On January 10 2018, the Minister of Industry (MOI) enacted
Regulation No. 01 of 2018 concerning Criteria and/or
Requirements for the Implementation of the Use of Income Tax
Facilities for Investment in Certain Lines of Business and/or
in Certain Areas of the Industrial Sector (MOI Regulation
01/2018). This regulation is a further implementation of
Government Regulation No. 18 of 2015 as amended by No. 9 of
2016 concerning Income Tax Facilities for Investment in Certain
Lines of Business and/or Certain Areas of the Industrial
Sector. An income tax facility as referred to herein is granted
in the form of:
- A 30% deduction of net income of
investment value in the form of tangible immovable assets,
charged for six years (5% per year) as of commercial
production;
- The accelerated depreciation of tangible
assets and accelerated amortisation of intangible assets
obtained in the framework of new investment and/or the
expansion of business;
- A 10% tax imposition on dividends paid to
foreign taxpayers other than permanent establishments in
Indonesia, or a lower rate based on a prevailing double
taxation avoidance agreement; or
- Compensation for losses of between five
and 10 years.
The MOI Regulation 01/2018 generally stipulates that an
income tax facility may be granted for domestic corporate
taxpayers in the industrial sector, provided that the corporate
taxpayer meets the following requirements: (i) it has high
investment value; (ii) it has high labour absorption; or (iii)
it has a minimum of 20% of local content in the form of raw
materials, supporting materials, or machinery.
The attachments to the MOI Regulation 01/2018 further
provide details on the industries and products that are
eligible to receive the facility, including the criteria and
requirements thereof. For example, the cocoa industry (ISIC
10731) producing cocoa powder, cocoa butter, cocoa fat, and/or
cocoa oil located in North Sulawesi, West Sulawesi, Central
Sulawesi, Southeast Sulawesi, South Sulawesi, and Gorontalo
with a minimum investment value of IDR 50 billion ($3.5
million) and a minimum of 50 employees will be eligible.
In order for an eligible industry to be able to use the
import tax facility, it must first obtain a Statement Letter
from the relevant directorate at the MOI stating: (i) the
conformity of the industrial line of business and the scope of
products; (ii) the satisfaction of criteria; and/or (ii) the
satisfaction of requirements.
On a separate topic, the Directorate General of Tax (DGT)
has been preparing for the issuance of new regulations related
to tax on e-commerce business, particularly on sales and
purchase transactions carried out by online shops using social
media. Through the new regulations, these entrepreneurs will be
expected to report their income in an annual tax return and pay
tax at the prevailing rate. It is reported that the DGT is
still waiting for data on the number of e-commerce
entrepreneurs in existence from the Indonesian E-Commerce
Association (idEA) to be further analysed for use as the basis
of the regulations.
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| Freddy Karyadi |
Nina Cornelia Santoso |
Freddy Karyadi (fkaryadi@abnrlaw.com)
and Nina Cornelia Santoso (nsantoso@abnrlaw.com),
Jakarta
Ali Budiardjo, Nugroho, Reksodiputro, Law Offices
Tel: +62 21 250 5125
Website: www.abnrlaw.com