August 18, 2015

Relocation in Indonesia: New Bank Regulations

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Aug

18

Relocation in Indonesia: New Bank Regulations

We have been advised by our destination service provider in Indonesia that a New Regulation on the Mandatory Use of the Rupiah in the country has been issued by the Bank of Indonesia and is effective from 1 July 2015.

Indonesian Rupiah is a restricted currency and as such can only be held in Indonesia. The new regulation places restrictions on the payment of some in-country expenditures that may affect you and your international assignees in Indonesia. If payments are made from one local company to another local company, all remittance must now be paid in Indonesian Rupiah. If one party is a foreign-based entity, payments can continue to be made in a foreign currency (typically US$) but will be subject to currency exchange fluctuations.

Tenancy Agreements signed prior to 1 July 2015 will not be subjected to the above new regulation. Tenancy Agreements signed on or after 1 July 2015 will be subject to the new regulation, and this will impact rental payments. For these leases, rental amounts must be quoted in Indonesian Rupiah and payments must be received in Indonesian Rupiah. For entities making payments outside of Indonesia in another currency, the funds will be converted into Indonesian Rupiah once it reaches the receiver’s bank account. The funds will be converted using the current exchange rate of the day and the receiver may experience a currency exchange gain or loss. As the exchange loss would be deducted from the amount sent, there may potentially be feedback from landlords that they did not receive the full rental amount and they may expect that the shortfall amount will be paid. 

Since Indonesian Rupiah cannot be sent out of the country, all conversions from Indonesia Rupiah to another currency have to take place in Indonesia. What this means is that at the end of the lease, the security deposit will also be refunded in Indonesian Rupiah by the landlord. If the landlord is remitting the funds overseas, the refund will be converted from Rupiah to the refund currency and may again be affected by the exchange currency gain and/or loss for the receiver.

There is likely to be a period of uncertainty as this new regulation takes effect, and we suggest that you contact your Cartus representative or seek the advice of a financial specialist for further information. 

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Ashley Barry

About Ashley

Ashley is the director of Supply Chain Management for Asia. She has more than a decade of global relocation experience, specializing in supplier sourcing, supplier performance management, and relocations to Asia’s key emerging markets.

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