Legal Insights

Understanding the Legal Obligations of Investment Activity Reporting in Indonesia 

In Indonesia, businesses are subject to stringent regulatory requirements aimed at fostering transparency, accountability, and regulatory compliance. Among these requirements is the submission of Investment Activity Reports, known as "Laporan Kegiatan Penanaman Modal" (LKPM), which serve as an important tool for monitoring investment and production realization on a periodic basis. 

The LKPM consists of two stages:  

1. The Construction/Preparation Stage. The report includes the realization of investment and manpower, and challenges faced by businesses. This LKPM is filled in the first period of the reporting year after establishing a company, during which business activities have not yet started; and 

2. The Operational and/or Commercial stage. This report comprises of the realization of investment, manpower, production/service and marketing; challenges faced by businesses; and the implementation of business obligations. This stage is for business that are already in production and/or commercial operation.  

Businesses must submit LKPM periodically online through the Online Single Submission (OSS) system by referring to the business licensing data listed in the OSS. The period of LKPM submission differs based on the investment value of the businesses and are regulated under the following provisions: 

1. Small-scale businesses with an investment value of under 5 billion shall submit the LKPM every 6 months within one reporting year. The reporting period are separated to semester I (no later than 10th of July) and semester II (no later than 10th of January); and 

2. Medium- and large-scale businesses with an investment value of above 5 billion are required to submit an LKPM every 3 months during a one reporting year. The reporting period shall be submitted no later than the 10th of April (quarter I), 10th of July (quarter II); 10th of October (quarter III), and 10th of January (quarter IV). 

Failure to comply with LKPM reporting obligations carries significant consequences. After two consecutive periods of non-compliance, businesses may receive administrative sanctions in the form of written warnings. Subsequent disregard of these warnings may lead to further sanctions, including temporary freezing or suspension of business activities. It is imperative for business actors to respond promptly to warning letters through the OSS system and adhere to regulatory obligations outlined in BKPM Regulation No. 5 of 2021. 

Beyond regulatory compliance, LKPM plays an important role in informing government policy-making processes. By providing comprehensive data on investment activities and operational challenges, these reports contribute to the formulation of targeted policies aimed at facilitating business growth and fostering a conducive investment climate. 

In conclusion, by adhering to the provisions outlined in BKPM Regulation No. 5 of 2021, businesses not only ensure their continued operations but also contribute to the broader objectives of fostering transparency, accountability, and sustainable economic development.