BKPM Regulates Procedure for Tax Holiday Application

 In Legal Updates, Uncategorized

Introduction

The Minister of Finance’s latest incentive for pioneer industry that is implemented on 16 August 2015 through issuance of Minister of Finance Regulation No. 159/PMK.010/2015 of 2015 on Institutional Income Tax Reduction Facility (Ministerial Regulation No. 159/2015) is responded by the Chairman of Indonesia Investment Coordinating Board (BKPM) through issuance of Regulation No. 13 of 2015 on Application Procedure of Income Tax Reduction Facility (BKPM Regulation No. 13/2015). The BKPM Regulation No. 13/2015 is enacted on 7 September 2015.

Industries that are Eligible for Tax Holiday

The BKPM Regulation No. 13/2015 is intended to implement Article 5 paragraph (1) of Ministerial Regulation No. 159/2015 that stipulates taxpayer shall submit an application to the Chairman of BKPM to acquire Income Tax Reduction Facility or Tax Holiday[i]. The BKPM Regulation No. 13/2015 reaffirms that Tax Holiday can be granted to taxpayer who conduct new investment in pioneer industry[ii], which can be as follows[iii]:

  1. Upstream metal industry
  2. Refinery of crude oil industry
  3. Basic organic chemical industry that came from crude oil and natural gas
  4. Engineering industry that produces industrial machinery
  5. Agriculture, forestry, and fishery products processing industry
  6. Telecommunication, information, and communication
  7. Ocean transportation industry
  8. Processing industry in core industry of Special Economic Zone (KEK), and/or
  9. Economy infrastructure that does not conducted through a partnership scheme between the government and business entity

Tax Holiday can be granted to taxpayer who meets the following criteria[iv]:

  1. New taxpayer
  2. Investing new capital in pioneer industry
  3. At least IDR 1,000,000,000,000 New Capital Investment Plan that has been ratified by the authorized institution, or at least IDR 500,000,000,000 if the investment is conducted in pioneer industry that introduce high technology in telecommunication, information, and communication
  4. Comply to provision on debt to capital ratio as regulated by a Minister of Finance Regulation
  5. Letter of Statement of being able to deposit 10 % of total Capital Investment Plan and would not withdraw it before realizing capital investment
  6. An Indonesia Legal Entity that has been ratified since or after 15 August 2015
  7. For taxpayer that is directly owned by a Permanent Establishment, the permanent establishment must acquire a fiscal statement that is issued by Directorate General of Tax

Application Procedure at BKPM’s One Stop Service

 To acquire the Tax Holiday facility, a taxpayer shall submit an application along with its supporting documents directly to the Front Officer at BKPM’s Central One Stop Service, these documents include[v]:

  1. Signed application letter with duty stamp by taxpayer’s management
  2. Principle permit and its revisions that are issued by BKPM or Capital Investment Board and Provincial One Stop Service
  3. Business entity’s Deed of Establishment records and its revisions that has been ratified/approved by Minister of Law and Human Rights or District Court
  4. Institutional Taxpayer Identification Numbers Record
  5. Study on compliance of pioneer industry criteria
  6. Statement of being able to deposit at least 10 % of total Capital Investment Plan in an Indonesian Bank
  7. Fiscal statement for taxpayer that is directly owned by a Permanent Establishment
  8. Information on financial source of company’s investment and its supporting documents
  9. Information on compliance to provision on debt to capital ratio as regulated by a Minister of Finance Regulation
  10. Sufficiently duty stamped Power of Attorney if the application arrangement is not directly conducted by the taxpayer’s management.

The Tax Holiday Application will be clarified by BKPM. This clarification process will result on issuance of proposal by the Chairman of BKPM on whether to approve or deny the Tax Holiday application, within 65 business days[vi]. The Chairman of BKPM’s proposal on whether to approve or deny the application will further be verified by a committee that is assigned by the Minister of Finance. The verification committee will produce a recommendation based on their findings and considerations. The final decision on whether to grant or deny the Tax Holiday will be made by the Minister of Finance based on the verification committee’s recommendations and considerations[vii].

For more information on Tax Holiday Application Procedure at BKPM’s One Stop Service, please kindly contact us at info@bplawyers.co.id or call to +62821 1000 4741

[i] See Consideration of BKPM Regulation No. 13/2015

[ii] See Article 2 paragraph (1) of BKPM Regulation No. 13/2015

[iii] See Article 2 paragraph (2) of BKPM Regulation No. 13/2015

[iv] See Article 2 paragraph (3) of BKPM Regulation No. 13/2015

[v] See Article 3 paragraph (1) and Article 4 paragraph (1) of BKPM Regulation No. 13/2015

[vi] See Article 4 and Article 5 of BKPM Regulation No. 13/2015

[vii] See Article 5 and Article 6 of Ministerial Regulation No. 159/2015

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