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Indonesia: Exporters of natural resources must park 30% of their Export Proceeds

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In brief

Developments in natural resource Export Proceeds Obligations

To create stability in the macroeconomy and the domestic financial market, the government of Indonesia has issued several regulations in relation to natural resource export proceeds. Read further below for more details.

Regulations in relation to natural resource export proceeds:

  1. Government Regulation No. 36 of 2023 on Export Proceeds from Exploitation, Management and/or Processing Activities of Natural Resources dated 12 July 2023 (“GR 36/2023“). GR 36/2023 replaced Government Regulation No. 1 of 2019 (“GR 1/2019“) on the same issue without grandfathering.
  2. Minister of Finance Regulation No. 73 of 2023 on the Imposition and Revocation of Administrative Sanctions for Violations of the Provisions on Export Proceeds from Exploitation, Management and/or Processing Activities of Natural Resources dated 24 July (“MOF Reg 73/2023“).
  3. Minister of Finance Decree No 272 of 2023 on Stipulation of the Types of Natural Resource Goods for Export with the Obligation to Deposit the Foreign Exchange Exports Proceeds into the Indonesian Monetary System dated 27 July 2023.
  4. Bank Indonesia Regulation No 7 of 2023 and Board of Governors Regulation No 4 of 2023, both on Foreign Exchange of Export Proceeds and Foreign Exchange of Import Payments dated 31 July 2023 (“BI Regs“).

(“Export Proceeds Regulations“)

The Export Proceeds Regulations stipulate, among other things, (i) the details of the obligations of exporters in relation to export proceeds, (ii) the placement instruments for and the usage of the export proceeds, (iii) the obligations of foreign exchange banks and the Indonesian export financing institution, (iv) supervision by and reports to Bank Indonesia, (v) sanctions and (vi) the type of products from mining, plantation, forestry and fishery for which the exporters must check whether they must maintain their proceeds in the Indonesian monetary system.

The main changes introduced under GR 36/2023 include the requirement to maintain 30% of export proceeds of natural resources in the Indonesian monetary system for a minimum of three months. This obligation applies to all exporters of natural resources (“Exporters“) that meet a certain export value threshold as set out in the regulation starting from 1 August 2023. The regulation additionally makes it possible to deposit proceeds with export financing institutions. It also introduces exceptions to these obligations, voluntary mechanisms and provisions on incentives.

Key takeaways: More express regulation on Deposit of Proceeds

The Export Proceeds Regulations restate the obligation to deposit and disburse export proceeds of natural resources (“Proceeds“) in a special Proceeds account (“Special Proceeds Account“) with (i) the Indonesian export financing institution (Lembaga Pembiayaan Ekspor Indonesia (LPEI)) and/or (ii) a licensed foreign exchange bank (“FX Bank“). While the sources of Proceeds remain the same (i.e., from mining (including coal, minerals and oil and gas), plantation, forestry and fisheries business activities), the Export Proceeds Regulations introduce new and more express technical provisions as follows:

  • All Exporters with an export value of ≥ USD 250,000 per export customs notification (not per monthly accumulation) are subject to the obligation to deposit Proceeds in the Special Proceeds Account.
  • Exporters are required to deposit the Proceeds in a Special Proceeds Account by no later than the third month after registering their export customs notification.
  • Exporters must ensure that 30% of their foreign currency Proceeds are maintained in the Indonesian monetary system for a minimum of three months in any of the following instruments:
    • Special Proceeds Accounts at LPEI or an FX Bank. Note that funds in this account should not be commingled with any other types of proceeds of the Exporters.
    • Banking instruments (foreign currency deposit).
    • Debt instruments e.g., promissory notes issued by LPEI.
    • Foreign Currency Term Deposit for conventional open market operation in Bank Indonesia.
    • Other instruments stipulated by Bank Indonesia.
  • The obligation to maintain 30% of their Proceeds in a Special Proceeds account does not apply for Proceeds deposited in a Rupiah Special Proceeds Account.
  • Bank Indonesia allows Exporters to use the funds in a Special Proceeds Account (i) as security to secure its Rupiah loans (with certain conditions) from the FX Bank or LPEI and (ii) for FX Swap and FX hedging transactions with the FX Bank.
  • Exporters are required to open an escrow account with (i) LPEI and/or (ii) an FX Bank for any remittance of the Proceeds from a Special Proceeds Account for any payment that will be made through an escrow account. Exporters are required to move their offshore escrow accounts to be opened with the above-mentioned institutions here in Indonesia by no later than 90 days after GR 36/2023 came into effect.
  • Depositing the Proceeds in a Special Proceeds Account or escrow account in LPEI is only applicable for transactions by an Exporter who is a debtor of LPEI (under GR 1/2019 it was only possible to deposit Proceeds in Indonesian foreign exchange banks).
  • The obligations under the Export Proceeds Regulations do not apply to non-business exports that do not result in foreign exchange activities, and exports made for the purpose of lawful bartering of goods.

