INDONESIA Law and Practice Contributed by: Emir Nurmansyah, Serafina (Fina) Muryanti and Adya Sepasthika, ABNR Counsellors at Law
The Investment Law also provides that in the case of an investment dispute between the gov- ernment and a foreign investor, the parties can refer and settle the dispute through international arbitration, if both parties agree to it. The Investment Law and the implementing regulations also facilitate investment, including through exemption of import duties for capital goods. Specifically for renewable energy, the government also provides the following fiscal benefits to encourage investment: • income tax benefits, namely a 30% reduc- tion of net income tax for six years, enhanced depreciation and amortisation, and compen- sation for any loss that occurred over more than five years, but not more than ten years (tax holiday); • exemption from tax (tax holiday) for between five and ten years form the start of the com- mercial operation of the power plant, and a 50% reduction in outstanding income tax for two years; and • VAT exemption and exemption from import duty for capital goods. 1.4 Sale of Power Industry Assets Restrictions on the sale of power industry assets, and on business and other transactions such as amalgamations and mergers, are applicable to power projects developed with PLN as the offtaker pursuant to a power purchase agree- ment (PPA). Pursuant to MEMR Regulation No 48 of 2017 concerning the Supervision of Busi- ness Activities in Energy and Mineral Resources Sector (MEMR 48/2017), any transfer of shares in power generation companies that sell electric- ity to PLN under a PPA are subject to the follow- ing restrictions.
• For a non-geothermal power plant, any trans- fer of shares in power generation companies before a commercial operation date must be initially approved by PLN, and in any case the shares can only be transferred to the sub- sidiary of the transferring shareholder, which owns more than 90%. Subsequently, power generation companies must notify the MEMR no later than five business days after the date on which the Ministry of Law and Human Rights (MOLHR) provides approval/receipt of notification for the change of shareholding. • For a geothermal power plant, power gen- eration companies may transfer their shares on Indonesia’s stock exchange once the exploration phase is complete, and must obtain approval from the MEMR prior to the initial public offering (IPO) or the transfer of share ownership being recorded on the stock exchange. MEMR approval is also required before any secondary rights are issued. It is unclear whether the restriction on the trans- fer of shares during the exploration phase applies to private sales. However, in practice – and in the view of the Directorate General of New, Renewable Energy and Energy Conser- vation of the MEMR – geothermal power gen- eration companies can privately transfer their shares during the exploration and exploitation phases. The requirement to notify the MEMR no later than five business days after the date the MOLHR provides approval/receipt of noti- fication for the change in shareholding is also applicable in this case. Other than the aforementioned restrictions, amalgamations and mergers, and the transfer of shares that constitute an acquisition, are also subject to the requirements under Law No 40 of 2007 on Limited Liability Companies, as amend- ed by Law 6/2023, as follows.
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