Introduction

To attract more new investments in pioneer industries in Indonesia, the Minister of Finance recently issued Regulation No. 159/PMK.010/2015 of 2015 on Institutional Income Tax Reduction Facility (Ministerial Regulation No. 159/2015). The Ministerial Regulation No. 159/2015 is effective since 16 August 2015 and repeals Minister of Finance Regulation No. 130/PMK.011/2011 along with its amendment the Minister of Finance Regulation No. 192/PMK.011/2014.

Scope of Pioneer Industry

Pioneer industry is an industry that have a wide interconnection, give value-added and high externality, introduce new technology, and have a strategic value to national economy[i].

Income Tax Reduction Facility

Institutional Taxpayer who conduct new investment in a Pioneer Industry can be facilitated by a reduction of Institutional Income Tax. This reduction facility is granted to income which is received or obtained from core business activities of a Pioneer Industry[ii]. The percentage of reduction is between 10% and 100% of payable Institutional Income Tax and valid for 5 to 15 years. However, certain consideration to increase competitiveness of national industry and strategic value of certain business activates can be used by the Minister of Finance to grant a facility that is valid for 20 years[iii].

Applicant Criteria and Requirements

Taxpayer who want to receive the facility must meet the following criteria[iv]:

1. New Taxpayer
2. A Pioneer Industry
3. New and Ratified Capital Investment Plan of at least IDR 1.000.000.000.000, but this Capital Investment Plan can be reduced to IDR 500.000.000.000 for Pioneer Industry in telecommunication, information and communication industries that can introduce high technology[v].
4. Comply to provision on debt to capital ratio for calculation of income tax
5. Submit a statement on ability to deposit 10 % of total fund in Capital Investment Plan to an Indonesian Bank
6. Indonesian Legal Entity that is ratified since or after 15 August 2011.

Permanent Establishment that directly owns a taxpayer who want to receive Income Tax Reduction Facility must acquire a fiscal statement from the Directorate General of Tax. This requirement does not apply if the taxpayer is directly owned by the government or its shares are listed in the Indonesia Stock Exchange[vi].

Taxpayer who meets the following requirements can be granted an Income Tax Reduction Facility[vii]:

1. Already start commercial production
2. Already realized capital investment as much as Capital Investment Plan
3. A pioneer industry that its capital investment business field is in accordance with capital investment business field plan

Application Procedure

To enjoy the benefit of the facility, a taxpayer must first submit an application to the Chairman of Indonesia Investment Coordinating Board (BKPM) along with the following supporting documents[viii]:

1. Copy of Tax Identification Numbers
2. Copy of Principle License of New Capital Investment
3. Letter of statement on ability to deposit 10 % of new Capital Investment Plan fund to an Indonesian Bank
4. Letter on Fiscal Statement from Directorate General of Tax for taxpayer that is directly owned by a Permanent Establishment

For further information on requirements and procedures to receive Institutional Income Tax Facility, please kindly contact us at:

E: bpl@smartlegal.id 

H: +62821-1234-1235

[i] Article 1 paragraph (3) of Ministerial Regulation No. 159/2015

[ii] Article 1 paragraph (1) and Article 1 paragraph (2) of Ministerial Regulation No. 159/2015

[iii] Article 3 of Ministerial Regulation No. 159/2015

[iv] Article 4 paragraph (1) of Ministerial Regulation No. 159/2015

[v] Article 4 paragraph (5) of Ministerial Regulation No. 159/2015

[vi] Article 4 paragraph (2) and Article 4 paragraph (3) of Ministerial Regulation No. 159/2015

[vii] Article 7 paragraph (7) of Ministerial Regulation No. 159/2015

[viii] Article 5 paragraph (1) and Article 5 paragraph (2) of Ministerial Regulation No. 159/2015