Indonesia

Posted By Steve On Wednesday, October 28th, 2009 With 0 Comments

Indonesia Securities and Equity Information

Instruments
Equities: Ordinary shares, preferred shares, rights and warrants
Debt: Corporate bonds, government bonds
Money Market: Sertifikat Bank Indonesia (SBIs), commercial paper, certificates of deposit
Other: Commodity futures, future contracts, currency and interest rate derivaties

Board Lots

Equities: Regular: 500 shares or any multiple thereof
Odd lot: Less than 500 shares
Block: Greater than 200,000 shares
Debt: No set board lots

Dividend Payment Frequency:
Annual by cheque or interbank fund transfer. Besides IDR, some Indonesian companies do pay dividends in USD.

Interest Payment Frequency
Interest on state companies and corporate bonds are made on a variable basis depending on the type of instrument. Payments are made net of withholding tax.

Interest Accrual Rate:
In general, interest is calculated on a 360-day basis, however some instruments may have interest calculation on a 365 day basis.

Corporate Actions

Common Events: Rights issues, stock dividends, cash and bonus shares, stock splits
Rights Tradeable: Yes
New Shares from Exercised Rights:The market standard is to receive five days after pay date, but it varies from issue to issue.

Foreign Investor Restrictions:
Unrestricted voting rights.

Shares Blocked:
No.

Meeting Notices/
Agendas

Provided in English or Bahasa Indonesia. Annual general meetings and extraordinary general meetings are announced one month in advance. The meeting schedule and agenda will be published two weeks before the meeting date.

Meeting Outcome
Outcome advised within 24 hours after the public announcement.

Company Reports
On request, subject to availability.

Power of Attorney:
Required.

Foreign Ownership
Market Entrance Requirements:
None

Investment
Restrictions

The Ministry of Finance has set the limit for foreign ownership in a financing company to 85% of the paid up capital.

Article 17 of The Indonesian Law No.32 Year 2002 on Broadcasting stipulates that broadcasting companies are allowed to receive capital injection from overseas sources so long as this does not exceed 20% of the total capital and must be owned by at least two shareholders. Although the Broadcasting Law is being amended, it stipulates that foreign investors are allowed to buy up to 20% of paid-up capital in a broadcasting company.

In March 2003, BAPEPAM together with the State Ministry of Communication and Information have reached an agreement to allow broadcasting companies to sell their shares to foreign investors up to 20% of the companies capital, through the issuance of new shares for the purpose of capital injection and business development. The regulators currently in the process of developing a detailed regulation for trading of broadcasting stocks, and several issues needs to be further discussed among the regulators which include the treatment of broadcasting shares currently owned by foreigners.

Repatriation Policy
Income and capital can be repatriated freely. Overnight overdrafts in IDR accounts are not permitted, and transfer of IDR to non-residents is regulated.

Bank Indonesia (BI) issued new regulations No.7/14/PBI/2005 in June 2005 and subsequent Circular Letters No. 7/23/DPD/2005 and 7/44/DPD/2005 governing the restriction of Rupiah (IDR) transaction and foreign currency credits granted by banks to non-residents.

a) Banks are prohibited from extending credit facility to Non Resident apart from for the following:

* Consumer loans which are utilised onshore
* Bank guarantees related to investment activities in Indonesia
* Credit cards
* Intra-day rupiah and foreign currency overdrafts, with certain requirements

b) Buying of IDR is allowed up to the equivalent amount of the underlying trade. Exceptions are given where the small differences are due to payment of broker commission.

c) The following table summarises the limitation of transfer in IDR:

Type Status Exceptions Documents required for transaction above IDR 500 million
Resident to Resident Permitted In the event Resident (beneficiary) account is with an offshore bank, the transfer is not permitted Not Applicable
Non Resident to Resident Permitted In the event Resident (beneficiary) account is with an offshore bank, the transfer is not permitted Not Applicable
Resident to Non Resident

And

Non Resident to Non Resident

Restricted Transfer of IDR to Non Resident account with an onshore bank is permitted provided there is underlying economic activity or for purchase of good and services, such as:

Payments related to direct participation or investment in Indonesia

Payments related to IDR denominated securities

Transfer of IDR up to IDR 500 million is allowed without the need for supporting documents. Client should quote “Payment For Investment” or “Payment For Goods and Services”

The following supporting documents are required for transfer involving more than IDR 500 million.

