As a business owner in Indonesia, it can be a challenge to stay up-to-date on changes in the legislative system. While it’s not uncommon for regulatory updates to occur, it is rare for changes to happen that can result in a major penalty like having your Business Identity Number (NIB) suspended. If you own a Limited Liability Company in Indonesia set up earlier than 2017, the change below applies to you.
Table of contents
Obligatory update to business classification number in Indonesia
Indonesia has gone through several breaking changes in its governmental procedures, such as making digital solutions more accessible. As a result, the Online Single Submission (OSS) system was implemented in the summer of 2018, making the submission and renewal of company information more efficient.
This led to a conflict with the prior Business Classification Number/KBLI industrial classifications – the new OSS categories are no longer compatible with these original categories. Hence, the new directive to update the KBLI applies to all LLC companies in Indonesia registered before 2017. The directive is mandatory, meaning all companies must comply or risk losing their Business Identification Number (NIB).
The directive to update corporate KBLI classifications was issued on October 11th, 2018, with a one year window for companies to perform the updates to their articles of incorporation. Therefore the final deadline for you to update your KBLI is approaching quickly – the final submission should reach authorities no later than October 11th, 2019.
How to achieve compliance
The government-regulated change requires you to adjust the purpose as well as business classifications of your company in the Articles of Association (AoA). The AoA is the document that defines your company’s operations, how you handle your financials, and the roles within your organization.
The idea behind revising the information in your AoA is to ensure the information uses the latest classifications available in the new KBLI, making your business compliant and compatible with OSS.
Business owners in Indonesia who have incorporated before the year of 2017 must update their standard industrial classification (KBLI) on time to avoid jeopardizing not only their Business Identity Number (NIB) but also the various licenses that your company may hold that depend on this.
Consequences of late KBLI revisions
One of the effects of the new OSS implementation is that a majority of information is now being exchanged online between government agencies, and all licenses between institutions are now connected. Thus, being late with the KBLI revision can have a heavy impact on your company’s operational activities. The consequences of late renewal include a significant chance that your Business Identification Number (NIB) will be frozen.
This can have a series of knock-on effects. As an example, if you were running an import company in Indonesia and your NIB were frozen, you would not be able to proceed with import activities, as your import license (API-U) and Customs Identification Number (NIK) will be deactivated automatically.
Therefore, the only way to avoid this from happening is to change your KBLI in the AoA on time.
Amending the AoA
You can comply with the new rules by amending the AOA of your company and obtaining approval from the Ministry of Law and Human Rights (MoLHR) prior to proceeding with business as usual with an operative NIB.
Issuing any changes to your company’s AoA documents requires careful attention and understanding of the implications of those changes. Submitting the wrong KBLI classifications can harm your company’s various licenses and areas of operation.
While this is a mandatory change, keeping an eye on compliance overall will only increase your chances of success.