CITAX H1

New Tax Holiday Rule Expands Industry Coverage

Jakarta, 25 August 2015 – The government has finally issued the long-awaited revised tax -holiday policy, expanding the coverage to include new industries and extending the time period of the tax -holiday implementation.

According to a ministerial regulation issued on Aug. 14 by the finance minister, the list of industries that will be eligible for the tax holiday facility has been expanded to nine industries from the previous five.

The new industries are manufacturing related to agriculture, forestry and fisheries; marine transport; manufacturing within Special Economic Zone (KEK) and economic infrastructure not part of the government-to-business program.

Finance Minister Bambang Brodjonegoro said earlier that the addition would hopefully attract new investors to venture into the industries  particularly to develop pioneer and strategic businesses — in the form of foreign direct investment (FDI).

The Investment Coordinating Board (BKPM) has set Rp 519.5 trillion (US$37.11 billion) in this year’s FDI target, up 12 percent from the realization in 2014.

The inclusion of agriculture, forestry and fisheries and marine transport can especially be seen as an attempt to help realize the government’s maritime vision, as promoted by President Joko “Jokowi” Widodo.

The implementation of the facility has been extended as well to last between five and 15 years, as opposed to the previous five to 10-year range.

However, the new policy stipulates that the ministry can extend the period up to 20 years if it deems the investment strategic to the economy.

The minimum amount of initial investment is still set at Rp 1 trillion, but a lower figure — Rp 500 billion — can be applied specifically to the telecommunication, information and communication industry, so long as they meet the “high technology” requirement.

In terms of tax holiday ratio, a new range of 10 percent to 100 percent has been introduced, depending on the industry type, whereas the previous policy did not make such distinction.

Investors wishing to obtain the tax-holiday facility must submit a request with the BKPM, which will coordinate with related ministries to assess the request.

However, according to the new revision, the finance minister now has higher leniency to approve or deny the request without having to deliberate with the verification committee.

In the past, the minister was required to obtain a recommendation from the committee and consult with the President.

The Center for Indonesia Taxation Analysis (CITA) executive director Yustinus Prastowo acknowledged that the new revision offered more ease in requirements and services, citing the final approval mechanism at the Finance Ministry.

“That final approval can make the process much simpler, but such discretion must be used responsibly,” he said on Monday.

He also insisted that the ministry increase monitoring to ensure that companies granted the facility were actually eligible for it. “For instance, illegal fishing companies may just apply for the tax-holiday since it is offered in the new industry list,” he added.

 

Source: The Jakarta Post  & http://www7.bkpm.go.id

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