The current business licensing framework in Indonesia applies a risk-based classification mechanism. Under this system, each business activity is categorized according to its risk level, which directly affects the scope and complexity of the licensing process.
Risk-Based Licensing Framework
The level of business risk determines the type of license required by Business Actors:
Low Risk
- Only a Business Identification Number (NIB) is required.
- The NIB serves as business identity, proof of legality, and for Micro and Small Enterprises (MSEs) also functions as compliance with Indonesian National Standards (SNI) and Halal Assurance Statements.
Medium-Low Risk
- Requires NIB and a Standard Certificate.
- The Standard Certificate is an independent self-declaration by Business Actors confirming compliance with applicable business standards.
Medium-High Risk
- Requires NIB and a Standard Certificate verified by the Government.
- After obtaining the NIB, Business Actors may receive a non-verified Standard Certificate to begin preparation. Verification must be completed prior to commencing operational or commercial activities.
High Risk
- Requires NIB and a Permit.
- A permit is government approval that must be obtained before operations begin. The NIB may be used during the preparation stage.
Stages of Business Activities
- Preparation Stage: Land acquisition, building construction, procurement of equipment, and compliance with business standards.
- Starting a Business
a. Fulfillment of business legality (e.g., articles of association).
b. Fulfillment of Basic Requirements (KKPR, PL, PBG/SLF).
c. Application for Business License (PB) through the OSS System. - Operational/Commercial Stage: Production of goods/services, logistics, and marketing.
- Running a Business
Basic Requirements for Licensing
Before obtaining a Business License, Business Actors must meet three requirements:
- Suitability of Space Utilization Activities (KKPR).
- Environmental Approval (PL): Based on level of environmental impact.
- Amdal: For significant impacts.
- UKL-UPL: For moderate impacts.
- SPPL: For micro/small businesses with minimal impacts.
- Building Approval (PBG) and Certificate of Functional Worthiness (SLF):
- PBG required before construction.
- SLF required before building utilization.
Online Single Submission (OSS) System
- OSS is an integrated electronic platform serving as a single gateway for all licensing processes.
- Mandatory for Ministries/Institutions, Regional Governments, SEZ Administrators, KPBPB Business Agencies, and Business Actors.
- Integrated with population, business entity, and tax databases.
- Sub-systems include: information services, basic requirements submission, licensing, investment facilities, and supervision.
Supervision of Business Activities
Supervision ensures compliance with business licenses:
- Routine Supervision: Periodic reporting and scheduled field inspections.
- Incidental Supervision: Triggered by public complaints or indications of violations.
- Objectives: To verify compliance, investment realization, and fulfillment of business obligations.
Administrative Sanctions
Violations of PBBR may lead to administrative sanctions:
- For Business Actors: Written warnings, temporary suspension, administrative fines, enforcement measures, and license revocation.
- For Service Providers (Government/Officials): Sanctions for non-compliance, including possible transfer of licensing authority to higher-level government.
Disclaimer
This information is intended for informational purposes only and does not constitute legal advice, opinion, or recommendation. The information has been prepared in good faith with due diligence; however, no warranty is given as to its accuracy, completeness, or timeliness. Readers are advised to seek professional consultation before taking any legal action based on this summary. By relying on this document, the reader agrees to waive any claim, lawsuit, or penalty arising from its use.