Tax Facilities in Indonesia

The Indonesian government provides tax facilities in Indonesia for Indonesian limited liability companies including:

  1. Companies in certain pioneer business fields with a minimum investment starting from 500 billion rupiah

  2. Companies in strategic business fields and certain areas with investments starting from 100 billion rupiah

  3. Companies in special economic zones with investments starting from 100 billion rupiah

  4. Companies that invest in labor-intensive industries

  5. Companies conducting research and development in Indonesia

  6. Companies that provide work practices, internships, and learning for the development of human resources based on certain competencies.

 

Tax Holiday Facilities for Companies in the Pioneer Business Sector in Indonesia

The tax facilities provided by the Indonesian government for companies in the pioneer business sector are tax holiday reductions of 50% to 100% from the total income tax. The requirement to obtain the tax holiday facility is that the taxpayer has a certain minimum capital amount (minimum of 500 billion Rupiah).

Companies must apply for tax holiday facilities through the Online Single Submission System under the Ministry of Investment.

 

Tax Reduction Facility for Companies in Certain Business Fields or Certain Areas in Indonesia

The tax facilities provided for companies in certain business fields or certain areas are in the form of tax allowances as follows:

  1. A reduction in net income of 30% (thirty percent) of the total investment value in the form of tangible fixed assets including land used for Main Business Activities, is charged for 6 (six) years each at 5% (five percent) per year;

  2. Accelerated depreciation of tangible fixed assets and accelerated amortization of intangible assets acquired in the framework of Investment

  3. The imposition of income tax on dividends paid to foreign taxpayers other than permanent establishments in Indonesia is 10% (ten percent), or a lower rate according to the applicable double taxation avoidance agreement; and

  4. Compensation for losses older than 5 (five) years but not more than 10 (ten) years,

  5. Fiscal losses that can be compensated for five years and can be extended up to 10 years for certain taxpayers

 

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Companies must apply for this facility through the Online Single Submission System at the Ministry of Investment.

 

Taxes Facilities for Companies in Special Economic Zones in Indonesia

Special Economic Zones or SEZ (“Kawasan Ekonomi Khusus”) are areas with certain boundaries within the jurisdiction of the Republic of Indonesia which are determined to carry out economic functions and obtain certain facilities.

 

Business Entities and Businesses in SEZ are provided with facilities as follows: 

  • Income Tax deduction; 

  • Exemption/reduction from the imposition of Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods; 

  • Import duty and PDRI; and/or 

  • Excise

 

Income tax facilities in special economic zones in Indonesia

Income Tax Facilities at special economic zones in Indonesia include:

  1. Corporate Income Tax deduction facility; or

  2. Income Tax facilities for investment in certain business fields and/or in certain areas.

 

Corporate Income Tax Deduction Facility

The corporate Income Tax deduction facility is provided in the amount of 100% (one hundred percent) of the total corporate Income Tax payable. 

 

Term and conditions

Corporate Income Tax Deduction Facility Requirement provided for an Investment value of at least IDR 100,000,000,000.00 (one hundred billion Rupiah).

 

The term of the corporate income tax deduction facility is a minimum of 12 years and a maximum of 22 years.

 

Tax Facilities for Companies Investing in Labor-Intensive Industries

Companies that invest in labor-intensive industries that meet certain requirements may be granted Income Tax facilities in the form of a reduction in net income up to a certain level against the amount of Investment within a certain period of time. 

 

The reduction in net income is 60% (sixty percent) of the total Investment in the form of tangible fixed assets including land used for Main Business Activities, charged for 6 (six) years from the tax year At the Commencement of Commercial Production each is 10% (ten percent) per year.

 

The requirements for obtaining tax facilities include:

  1. Is a domestic corporate taxpayer;

  2. Carrying out Main Business Activities in accordance with the business field with the Standard Indonesian Business Field Classification (KBLI) in 2017, has a certain product coverage, in certain areas, with certain requirements, and

  3. an Indonesian workforce of at least 300 (three hundred) people, the average number in a tax year.

 

Super Deduction Tax Facility for Companies that conduct Research and Development in Indonesia

Taxpayers who conduct certain research and development activities in Indonesia can be given a reduction in gross income of up to 300% (three hundred percent) of the total costs incurred for certain Research and Development activities in Indonesia which are charged within a certain period of time.

 

The maximum reduction in gross income is 300% (three hundred percent) includes: 

  1. Reduction of gross income by 100% (one hundred percent) of the total costs incurred for Research and Development activities; and 

  2. Additional gross income reduction of a maximum 200% (two hundred percent) from accumulated costs incurred for Research and Development activities within a certain period. The amount of additional gross income reduction (200%) includes: 

  1. 50% (fifty percent) if Research and Development results in Intellectual Property rights in the form of Patents or PVP Rights that are registered at the domestic Patent office or PVP office; 

  2. 25% (twenty-five percent) if Research and Development produces Intellectual Property rights in the form of Patents or PVP Rights which in addition to being registered at the Patent office or domestic PVP office as referred to in letter a, are also registered at the Patent office or overseas PVP office; 

  3. 100% ( one hundred percent) Development reaches and / or if Research and Commercialization stage; 

  4. 25% (twenty-five percent) if the Research and Development that produces Intellectual Property rights in the form of Patents or PVP Rights as referred to in letter a, letter b, and / or reaches the Commercialization stage as referred to in letter c, is carried out in collaboration with Government Research and Development institutions and / or higher education institutions, in Indonesia.

 

Super Deduction Tax Facility for Companies that Provide Work Practices, Internship, and Learning for Development of Human Resources Based on Certain Competencies in Indonesia

Companies in Indonesia that provide work practices, internships, and learning for development of human resources based on certain competencies can obtain tax facilities. Companies must apply for this facility through the Online Single Submission System at the Ministry of Investment.

 

The tax facility is a gross income reduction of at least 200% (two hundred percent) from the total costs incurred for practical work activities, internships, and/or learning. The reduction in gross income shall include: 

 

a. Reduction of gross income by 100% of the total costs incurred for work practices, apprenticeship and/or learning activities; and

 

b. Additional reduction in gross income of a maximum of 100% of the total costs incurred for work practices, apprenticeship and/or learning activities. 

Requirements for additional reduction in gross income

 

Taxpayers can take advantage of the additional gross income reduction by fulfilling the following requirement:

 

  1. Has carried out work practices, apprenticeships, and/or learning activities in the context of fostering and developing of human resources based on certain competencies;

  2. Has a Cooperation Agreement;

  3. Not in a state of fiscal loss in the Tax Year of additional utilization of gross income deductions; 

  4. Have submitted a Fiscal Certificate.

 

Certain competencies

Certain competencies are competencies that are taught to:

  1. Vocational high schools and/or vocational madrasah aliyah for students, educators, and/or education staff;

  2. Higher education diploma programs in vocational programs for students, educators, and/or education staff; and/or job training centers for individuals as well as trainees, instructors and/or training staff.

  3.  

A list of certain competencies is listed in Appendix A in Minister of Finance Regulation number 128 of 2019.

 

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