ANNOUNCEMENT 15 Aug 2011

In August 2011, the government of Indonesia announced a targeted tax change.

NUMBER OF INTERVENTIONS

1

  • 1 harmful
  • 0 neutral
  • 0 liberalising

SOURCE



Ministry of Finance regulation 130/PMK.011/2011 (in Bahasa Indonesia):
http://www.sjdih.depkeu.go.id/fullText/2011/130~PMK.011~2011Per.HTM

Secondary Source:
http://kemenperin.go.id/artikel/5457/Tax-Holiday-Harus-Diperluas


Inception date: 15 Aug 2011 | Removal date: open ended
Still in force

Tax or social insurance relief

On 15 August 2011, the Indonesian Ministry of Finance issued regulation 130/PMK.011/2011 introducing tax holidays for companies in "pioneering industries".
With the regulation, certain companies may obtain income tax exemptions within the first five to years after the start of commercial production (art. 2(2) of the regulation). After the end of this tax exemption, the entities are eligible for another two years to obtain a income tax reduction of 50%. However, according to art. 2(4), the period of tax exemptions and reductions may be extended "taking into account the interests of maintaining the competitiveness of national industries and the strategic value of certain business activities".
The criteria for being awarded tax holidays are as follows:

  • "a. being part of a pioneering industry;
  • b. have new capital investment plans that have been approved by a competent agency worth more than 1 trillion IDR 'based on the exchange rate on the day of the issuance ca. 117 million USD'
  • c. placing at least 10% of the funds of the capital investments referred to in letter b in Indonesian banks and not withdrawing them before the start of the realization of the investment
  • d. have the status of an Indonesian legal entity for at least 12 months on the day of the implementation of this regulation" (own translation; art. 3(1) of the regulation).

Furthermore, article 3(2) defines "pioneering industries" as one of the following:

  • "a. basic metals industry;
  • b. petroleum refining industry and/or basic organic chemical industry which is derived from petroleum and natural gas;
  • c. machine industry;
  • d. industry in the field of renewable resources; and/or
  • e. communications equipment industry".

The article also mentions that the scope of pioneering industries may be extended "taking into account the interests of maintaining the competitiveness of national industries and the strategic value of certain business activities".
The regulation came into force on the day of its issuance.
The GTA includes state guarantees and other financial incentives that are likely to affect the restructuring and performance of firms facing international competition, whether from imports, in export markets, and from foreign subsidiaries.
 

AFFECTED PRODUCTS

 
N/A