ANNOUNCED AS TEMPORARYNo
Tax or social insurance relief
On 16 November 2009, the Indonesian Ministry of Finance announced regulation 176/PMK.011/2009 eliminating import tariffs on machines, goods and materials, which are part of direct investments in Indonesia's industry.
Under the condition that at least 30% of the total value of machines used were purchasedlocally, the company may obtain a duty exemption for a period of up to 4 years on goods and materials'for the purpose of production/additional needs in the production' (art. 5(1)).
A similar exemption is available for machines and may hold for up to 2 years -with the option of a prolongation for another year under certain circumstances (art. 3 & 4 of regulation 176/PMK.011/2009).
According to article 6 of the regulation, the exemptions do not hold for the industry of motor vehicle assembly, apart from the industry of motor vehicle components.
Companies involved in services need to be part of one of these industries in order to benefit from the tax exemption:
This measure qualifies as a discrimnating local content regulation rather than a liberalising tariff elimination, given that the measure provides companies with an incentive to buy local and the tariff elimination is used as a reward for that. The preamble to the Regulation explicitly states that it was introduced 'in order to increase domestic investment to strengthen the national economy which faces the global competition'.
The regulation came into force 30 days after its issuance, i.e. on 16 December 2009. It was amended by regulations 76/PMK.011/2012 and 188/PMK.010/2015. However, since the amendments focused on extending the tariff exemption on the motor and construction industries, this measure is still valid and a separate measure was created for the motor industry (cf. Related Measures).
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