Construction Stage vs Production Stage in the LKPM: Differences and a Quick Filing Guide

For businesses in Indonesia, obtaining a Business Identification Number (NIB) and licences through the Online Single Submission (OSS) system is only the first step. Once licensing is in place, there is a further administrative obligation that must be met: submitting the Investment Activity Report (LKPM). This obligation has a firm legal basis in Investment Coordinating Board (BKPM) Regulation Number 5 of 2021 on Guidelines and Procedures for the Supervision of Risk-Based Business Licensing. So why does this reporting matter so much?

The LKPM is the main instrument for monitoring how much of a company’s planned investment or capital has actually been realised, and for tracking the progress of its business operations on the ground. Through this data, the government can identify the obstacles businesses face and provide better-targeted facilities or policies. For companies, regular LKPM reporting is evidence of legal compliance and also protects the continuity of their business licences against suspension or revocation by the authorities. In practice, the LKPM schedule is not the same for every type of business. The reporting period depends on the company’s scale of capital, as follows:

• Half-yearly reporting (every 6 months): Required for Small Businesses, i.e. businesses with investment capital of IDR 1 billion up to a maximum of IDR 5 billion, excluding land and buildings used for the business. Reports are submitted from the 1st to the 10th of July (for Semester I) and January (for Semester II).

• Quarterly reporting (every 3 months): Required for Medium Businesses (investment capital of IDR 5 billion to IDR 10 billion) and Large Businesses (investment capital above IDR 10 billion). Reports must be submitted from the 1st to the 10th of April (Q1), July (Q2), October (Q3) and January (Q4).

Although the schedule is clear, in practice many business owners are still confused when they enter the LKPM filing system on OSS. This often stems from not knowing how to distinguish between the two main reporting phases: the Construction Stage and the Production Stage. Choosing the wrong stage can result in inconsistent data. To avoid missteps, let us look at a quick guide and the differences in how the LKPM is completed at each stage.

1. Filing the LKPM at the Construction Stage (Pre-Commercial)

   The Construction Stage, often referred to as the pre-commercial stage, is specifically intended for companies that are still preparing, carrying out physical construction or building infrastructure, and are not yet generating revenue from their main business activity. Legally, the classification and breakdown of components to be reported at this stage follow the appendix to BKPM Regulation Number 5 of 2021. The regulation provides that, as long as a company has not reached commercial status or begun production, the investment realisation reported consists of expenditure on fixed capital formation and business preparation costs. When you open the Construction Stage LKPM form on OSS, you will be asked to break down your investment realisation into the following components:

   • Land purchase and preparation: The total funds spent by the company to acquire business land during the reporting period. This includes the land purchase price, land preparation costs (filling/clearing), notary fees, land acquisition duty and certificate processing. If your company leases land or a building, rent paid in advance is also recorded here.

   • Buildings: All expenditure related to the physical construction of business premises, including payments to contractors, building materials, architectural design fees and the cost of renovating a shophouse or office space so it is ready for use.

   • Machinery and equipment: The purchase value of operational fixed assets, such as factory machinery, work equipment, computers, servers, core software and electrical or water installations. This covers both domestically purchased goods and imported capital goods.

   • Other: Any operational costs incurred during the preparation period that do not fall into the three categories above, such as the cost of obtaining supporting licences, business feasibility studies, operational vehicles, office furniture (desks/chairs) and salaries of employees who have already started work during the preparation period.

   In addition to reporting expenditure, two other important elements must be completed at the Construction Stage:

   • Workforce: The company must report the number of additional workers (both Indonesian citizens and foreign nationals) taken on or starting work during the reporting period.

   • Problems and obstacles: This field allows businesses to report real obstacles on the ground. If the company is facing slow licence issuance from the regional government, difficulty importing machinery or a land dispute holding up construction, this must be described in detail. BKPM regularly uses data from this field to help facilitate problem-solving, or debottlenecking, for companies.

