agreement states that the Lessee will obtain the right of ownership of the apartment automatically when the law and regulations regarding the land and apartment change. Then both lessee and lessor will enter into Sale and Purchase agreement. And the title of ownership shall be transferred to the lessee.
The current practice in Indonesia that the developer company usually uses the standard contract in selling strata title to the customers. The standard contract is one sided contract. The content of the contract are made by the developer not the by both parties. It is can be called ‘take it or leave it contract’. There is no freedom of contract.
Promissory Note: Besides, the convertible lease agreement, the lessee shall enter separate agreement with developer (“Promissory Note”). The said Promissory Note states that the lessee may re-sell the apartment to other parties chosen by him/her. Moreover, it shall be stated also that if the developer transfer its rights and obligation to third party under the lease agreement, the said promissory note shall be valid and forced to the third party.
2. NOMINEE ARRANGEMENT: The foreigners may have an Indonesian person that they can trust so that the property under the Indonesian name.
Then, the foreigner and Indonesian person will enter into an agreement that this Indonesian person has debt to the foreigner and pledge the said apartment.
Termination Employment Agreement : MTA or Resignation Letter ? (Indonesia Labor Issue)
October 9, 2007
The company that wishes to terminate its employees in Indonesia shall follow procedures pertaining prevailing laws and regulations.
The company shall obtain the approval from Industrial Relation Court (“PHI”) unless there is Mutual Termination Agreement (“MTA”) between the Company and the respective employee.
Both parties first, shall conduct bipartite negotiation. If there is agreement between both parties, then MTA is signed by both parties. Furthermore, the said MTA shall be registered to PHI. In the event, there is dispute or there is no agreement between the Company and Employee, then it shall be settled either Mediation or Conciliation. If there is still no consensus between both parties, then the dispute goes to PHI.
Based on explanation above, we can conclude that the termination process is quite long from the negotiation up to MTA and the registration.
Resignation Letter: Moreover, the Company sometimes thought that it will be much easier for them to talk to the Employees and ask the Employee to sign the resignation letter. Then, the said letter will be delivered to the Company. In this case, the said letter is only signed by one party. Often, there are no witnesses to the signature if the employee just renders the said letter to the Company. This condition could be used by the employee that he/she was forced under duress to sign the said letter.
MTA: On the other hand, MTA in a standard form often enables the Company to obtain further releases and additional wording stating that the Employee has, for example, no further financial claims against the Company and has received all relevant severance or other monies. Once the mutual agreement is registered, which should be undertaken immediately after execution, it is then much more difficult for the employee to raise a subsequent claim at the Industrial Relations Court or contest the termination.
We may conclude that the MTA is favorable to be used for termination employment agreement purposes.
Termination of Employment Agreement in Indonesia
September 26, 2007The unilaterally termination of employment agreement shall obtain an approval from the Industrial Relation Court unless the company and the respective employee enter into a Mutual Termination Agreement (MTA). It means that unilaterally termination of employment agreement is not recognized under Indonesia Labor Law. Moreover, in the event that there is MTA signed bythe company and the employee, then the said MTA shall be registered to the Industrial Relation Court.
