On 25 June 2019, the Indonesian government issued regulation 45/2019 amending its previous regulation 94/2010 on investment-related tax incentives.



  • 1 harmful
  • 0 neutral
  • 0 liberalising
Inception date: 26 Jun 2019 | Removal date: open ended

Tax or social insurance relief

Regulation 45/2019 expands the possibilities for Indonesian companies to receive investment-related income tax reductions. Whereas previously this was largely restricted to certain labour-intensive industries (see related state acts), the new regulation not only expands the maximum tax reduction amount to the equivalent of 600% of the undergone investment (previously 100%) for the aforementioned industries, but also introduces the following two new categories for investment-related tax reductions:

  • "Domestic taxpayers who carry out work practices, apprenticeship and learning activities in the framework of developing and developing competency-based human resources can be given a reduction in gross [taxable] income of no more than 200% (two hundred percent) of the total costs incurred for work practices, apprenticeship, and / or learning activities." (art. 29B; own translation)
  • "To taxpayers of domestic bodies conducting certain research and development activities in Indonesia, a maximum reduction of gross [taxable] income of 300% (three hundred percent) of the total costs incurred for certain research and development activities in Indonesia may be charged in the period of certain time." (art. 29C(1); own translation).

This de facto means that the investment incentive scheme has been opened up potentially to all sectors in the Indonesian economy. However, as the Global Trade Alert does not cover general tax policies that do not discriminate across firms operating in a given jurisdiction, only the first dimension related to labour-intensive industries is covered by this intervention. This is justified by the fact that with the 2019 amendment in place, it is still significantly easier to obtain tax reductions in one of the specified industries relative to other industries. Furthermore, the amendment increases the amount of potential tax reductions to 600% which is unmatched by the 200% in the case of investment into human capital or 300% in the case of R&D-related investments.

The regulation came into force on 26 June 2019.

A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. The subsidy recipient produces internationally tradable goods. On this metric, the state aid proposed here is discriminatory.