Payment related to direct participation or investment:

Copy of a sale and purchase contract/agreement

Payment related to IDR denominated securities:
MT541 SWIFT Instruction or a brokers contract note or purchase confirmation (SWIFT, Tested Telex or Reuters Confirmation)

d) Non Residents are not allowed to enter into Derivatives transactions, including;

  • Swap sell/buy foreign currency against IDR
  • Call option sell/buy foreign currency against IDR
  • Put option buy/sell foreign currency against IDR
  • Other similar derivate products such as Non Deliverable Forward and etc.
  • Outright forward sell/buy foreign currency against IDR.

Exceptions:
a) Where derivatives are carried out for the purpose of protecting the value (hedging) of investments in Indonesia. The derivatives transaction should have a minimum tenor of three months.

The amount of the derivative transaction should not exceed the total market value of the portfolio at the time the transaction is entered into, and through out the life of the transaction. Should there be a drop in the portfolio value during the tenor of the derivatives transaction, the non resident is required to top up their portfolio. In addition the following documentary proof must be submitted to the Bank prior to executing the transaction;

  • Statement of holdings
  • Swift Receive versus Payment message
  • A declaration Statement in SWIFT to include, name and identity of the party entering into the transaction, Name of Bank with whom the derivative transaction is entered into, nominal value of derivative transaction and confirmation that the underlying transaction used for hedging will not be utilised for other derivative transaction executed with the same bank or other banks.

b) For outright forward transactions with a period matching the settlement timeframe of the underlying investment activities the following supporting documentation is required;

  • Brokers contract note
  • Copy of the SWIFT instruction

Securities Lending

Indonesia stock lending and borrowing (SLB) programme was formally announced by the Chairman of BAPEPAM on August 13, 2001 and was soft launched on July 30, 2001.

In the past, participation in SLB was limited to brokers and its main purpose was to bridge failed settlements. BAPEPAM has approved custodian banks’ participation in the SLB programme. Concrete guidelines and procedures have not yet been announced.

Currently, there are 91 stocks available under the SLB programme.

Taxation

Dividend Tax Rate
20% withholding tax, or as per Double Tax Treaty rate.

Interest Tax Rate
20% withholding tax, or as per Double Tax Treaty rate.

Capital Gains Tax Rate:
Foreign investors are exempt from capital gains tax on equities. However, a sales tax of 0.1% is applied on all sale transactions.

Technically Capital Gains Tax on bonds does not exist in Indonesia. Notwithstanding that, regulatory definition has construed the differences between the sales and purchase price as discounts, hence they are taxable under the Withholding Tax regime.

The definition of bonds has been clarified to include Corporate bonds and Government bonds with a maturity of more than one year that are traded and/or reported on the Indonesian stock exchange. Thus, the withholding tax on bonds trading are applied on:
a. Interest from Interest bearing bond (based on actual holding period) and,
b. Discounts (difference between acquisition cost and sale price)

Tax on SBIs (Sertifikat Bank Indonesia) is only applicable in the secondary market to the first buyer only, and is tax exempt only to Resident Banks, Pension Funds and SKBs. Subsequent buyers are not subject to this tax, however, the market normally builds this tax benefit into the selling price. The withholding tax rate is 20% or the relevant treaty rate.

Tax Treaties

Aljazir Jordan South Africa
Australia Korea (North) Spain
Austria
Bangladesh
Korea (South
Kuwait
Sri Lanka
Sudan
Belgium Luxembourg Sweden
Brunei Malaysia Switzerland
Bulgaria Mexico Syria
Canada Mongolia Taiwan
China Netherlands Thailand
Czech Republic New Zealand Tunisia
Denmark Norway Turkey
Egypt Pakistan United Arab Emirates
Finland Philippines Ukraine
France Poland United Kingdom
Germany Romania United States of America
Hungary Russia Uzbekistan
India Seychelles Venezuela
Italy Singapore Vietnam
Japan Slovak Republic

Stamp Duty:

Stamp duty of IDR 6,000 is paid on all cash statements, and corporate action voting forms.

Other Taxes:
The stock exchange levy is 0.04% of the transaction value for both purchase and sale transactions.

VAT of 10% is applied to all brokerage commissions and the stock exchange levy.

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