ANNOUNCEMENT 25 Jun 2019
On 25 June 2019, the Indonesian government issued regulation 45/2019 amending its previous regulation 94/2010 on investment-related tax incentives.
NUMBER OF INTERVENTIONS
Governmental regulation 45/2019 (in Bahasa Indonesia)
Governmental regulation 94/2010 (in Bahasa Indonesia)
Secondary source (in English)
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:
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.