Get an immediate FREE trial of Orbitax's International Tax Research & Compliance Expert (ITRCE) software for 7 days.
News Share

The Tax Hub

Daily Tax Newsletter

Indonesia

Responsive image

Update - Indonesia Publishes New Regulation on Pioneer Industry Incentive

Indonesia has published Regulation No. 35/PMK.010/2018 from the Ministry of Finance, which provides for a new tax holiday incentive scheme for investments in eligible pioneer industries.

The Tax Holiday Incentive

The regulation provides that a tax holiday (exemption) will be available for new investments in qualifying pioneer industries for a set number of years depending on the investment amount as follows:

  • a 5-year tax holiday if the investment is at least IDR 500 billion, but less than IDR 1 trillion;
  • a 7-year tax holiday if the investment is at least IDR 1 trillion, but less than IDR 5 trillion;
  • a 10-year tax holiday if the investment is at least IDR 5 trillion, but less than IDR 15 trillion;
  • a 15-year tax holiday if the investment is at least IDR 15 trillion, but less than IDR 30 trillion; and
  • a 20-year tax holiday if the investment is at least IDR 30 trillion.

After the tax holiday period ends, the taxpayer is provided a 50% tax reduction for two years, regardless of the investment amount.

Qualifying Taxpayers and Industries

In addition to being a new investment in a qualifying pioneer industry, the taxpayer must be an Indonesia legal entity with a minimum capital investment of IDR 500 billion with a debt-to-equity ratio that does not exceed the 4:1 ratio provided in Indonesia's thin-capitalization rules. Further, the taxpayer cannot enjoy any other tax incentive.

Industries that qualify as pioneer industries for the purpose of the new tax holiday incentive include:

  • Upstream base metal industry (steel and non-steel);
  • Oil and natural gas refining industry;
  • Petrochemical industry based on petroleum, natural gas, or coal;
  • Inorganic chemical industry;
  • Organic chemical industry;
  • Pharmaceutical raw material industry;
  • Semiconductor manufacturing and other major computer component manufacturing, such as semiconductor wafers, LCD backlights, electrical drivers, and LCDs used in computers;
  • Manufacturing of major components for telecommunications equipment, such as semiconductor wafers, LCD backlights, electrical drivers, and LCDs used in smartphones;
  • Manufacturing of major components for medical equipment, including for irradiation, electromedical, or electrotherapy equipment;
  • Manufacturing of major components for industrial machinery, such as electric motors and internal combustion motors;
  • Manufacturing of major components for engines, such as pistons, cylinder heads, or cylinder blocks used in vehicle manufacturing (at least four wheels);
  • Manufacturing of robotic components used in machinery manufacturing;
  • Manufacturing of major components used in the shipbuilding industry;
  • Manufacturing of major components used in the aircraft manufacturing industry, such as engines, propellers, rotors, and structural components;
  • Manufacturing of major components used in the train manufacturing industry, such as engines and transmissions;
  • Power generation machinery industry, including machinery for power generation from waste/garbage;
  • Economic infrastructure; and
  • Other possible industries not listed, subject to request and approval.

Incentive Application

In order to enjoy the tax holiday, taxpayers must submit an application requesting the incentive to the Investment Coordinating Board prior to the commencement of commercial production of the new investment, either:

  • Together with the application for the registration of the capital investment; or
  • Within one year following the issuance of investment registration.

If the conditions for the tax holiday are met, the Board will forward the application to the Minister of Finance for final approval. Once the application is sent, a final decision must be given within five business days, even if the Minister of Finance is not available, in which case the decision is made by Director General of Taxes.

Where the incentive is granted, the tax holiday period begins from the year commercial production begins, which includes when the taxpayer first sells the products resulting from the main business activity or uses the products for further processing. Before the tax holiday can begin, however, an audit by the tax authority must be conducted to determine that the project has reached the commercial production stage, the capital investment commitments have been met, and the actual activity matches the proposed plan. Failure to meet the conditions may result in the incentive being revoked.

The regulation is effective from 4 April 2018.

Powerful Tax Tools

NEW

FX Rates

Global FX Rates including Tax Year Average FX Rates and Spot Rates for all Reporting Currencies.

NEW

Corporate Tax Rates

Corporate tax rates, surtaxes, and effective tax rates for the current year, as well as historical rates and approved future rates.

NEW

Country Analysis

Detailed tax guidance for companies doing business in over 100 countries, including summaries and snapshots of key tax facts and issues.

NEW

Cross Border Tax Calculator

Calculate total tax costs and benefits of a cross border transaction including withholding tax, participation exemption and foreign tax credit rules.

NEW

Cross Border Tax Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment streams.

NEW

OECD BEPS Project

Complete overview of the OECD BEPS Project, including daily BEPS news, country adoption of BEPS measures, and an overview of the 15 BEPS Actions.

NEW

Tax Calendar

Customizable calendar tool that tracks corporate income tax, value added tax and transfer pricing obligations by country or entity.

NEW

Tax Forms

English translations of key tax forms for over 80 countries, including tax return forms, treaty benefit forms, withholding tax forms, and more.

NEW

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

NEW

Worldwide Tax Planner

Calculates the worldwide tax cost of what-if scenarios based on legal entity structure, taxable income, and cross border transactions.

NEW

Certified Rates Report

Customizable Certified Rates Report providing updated corporate and withholding tax rates at the end of each month for over 100 countries.

NEW

Withholding Tax Minimizer

Enables quick calculation of tax costs and benefits of cross border transactions considering all possible transaction combinations and optimal routes.

NEW

VAT Rates

Provides value added tax (VAT) rates, goods and services tax (GST) rates and other indirect tax rates for over 100 countries.

NEW

NOL Calculator

Country specific calculator to determine how net operating losses can be utilized in carryback and carryforward years.

NEW

Transfer Pricing Calculator

Calculates TP ratios under various TP methods and calculates the difference between target ratios and actual ratios.

NEW

Individual Income Tax Rates

Individual tax rates for over 100 countries.

Play of the Day

FX Rates

Global FX Rates including Tax year Average FX Rates and Spot Rates for all Reporting Currencies.

We’re here to help

We’re here to answer any questions you have about the Orbitax products and services.

Send us a message

Who’s behind Orbitax?

We’re committed to providing high value, low cost tax research and management solutions.

Learn More