Civil Servants and Corruption: how promising something to a civil servant can constitute an act of corruption

Corruption is commonly associated with financial loss to the state. However, this interpretation can be misleading as the concept of corruption under the Indonesian anti-corruption law ("Anti-Corruption Law") encompasses a far broader range of conduct than only activity that leads to state loss. The Anti-Corruption law formulates 30 types of action that may be deemed as corrupt, which can be divided into the following seven categories:

i.    corruption related to state financial loss;
ii.   bribery;
iii.  malfeasance;
iv.  extortion;
v.   tort;
vi.  conflict of interest in procurement; and
vii. gratification payments.

This client alert focuses on bribery and gratification payments made to civil servants. The client alert includes a discussion on what constitutes a bribery/gratification payment offence, and who can be made criminally liable for such an offence.

KPPU Issues a New Regulation on Case Handling Procedure

Amidst the long-awaited amendment of the Indonesian Competition Law, (Komisi Pengawas Persaingan Usah or “KPPU”) published KPPU Regulation No. 1 of 2019 on Case Handling Procedure ("New Regulation") early this week. This New Regulation entirely supersedes the previous regulation on case handling procedure. It is important to note that cases commenced prior to 4 February 2019 that have not been decided yet will continue to be subject to the previous regulation.

The most notable feature under the New Regulation is the introduction of behavioural remedy, which allows a defendant to plead guilty at the beginning of a hearing and to agree to change its behaviour in order to stop the case.

Enhancing the Competitiveness of the Indonesian Export Service

For almost 10 years, it is known by many that the Indonesian export service does not encourage competition due to the fact that zero Value Added Tax rate ("0% VAT") is only applicable to limited types of export service, i.e. toll manufacturing service, repair and maintenance service connected to or engaged for movable goods utilized outside of the Indonesian Customs Area, and construction service connected to or for immovable goods located outside of the Indonesian Customs Area. As a result, an export of service outside of Indonesia may be subject to double taxation whenever the service is utilized in other jurisdictions that imposed VAT or GST under their taxation laws.

To improve the Indonesian economic condition by enhancing the export service and improving the competitiveness of the national services industry, the Minister of Finance ("MOF") on 29 March 2019 issued MoF Regulation No. 32/PMK.010/2019 on Limitation of Activities and Types of VAT-able Services whose Export is Subject to Value-Added Tax ("New Regulation"), which expands the types of export service that is subject to 0% VAT.

The New Regulation entered into effect on 29 March 2019 and revokes the previous MoF Reg. No. 70/PMK.03/2010, as amended by MoF Reg. No. 30/PMK.03/2011 which was became effective since 1 April 2010.