NEWSBRIEF: Mandatory Use of Rupiah

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MANDATORY USE OF RUPIAH

 

Following the enactment of Law No. 7 of 2011 on Currency, Bank Indonesia as the monetary authority in Indonesia, issued Regulation No. 17/3/PBI/2015 on the Mandatory Use of the Rupiah Currency within Indonesia’s Territory (“BI Currency Regulation”), effective 31 March 2015. The BI Currency Regulation is intended to improve the stability of Rupiah’s exchange rate.

 

BI Currency Regulation requires the mandatory use of the Rupiah by individuals and corporations for cash and non-cash transactions in Indonesia, including for:

 

  1. transactions for payment purposes;
  2. transactions to fulfill the obligations that must be performed with money; and/or
  3. other financial transactions, such as Rupiah remittance to the bank account.

 

There are a number of transactions which are exempted from this obligation, such as the following:

 

No.TransactionsRemarks
1Transactions for implementing state revenues and expenditures budget (anggaran pendapatan dan belanja negara or APBN)

 

It includes the following transactions:

  1. payment of foreign debt;
  2. payment of domestic debt in foreign currency;
  3. goods and capital expenditures from overseas;
  4. state income from sales of government bonds in foreign currency; and
  5. other transactions for implementing the APBN.
2Receiving or granting offshore grants (hibah)Foreign currency may only be used if the recipient or grantor of hibah is located overseas
3International trade transactionsThese transactions consist of:

  1. export and/or import of goods from/to Indonesia’s customs territory;
  2. international sales of services, by:
  1. cross border supply (e.g. online transactions or call center); and
  2. consumption abroad (e.g. Indonesian students who study abroad).
4Bank’s saving in the form of foreign currency

 

5International financing transactionsForeign currency may only be used if the recipient or grantor of the financial facility is located overseas. It is subject to the regulation on the foreign currency transactions between a bank and a foreign party if the grantor of the financial facility is a bank.
6Foreign exchange activities that are performed by banks in accordance with the prevailing laws and regulationsThese transactions include among others:

  1. credit in foreign currency for export and other activities;
  2. interbank financial market in foreign currency;
  3. bonds in foreign currency;
  4. sub debts in foreign currency;
  5. sale and purchase of commercial paper in foreign currency; and
  6. other financial transactions in foreign currency which are stipulated under the laws and regulations.
7Transactions of government bonds/securities in primary or secondary markets
8Other transactions in foreign currency in accordance with laws and regulations
9Transactions of money changers which are held by non-bank institutions that have permits from Bank Indonesia in accordance with the prevailing laws and regulations
10Carriage of foreign currency (cash) in/out of Indonesia’s customs territory in accordance with the prevailing laws and regulations

 

BI Currency Regulation also stipulates that if the parties agreed in writing to the terms of payment in a currency other than Rupiah, they may use another currency pursuant to the agreed terms. Such terms are subject to the following conditions:

  1. the agreement is in respect of transactions which are excluded from the BI Currency Regulation; or
  2. the agreement is for a strategic infrastructure project upon securing approval from Bank Indonesia, as well as a statement letter from the relevant ministries/institutions.

 

Further, for the written agreements on non-cash payments or settlement of obligations in foreign currency (other than the agreements mentioned above), which were executed before 1 July 2015, will remain valid, applicable and exempted from the BI Currency Regulation until the expiry of those agreements. However, the extensions or amendments of those agreements shall be subject to the BI Currency Regulation.

 

Sanction

Under Chapter VIII of this BI Currency Regulation, failure to comply with the requirement to use Rupiah currency for cash transactions, as well as in any case where individuals or entities refuse to use Rupiah currency, are subject to criminal sanctions of up to one (1) year imprisonment and a fine of maximum IDR 200,000,000 (two hundred million Rupiah).

 

Further, for the failure to comply with the requirement to use Rupiah currency for non-cash transactions is subject to qntlistrative sanctions, which include:

  1. written  warning;
  2. one percent (1%) fine of the transaction value with a maximum fine of IDR 1,000,000,000 (one billion Rupiah);
  3. prohibition to participate in payment transaction; and
  4. recommendation by Bank Indonesia to the relevant authority to impose any further actions with regard to the violation.

 

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