What Fiscal Benefits You can Get from Doing Business in Indonesia
Investment and import sectors have been very popular amongst businessman in the present day. To encourage the growth of those sectors, especially in Indonesia whose economic grows steadily, the Government enacted laws about fiscal facility that give benefits for the investor and also the importer. Most of the benefits usually come in a form of exemption of customs or even remission of taxes. What are the example of the fiscal facilities the Government gives?
Customs in Import Sector
The Government of Indonesia has given facilities for the investor to do importations, as could be seen in Law No. 17 of 2006 about Customs. In Article 26 of the said law, a remission or even an exemption of customs could be given for imported goods, for example for goods and materials for industrial development in the context of capital investment and engines for industrial development. This remission is given with expectation to attract the stakeholders to invest in Indonesia’s industrial sectors. Aside from the law made by the Central Government, each region has its own regulations that gives benefits for the investor. An example in DI Yogyakarta, the Head of the Customs Regional Office of Yogyakarta has stated that he will give fiscal facility for companies to stimulate their rapidly development.
To facilitate the companies that eligible for the fiscal facility in a form of remission of customs, even further, the Vice-Minister of Finance in Indonesia, Mardiasmo, for example, has already formalized the single submission for fiscal facility services for importations of operating goods for Upstream Oil and Gas Business Activities in Jakarta. As the busiest city and the most well-known city for business, this enactment has given the stakeholder transparent and accountable advantages. This fiscal facility related to oil and gas business itself is a policy that has been made to reduce or even exempt the stakeholders from customs. Through this single submission application, companies that wish to get this fiscal facility of exemption of customs can act more effectively and cut times to get the letter of statement of exemption.
A Value-Added Tax
Generally, there exist few types of value-added tax (VAT) in Indonesia, they are: 0% VAT facility, VAT not charged, VAT exempted and VAT not collected. All of which are regulated under Law No. 42 of 2009 about Value-added Tax.
- 0% VAT facility applies for exported goods
- VAT not charged applies for delivery of goods and services that do not qualified as VAT object
- VAT exempted applies for certain business activities in accordance with Article 16B of Law No. 42 of 2009 and as results, the goods cannot be credited
- VAT not collected applies for certain business activities and further regulated under Government Regulation No. 85/2015 and differ from VAT exempted, the goods can still be credited.
In the Regulation of the Minister of Finance of the Republic of Indonesia No. 116/PMK.04/2019 for example, there exists a fiscal facility enticed closely with import sector relating to VAT, that is exemption of value-added tax for imported goods relating to Kontrak Karya (KK) or Perjanjian Karya Pengusahaan Pertambangan Batubara (PKP2B). The company that wanted to get this facility, they must declare it in the contract and state the period of time for the exemption. In conclusion, if the company has stated clearly in the contract they have made, they could be exempted from VAT for a certain period of time as one of many fiscal facilities given by Indonesian Government.
Corporate Income Tax
As a company that has made profit, the Government has applied the self assessment tax collection system that one of the forms of it is the duty to pay corporate income tax. In this regards, a form of fiscal facility given by the government is a remission and an exemption from corporate income tax. This remission is regulated through Government Regulation No. 77/2013 about Decrease in Income Tax Rates for Domestic Corporate Taxpayers in a form of Perseroan Terbuka. To receive the facility, the company must fulfil the prerequisites under Article 2 which are:
- at least 40% of the total number of shares deposited is listed for trading on the stock exchange in Indonesia and included in collective custody at the depository and settlement institution;
- the shares in the first point must be owned by at least 300 parties;
- the parties must have less than 5% of the total issued and fully paid shares;
- the provisions in point (1) and (2) must be fulfilled in a period of at least 183 calendar days within a Tax Year.
Evidently, by issuing this regulation, the Government wants to encourage the growth of capital investment and also encourage the growth in number of Perseroan Terbuka.