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Jakarta, Ideatax -- In an article published by Stanford University in 2023, it was mentioned that one of the factors that caused China to excel in the economic and technological fields is the technology extraction policy or "tech extractor" (Stanford, 2023). Tech extractor is a policy initiated by the Chinese Government that requires foreign investors to transfer technology to local entrepreneurs. According to Stanford University researchers, this technology transfer policy is able to transform China as a winner in certain business sectors such as High-Speed Railway and Artificial Intelligent.
Indonesia essentially also has policies in support of development and technology. In the field of taxation, for example, the government provides income tax deduction to taxpayers who conduct field work practice, apprenticeship and or learning activities in human resource development. This income tax reduction on vocational activities is better known as super deduction tax. It is called super deduction tax because the amount of cost reduction used in calculating the income tax given is not playful. It ranges from 200% to 300% of the cost of education, training and research incurred by taxpayers.
The technical provisions regarding this super deduction tax are regulated in Government Regulation Number 94 of 2010 concerning Calculation of Taxable Income and Payment of Income Tax in the Current Year as last amended by 45 of 2019. There are two types of super deduction tax, namely super deduction tax on industrial vocational activities and super deduction tax for research and development activities.
Super Deduction Tax on Industrial Vocational Activities
Article 29B paragraph (1) of Government Regulation No. 94/2010 stipulates that domestic corporate taxpayers who organize work practice, apprenticeship and or learning activities in the context of fostering and developing certain competency-based human resources may be granted a maximum gross income deduction of 200% of the total costs incurred for work practice, apprenticeship and or learning activities.
If further analyzed, the article consists of several elements. First, taxpayers who can obtain a gross income reduction are corporate taxpayers. Referring to the Income Tax Law, what is meant by a corporate taxpayer is a group of people or capital that becomes a unit, both those doing business and those not doing business in the form of a limited liability company, a partnership, a firm, and so on.
Second, there are work practices, apprenticeship or learning activities. Work practice or apprenticeship is work practice or apprenticeship at a domestic corporate taxpayer's place of business that provides work practice or apprenticeship facilities. Meanwhile, learning is a teaching activity conducted by a party assigned by a domestic corporate taxpayer to teach at Vocational High School, Vocational Aliyah Madrasah, Diploma College at Vocational Education and or Vocational Training Centre.
Third, work practice, apprenticeship and or learning activities in the context of fostering and developing human resources are based on certain competencies. Certain competencies referred to here are competencies to improve the quality of the workforce through strategic work practice, apprenticeship and or learning programs to achieve workforce effectiveness and efficiency as part of human resource investment.
Based on the tax expenditure report published by the Fiscal Policy Agency (BKF) in 2023, it is known that the value of facilities utilized by taxpayers for vocational activities has not been maximized. For example, for the 2021 tax year, BKF estimates that the value of income tax reduction from super deduction tax is four billion rupiah. Meanwhile, in 2022, the estimated value of super deduction tax from vocational activities is six billion rupiah (Fiscal Policy Agency, 2023).
Super Deduction Tax on Research and Development Activities
Furthermore, Article 29C paragraph (1) of Government Regulation No. 94/2010 also stipulates that domestic taxpayers conducting certain research and development activities in Indonesia may be granted a gross income deduction of up to 300% of the total costs incurred for research activities in Indonesia charged within a certain period of time.
The research activities referred to in the article are research and development activities conducted in Indonesia to produce inventions, produce innovations, master new technology and or transfer technology for industrial development to increase national competitiveness.
Based on the tax expenditure report published by BKF, it is reported that there are no taxpayers who utilize the gross income reduction facility for research and development activities.
Considering the low tax expenditure on vocational and research and development activities, this is basically a great opportunity for taxpayers who want to invest in Indonesia. This means that if investors want to invest in Indonesia, it should be accompanied by training, apprenticeship and development activities in order to obtain a cost reduction of up to 300%.
Related Regulations:
- Law No. 7 of 1983 on Income Tax as last amended by Law No. 7 of 2021 on Harmonization of Tax Regulations.
- Government Regulation Number 94 of 2010 concerning Calculation of Taxable Income and Payment of Income Tax in the Current Year as last amended by 45 of 2019.
References
Badan Kebijakan Fiskal. (2023). Laporan Belanja Perpajakan 2022. Jakarta: BKF.
Stanford. (2023, July 1). Assessing the Strengths and Limitations of China’s Technology Transfer Policies . Retrieved from Standford: Senter on China's Economy and Institution: https://sccei.fsi.stanford.edu/china-briefs/assessing-strengths-and-limitations-chinas-technology-transfer-policies
