This content is from: Local Insights

Indonesia: Regulating rupiah use

The central bank of Indonesia, Bank Indonesia (BI), has issued a new regulation requiring individuals and corporations to generally use rupiah in transactions in the territory of the Republic of Indonesia

Oene MarseilleEmir Nurmansyah
The central bank of Indonesia, Bank Indonesia (BI), has issued a new regulation requiring individuals and corporations to generally use rupiah in transactions in the territory of the Republic of Indonesia.

There are several key exceptions.

First, transactions in the context of the state budget are exempted from the new regulation. These transactions include: (i) debt payments to foreign parties or domestic parties in foreign currency; (ii) state expenditures in connection with the purchase of non-domestic capital and other goods; (iii) foreign currency received in connection with the sale of government bonds; and (iv) other transactions in the context of executing the state budget.

Second, grants of moneys denominated in foreign currencies from or to parties domiciled in foreign jurisdictions are also exempted.

Third, international trade transaction payments in the context of: (i) cross-border export or import of goods; (ii) for cross-border provision of online or call-centre payment services; and (iii) provision of services provided abroad (for example, tuition payment for Indonesian students abroad or hospital bill payment for inpatient services abroad).

Fourth, foreign-currency savings and deposits in Indonesian banks are not disallowed.

Fifth, any international financing transaction, if either the payor or the payee is domiciled abroad, is exempted from the new regulation. In the event that the financing provider is a bank, the bank is required to comply with the existing reporting requirements under BI or other regulations.

BI is empowered to request reports and data from the relevant party and conduct investigations in the context of enforcing the new regulation.

Violators of the new regulation may: (i) receive written warnings; (ii) be obligated to pay fines up to one percent of the transaction value, capped at Rp1 billion ($76,000); or (iii) be prohibited from participating in the country's banking or financial payment system.

Although the new regulation is effective as of March 31 2015, the compliance requirement for non-cash transactions is effective as of July 1 2015. Additionally, non-rupiah, non-cash payment arrangements made in connection with written agreements entered into prior to July 1 2015 would be allowed to continue under the terms of the agreements (which may extend post July 1 2015).

Oene Marseille and Emir Nurmansyah

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