Tax incentives in Asia-Pacific

Indonesia

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The income tax incentives are granted by the Indonesian Government to meet various economic and social objectives. The Government Regulation Number 9 Year 2016 regarding income tax facility for investment in certain business fields and certain regions stipulates that taxpayers making a new investment or expanding the current business activity on certain business fields can be granted income tax incentives. With the regulation, the Indonesian Government is expecting more foreign investments into the country to support and grow the economy as a whole and accelerate the development of certain regions and provinces in Indonesia.

Indonesia incentive regime overview

Incentives in Indonesia can be broadly categorised into discretionary and statutory incentives. Discretionary incentives include the Tax Allowance incentive and Tax Holiday incentive, which require approvals from the Ministry of Finance. Statutory tax incentives include incentives for listed companies and small or medium scale companies and conditions and requirements are specifically defined under the Income Tax Law.

General information on discretionary incentives:

Incentive administering body

Various government boards based on administrative requirements:

  • Investment coordinating board (Badan Koordinasi Penanaman Modal (BKPM))
  • Directorate General of Taxation (DGT)
  • The Ministry of Finance

General application process

  • Submission of application to the BKPM
  • Evaluation of the application by the committee
  • BKPM will submit its recommendation to the Minister of Finance through the DGT
  • DGT will conduct discussions with the BKPM for examination and verification
  • The Minister of Finance will issue the Income Tax Incentive approval

Incentive application timeline

By law, the BKPM recommendation will take 18 working days from the date the company receives an official receipt stating that the documents and information provided are complete.

The evaluation process with the DGT will take much longer than the regulated time line if the information provided is insufficient.

The Income Tax Incentive approval by the Minister of Finance will be completed within 10 working days after DGT’s review is complete.

Other things to note

Taxpayers who are granted the Income Tax Incentive cannot:

  • Use fixed assets receiving facilities for any purpose other than for the said investment project that the incentive is granted for
  • Transfer parts or the entire fixed assets unless the transferred fixed assets shall be replaced with new fixed assets

The useful life of each fixed asset is determined by the DGT on the basis of the regulations.

The key tax incentives in Indonesia focus on export-oriented industries, manufacturing industries and sophisticated technology industries. We provide an overview of key available tax incentives for the manufacturing industries available, through application with the relevant government agencies and the Indonesia BKPM.

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