Bank Indonesia Re-Introduces Capital Limits on Short-Term Offshore Bank Loans
Bank Indonesia ("BI") has issued Regulation No. 13/7/PBI/2011 ("Regulation 13") which amends an earlier regulation on offshore bank loans (BI Regulation No. 7/1/PBI/2005) and reintroduces certain restrictions on short-term offshore loans.
Regulation 13 provides that the daily balance of short-term offshore loans must not exceed 30% of a bank's capital. The definition of bank capital as applicable to local banks and branches of foreign banks is set out in Regulation 13. Failure to comply with the above restriction will result in financial sanctions.
Certain transactions are exempted from the restriction including the following: (i) short-term offshore loans from controlling shareholders to resolve a bank's liquidity issues; and (ii) demand deposits of non-residents used for investment in Indonesia.
Regulation 13 has been in force since 28 January 2011.
Government Introduces Tax Exemptions for Investments in Certain Pioneer Industries
The Government has issued Regulation No. 94 of 2010 ("Regulation 94") which introduces certain tax exemptions for investors in certain pioneer sectors, such as agriculture and public private partnership (PPP) infrastructure projects.
Regulation 94 provides that the prescribed tax exemptions will only apply to investments in a pioneer industry that meet certain criteria relating to job creation, the introduction of new technologies and strategic value for the national economy.
Specific details regarding the exemptions are expected to be issued by the Minister of Finance shortly. Regulation 94 has been in force since 30 December 2010.
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