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Indonesia – Currency Regulations

On March 31, 2015, Bank Indonesia issued regulation number 17/3/PBI/2015 concerning Mandatory Use of Rupiah in the Territory of Indonesia (BI Regulation).

In the much discussed Law number 7 of 2011 concerning Currency the mandatory use of rupiah in Indonesia was already regulated, however could be exempted in case the contract parties had agreed in writing to the terms of payment in a currency other than rupiah. Under the new BI regulation the terms on the use of foreign currencies are further restricted. All cash and non-cash transactions in Indonesia performed by individuals or corporations must use the Rupiah Transactions, which include: each transaction which has the purpose of a payment for something; other settlement of obligations that must be fulfilled by transferring money; and/or other financial transactions.

SANCTIONS

A violation of the mandatory use of rupiah in non-cash transactions can be subject to the following sanctions: written warnings, administrative penalty of 1% of the transaction value; and/or prohibition of being involved in any payment transaction.

A violation of the obligation to quote services or products in rupiah may be subject to written warnings.
Besides the sanctions above, Bank Indonesia has the authority to recommend relevant government bodies to impose sanctions in line with their authority. For foreign investors this might result in a revocation of e.g. business license by BKPM. It is however too early too early to estimate whether or not such sanctions will be actually imposed on foreign investors which violated the BI Regulation.

The BI Regulation has been reinforced as of July 1, 2015

Comments from Esti M:

The IDR transaction as of July 1, 2015 is imposed also for the payment of salary to expatriate employees. As this is still very new and many grey areas, many companies are still lobbying with many government bodies on how to really implement this properly.

This has effects on multinational companies with many expat employees too, as many expats are not happy to receive all the salary in IDR. Some have come to agreement to accept some portion of the salary in IDR in bank account in Indonesia, and some portion of the salary are paid into overseas account in USD, Another problem facing many MNC is agreeing with the expat employees on the pegged exchange rates for the payment of the salary and this is difficult due to the volatile fluctuations of the IDR.