Kedutaan Besar Republik Indonesia
Embassy of the Republic of Indonesia
Ambassade de la RÉpublique d'Indonésie

Tax Holidays Becomes Available To Investors

Tax holiday packages promised by the government are now available for investors after the Industry Ministry finally issued on Wednesday supporting regulations to take advantage of the tax incentives.

Industry Minister M.S. Hidayat said in Jakarta on Wednesday a ministerial regulation had been issued on the detailed technicalities of the tax reduction for big investments in manufacturing projects. In line with that, the Investment Coordinating Board (BKPM) also introduced a similar regulation to ease big investorsa�� access to the tax holiday.

a�?These regulations will be effective starting Dec. 1. Investors can choose whether to propose applications to get the tax holiday through the Industry Ministry or the BKPM. Ita��s just the same, as therea��s only one team that will process the applications,a�? he told The Jakarta Post in a telephone interview.

Hidayat said that all applications would be processed in a two-week period at the maximum and later, eligible applications would be sent to the Finance Ministry for further verification, which was set to be complete in six weeks at the latest.

a�?The team will evaluate several aspects of the investments, such as total value, sectors, locations and multiplier effects of the business, including labor absorption,a�? he said.

The government announced in August a tax incentive scheme that offered an income tax holiday from between five to 10 years along with tax allowances to projects in high-priority sectors and in remote areas in a bid to accelerate investments in the countrya��s infrastructure and natural resource-based manufacturing industries.

The tax holiday will be accessible for manufacturing projects in the countrya��s five pioneer sectors a�� base metals, oil refining, basic petrochemicals, machinery, renewable energy and telecommunication equipment a�� with a minimum
value of about Rp 1 trillion (US$110 million).

Tax allowances, which cut taxable income up to 30 percent of total investments realized over six years, will be made available for certain labor-intensive projects in remote areas with a minimum investment of Rp 50 billion.

Earlier, the Industry Ministry nominated several investments that would likely be eligible for the tax holiday such as a $6 billion steel project in Cilegon, Banten, by Indonesiaa��s largest steel maker, Krakatau Steel, and the worlda��s third-largest steel producer, South Koreaa��s Posco, an $8 billion oil refinery project in Balongan, West Java, by Kuwait Petroleum Corporation and a $500 million heavy-equipment manufacturing project by US-owned heavy equipment producer Caterpillar Inc.

Until the third quarter of this year, investment rose steadily to Rp 181 trillion, up 20.9 percent from the same period last year, and inched closer to the governmenta��s full year target of Rp 240 trillion.

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