OSS – Risk Based Approach: Introduction And Guide To Know How
OSS – Risk Based Approach – The Omnibus Law has regulated 11 clusters of Business Sector in Indonesia : some of them are related to our today’s topics on the newly launched OSS system known as the OSS RBA (Risk Based Approach). Those clusters are :
- Development on Investment and Business Activities Ecosystem
- Business Licensing
- Cooperation and Small & Micro Business Support
- Research and Innovation Support
- Land Usage
- Economic Area
- Ease of Doing Business
- Central Government Investment and Acceleration of PSN
- Governmental Administration
- Imposition of Sanctions
The process of the Risk Based Approach Licensing follows the regulated provision in Omnibus Law on Article 6 and Article 7 (1) and Article 7 (7) of Law No. 11 year 2020. The development of this new system has divided the risks into 3 categories : a. low-risk business; b. middle-risk business and c. high-risk business. The implementation of this process follows the Government Regulation No. 5 of 2021.
The process of business licensing is changed into risk-based assessment with the licenses issued of each Approach, as stated :
Low-Risk : Business ID Number (NIB)
Middle-Low Risk : NIB + Standard Certificate (Self Declare)
Middle-High Risk : NIB + Standard Certificate (Self Declare + Verification)
High Risk : NIB + License (with or without Verified Standard Certification)
For Low-Risk Business, the Business ID Number serves as an all-in business license for operational and commercial activities for the Business. As for the Middle-Low Risk Business, the Business ID Number must be followed by a Standard Certificate in a form of a statement letter directly declared by the business owners and will then perform as the license for operational and commercial activities.
However, for Middle-High Risk Business, the requirements of licenses will direct business owners to acquire verification by the related government institutions before performing the operational and commercial activities. And for High Risk Business, the business owners will be required to achieve related Business License (Izin Usaha) before performing the operational and commercial activities.
The determination of Risks are provided in the list Business Classification / KBLI. Before establishing their business, business owners must first follow the determined risk of their chosen KBLI. See below the flow chart of OSS-RBA license issuing :
Other than the new implementation of OSS-RBA, the Government has also released a new business classification for investment limitation, whilst previously several sectors are limited to foreign-owned ownership, now with the Presidential Regulation 10 of 2021, a lot of sectors are open for 100% foreign-owned ownership. This regulation replaces the Presidential Regulation 44 of 2016 regarding Negative Investment List (DNI) with 350 sectors allowed for limited foreign-owned investment and 20 sectors closed for foreign-owned investment. But. The regulation of Investment Business Sector (BUPM) has only 43 sectors for limited foreign-owned investment; which would help the foreign investors to expand their chosen business activities in Indonesia.
Following this breakthrough of a total makeover in the business licensing, the Indonesia Investment Coordinating Board (BKPM) is preparing 4 drafts of BKPM Regulation to assist the implementation of its new OSS-RBA system; those are :
- BKPM Regulation regarding the Implementation of Electronic System of Risk Based Approach Business
- BKPM Regulation regarding Guide and Procedures on Implementation of Risk Based Approach Business Licensing and Investment Facility
- BKPM Regulation regarding Guide on and Procedures on Supervision of Risk Based Approach Business Licensing
- BKPM Regulation regarding Procedures of Fulfilling Criteria and Request of Withholding Tax Facility outside of the Network in Special Economic Zone
In conclusion, it is imperative that all business owners understand the classification of risks through the their intended business activities and while the OSS-RBA system is still in development even until this day, our consultant can give you a more thorough guide on how to acquire the necessary business license for you to explore the biggest market in South-East Asia.