The Capital Investment Coordinating Board (“BKPM”) has recently issued a regulation to exempt some new businesses from paying Corporate Income Tax (“Tax Holiday”). Tax Holiday Facility is regulated under the Regulation of the Head of BKPM Number 5 of 2018 on Details of Business and Production Types for Pioneering Industries that can be Granted the Corporate Income Tax Deduction Facility, and Guidelines and Procedures for the Granting of the Corporate Income Tax Deduction (“Regulation”). This new regulation provides more detailed provisions than the Regulation of the Minister of Finance Number 35/PMK.010/2018 of 2018 on Corporate Income Tax Deduction Facilities.
A company that wishes to obtain the Tax Holiday Facility must meet several criteria as follows: (1) A pioneer Industry (there are 17 (seventeen) scopes of pioneer industries including the areas of economy and infrastructure); (2) A new Investment; (3) Having new minimum capital investment of IDR 500,000,000,000.00 (five hundred billion rupiahs); (4) Having a debt to equity ratio not more than 4:1; (5) Not Having any pending Tax Holiday application and the Minister of Finance has never refused any Tax Holiday application request submitted by the company; (6) An Indonesian Legal Entity; and (7) Having Tax clearance letter of all of domestic Shareholders recorded under the latest amendments of deed of establishment from Directorate General of Taxation.
In the event that a company has fulfilled the criteria, the company is granted a Tax Holiday Facility with the single rate of 100% (one hundred percent) deduction, which means a company is free from paying Corporate Income Tax. The facility can be granted for 5 (five) years up until 20 (twenty) years depending on the amount of capital investment.
After the Tax Holiday Facility is expired, there is a transitional period in which the company that has received the Tax Holiday Facility will be receiving 50% (fifty percent) Corporate Income Tax deduction for the following 2 (two) years.
As for the company that has submitted the Tax Holiday Facility application from 16 August 2015 to just before the effective date of the Regulation above but has not received written notification on rejection by MoF, the application will be processed in accordance with this Regulation. (ppm)
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This publication has been prepared by Aditya Yudhistira for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.