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Freddy Karyadi |
Luna Puspita |
To encourage economic growth equitable and accelerate development in certain regions, and foreign and domestic capital investments in specified business fields, certain income tax facilities are given to taxpayers who make new investments or expand their existing business in specified business fields and/or certain regions.
As of May 7 2016, the revision of Tax Facilities for Investment was issued. The revision amends the list of specified business fields and certain regions which are eligible for the tax facilities. As a result, the amendment is expected to create job opportunities for two million people per year.
The lists are:
Specified business fields as shown in Table 1;
Specified business fields in certain regions as shown in Table 2.
Table 1 |
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Crop agriculture, livestock, hunting and related activities |
Forestry and logging |
Coal and lignite mining |
Natural oil and natural gas and geothermal mining |
Food |
Textile |
Made-up clothing |
Leather goods and footwear |
Coal products and natural oil refinery |
Chemicals product |
Pharmaceuticals, chemical medicines and traditional medicines |
Rubber and plastic products |
Base metal industry |
Metal goods, Non-machinery and equipment products |
Computer, electronic and optical products |
Electrical equipment |
Machinery and others products |
Motor vehicles, trailers and semi-trailers |
Other transportations |
Reparation and installation of machinery and equipment services |
Electricity, gas, steam/hot water and cold air procurement |
Water procurement |
Land transport and pipeline transport |
Warehousing and freight forwarding |
Computer programming, consultancy and other related activities |
Real estate |
Table 2 |
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Crop agriculture, livestock, hunting and related activities |
Ore mining |
Paper products |
Base metal industry |
Forestry and logging |
Food |
Chemicals products |
Furniture |
Fishery |
Textile |
Rubber and plastic products |
Reparation and installation of machinery and equipment services |
Coal and lignite mining |
Leather goods and footwear |
Non-metal mined products |
Waste management |
Table 3 |
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Category: Fixed Tangible Asset |
Useful Life Into |
Depreciation Rates |
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Straight Line |
Declining Balance |
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I. Non-buildings |
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Category I |
2 years |
50% |
100% (charged directly to income) |
Category II |
4 years |
25% |
50% |
Category III |
8 years |
12.50% |
25% |
Category IV |
10 years |
10% |
20% |
II. Buildings |
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Permanent |
10 years |
10% |
- |
Non-permanent |
5 years |
20% |
- |
Table 4 |
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Category: Fixed Intangible Asset |
Useful Life Into |
Amortisation Rate |
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Straight Line |
Declining Balance |
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Category I |
2 years |
50% |
100% (charged directly to income) |
Category II |
4 years |
25% |
50% |
Category III |
8 years |
13% |
25% |
Category IV |
10 years |
10.00% |
20% |
The income tax facilities shall be given to the taxpayer having high investment value or for export, significant labour absorption or high local contents. The income tax facilities given shall include:
a reduction of net income by 30% of the total investment, deducted for six years, by 5% each year;
Accelerated depreciation for tangible assets: see Table 3;
Accelerated amortisation for intangible assets: see Table 4;
Imposition of 10% income tax on dividends paid to non-resident taxpayers other than permanent establishments in Indonesia, or otherwise a lower rate subject to the prevailing agreement for the avoidance of double taxation;
Extended loss carry forward of more than five years but less than 10 years:
With an additional period of one year if: (i) newly investing in the fields of business conducted in industrial estates and bonded zones; (ii) investing/expending at least Rp10 billion ($73,400) in economic and/or social infrastructure in business locations; (iii) using at least 70% of raw materials and/or components of the domestic products since the fourth year;
With an additional period of one year or two years if: (i) One year: employing at least 500 Indonesian workers for five consecutive years; or (ii) Two years: employing at least 1,000 Indonesian workers for five consecutive years;
With an additional period of two years if: (i) within five years, expending at least 5% of the investment in domestic R&D costs for product development or production efficiency; (ii) investment for extension of the existing specified business fields and/or dedicated regions partly originates in earnings after tax of a fiscal year before the issuance of the principal licence for extension of investment; and/or (iii) exporting at least 30% of the total sales value, for investment in specified business fields outside a bonded zone.
Freddy Karyadi (fkaryadi@abnrlaw.com) and Luna Puspita (lpuspita@abnrlaw.com), Jakarta
Ali Budiardjo, Nugroho, Reksodiputro, Counsellors at Law
Tel: +62 21 250 5125
Website: www.abnrlaw.com