2. Filing the LKPM at the Production Stage (Commercial)

   Unlike the construction stage, a company enters the Production Stage, or commercial stage, when the business is fully up and running, producing goods or providing services, and generating revenue from its main business activity. On OSS, the LKPM form automatically switches to the production stage once the business updates its operational readiness status or declares that it is operating commercially. The focus of reporting shifts significantly at this stage. The government is no longer primarily monitoring physical construction, but rather operational stability, use of raw materials, production capacity and the company’s compliance with its social and environmental obligations. The Production Stage LKPM form is divided into the following main components:

   • Additional investment realisation (if any): The land, building and machinery fields remain available at this stage but are only completed if the company has added assets or expanded during the reporting period. If there are no additions to fixed assets at all, simply enter zero (0).

   • Working capital: This is the most crucial component at the production stage. Working capital is the company’s total operating expenditure during the reporting period (the quarter or semester), including raw materials or trading goods, employee salaries, utility bills (electricity, water, internet), marketing costs and monthly operational rent.

   • Production of goods/services: The company must report how many goods or services it produced and sold during the reporting period. This field requires production volume/units and their financial value (in Rupiah or US Dollars), divided into two categories: sales value for the domestic market and export value (if any).

   • Workforce: As at the construction stage, the company must report the number of additional workers recruited during the period.

   • Company obligations: At the commercial stage, the government monitors compliance more closely. You will be asked to report the status of obligations such as environmental management (UKL-UPL/AMDAL documents), employee enrolment in BPJS Employment and BPJS Health, Corporate Social Responsibility (CSR) programmes and partnership obligations with MSMEs (where required by the licence).

   • Problems and obstacles: As at the construction stage, this field allows the company to report operational obstacles. At the production stage, commonly reported issues relate to raw material import quotas, tax policy, supply chain disruption or other operational constraints that need facilitation from the Ministry of Investment/BKPM.

3. Risk Mitigation: Administrative Sanctions and the Importance of Checking Your LKPM Status

   Ignoring the LKPM obligation is not a wise decision. Under BKPM Regulation Number 5 of 2021, the government imposes tiered administrative sanctions on businesses that fail to report, report late or do not submit the LKPM on schedule. The OSS system automatically detects non-compliant companies. Sanctions generally follow these stages:

   • Written warnings: Issued in stages, from a first to a second and third warning. These warning letters are usually sent directly through OSS or to the company’s official email address.

   • Temporary suspension: If the warnings go unanswered and the LKPM is still not submitted, the government may freeze the company’s Customs Access Rights and temporarily suspend its operations or its Business Identification Number (NIB).

   • Revocation of business licences: This is the ultimate and most serious sanction. If the company persists in non-compliance, the government will revoke its NIB and all its business licences, meaning the company loses its legal standing to operate in Indonesia.

   Don’t Just “Submit”: Make Sure Your LKPM Status Is “Approved”

   One common technical mistake is assuming the obligation has been met once the submit button on OSS has been clicked. In fact, submitted reports go through verification by officers of the Ministry of Investment/BKPM or the regional One-Stop Integrated Investment and Services Office (DPMPTSP).

   After submission, you must monitor the status of your report. Your reporting obligation is only truly fulfilled once the LKPM status has changed to “Approved” (Disetujui).

   Verifying officers often return draft reports with the status “Needs Revision” (Perlu Perbaikan) if figures are inconsistent, fields are left blank or supporting documents are missing. If your report is returned, you must revise and resubmit it promptly before the reporting deadline. If the reporting window closes while your LKPM is still marked “Revision” or has not been approved, your company will still be recorded as not having reported and may face sanctions.

Understanding the difference between the Construction Stage and the Production Stage is key to ensuring your company’s investment report is valid and reflects reality on the ground. Filing the LKPM should not be seen merely as an administrative chore of transferring expenditure figures, but as a reflection of your company’s level of legal compliance. By managing LKPM reporting in an orderly, careful and timely manner, your company not only avoids the threat of licence suspension but also helps keep its investment climate healthy and secure in the long term.

Illustration: Gemini AI