Updates to incentives

In line with the effort to encourage compliance and participation, GR 36/2023 states that tax facilities for the income from the placement of the Proceeds may be granted in accordance with applicable tax laws. Government Regulation No 123 of 2015 on the Amendment of Government Regulation No 131 of 2000 regarding Income Tax on Savings and Deposit Interest Including Discounts on Bank Indonesia Certificates dated 28 December 2015 stipulates tax facilities for export proceeds. A lower final income tax rate is applicable for interest derived from export proceeds placed in a time deposit in an Indonesian bank, which ranges from 0% to 10%, where the normal final income tax for interest is 20%. Compliant exporters may also be designated as “reputable” by the government according to applicable trade regulations. To further encourage compliance, GR 36/2023 also empowers relevant ministries, institutions and/or authorities to implement incentives for FX Banks, LPEI and exporters depositing their Proceeds in instruments issued by Bank Indonesia.

Introduction of voluntary deposit of proceeds

Although the obligation to deposit and store Proceeds in Indonesia only applies to Exporters with an export value of ≥ USD 250,000 per export customs notification, GR 36/2023 also introduces a voluntary participation mechanism. Exporters with less than USD 250,000 worth of exports per export customs notification may voluntarily choose to use the systems set out in GR 36/2023. The obligation to maintain 30% of the export proceeds in a Special Proceeds Account also applies for this voluntary deposit of proceeds.

Exporters are deemed to be voluntarily depositing their export proceeds in a Special Proceeds Account if they do not transfer out those funds within three days after the deposit of the Proceeds.

Since GR 36/2023 also contains the aforementioned incentive provisions, we expect the government to implement incentive programs to encourage participation in this.

Sanctions for non-compliance

Exporters that violate the provisions of the Export Proceeds Regulations and MOF 73/2023 will be subject to administrative sanctions from the customs authority, in the form of suspension of export services. Bank Indonesia and OJK will inform the customs authority if the following conditions arise:

  1. Exporters do not deposit the Proceeds in a Special Proceeds Account.
  2. Exporters do not deposit export proceeds of at least 30% of their Proceeds for no less than three months.
  3. Exporters do not open an escrow account with LPEI and/or an FX Bank, or they do not move their offshore escrow accounts as explained above.

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Indri Pramitaswari “Mita” Guritno is a Senior Partner in Hadiputranto, Hadinoto & Partners in Jakarta who has been specializing in banking and finance transactions for more than 25 years. She has wide and extensive experience in debt restructuring (acting both for borrowers and creditors), structured finance. Mita also has substantial experience in handling complex transactions; almost all of her deals have been cross-border transactions involving numerous law firms, covering various areas of law, among others: capital market, banking, mining, property, natural resources and corporate law). Her transactions cover all aspects of financing including project finance, property financing, acquisition finance, trade finance and syariah banking (Islamic finance).

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Ponti Partogi is head of the Tax and Trade Practice Group at Hadiputranto, Hadinoto & Partners (HHP Law Firm), a member of Baker & McKenzie International. He has been practicing for more than 20 years, focusing on domestic and international tax and trade issues relating to inbound and outbound investment and cross-border corporate exercises including JVs, M&As, divestitures, spin-offs and takeovers. His combined legal and accounting background allows him to provide comprehensive tax advice on various transactions both from the legal and the accounting perspective.

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Irvan is an Associate Partner in the Tax & Customs Practice Group at HHP Law Firm, a member firm of Baker & McKenzie International. He is a customs specialist. Before he joined HHP, he worked in the Directorate General of Customs and Excise ("Customs") as a Customs Auditor for 12 years, and he worked for the tax division of a big four public accounting firm for 11 years. He is adept in providing various types of customs advice, customs audit assistance, and customs dispute assistance in various industries, including in areas such as information and communication technology, electronics and mobile phones, energy & mining, automotive, plantation (palm and its derivatives, cocoa) and other consumer products.

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Daru Hananto is a partner – tax advisory and transaction services in the Tax and Custom Practice Group at HHP Law Firm, a member firm of Baker & McKenzie International.
Daru has extensive experience in Indonesian taxation. He also has significant experience in tax litigation and controversy, and in advising clients on taxation issues related to consumer goods, construction, production sharing contracts, and digital economy.

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Gamma Alicia Dewi is an Associate at Hadiputranto, Hadinoto & Partners (HHP Law Firm), a member of Baker & McKenzie International, Jakarta office.

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Veronika Hutting is a Professional Support Lawyer at Hadiputranto, Hadinoto & Partners (HHP Law Firm), a member of Baker & McKenzie International, Jakarta office.

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