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Jakarta, Ideatax -- BKPM (2023) reports that Singapore has invested USD 51.1 billion in Indonesia in the last five years with 50,542 projects. This value also places Singapore as the number one country investing in Indonesia. China occupies the second position among countries investing in Indonesia, with an investment value of USD 26.56 billion and 14,687 projects. Meanwhile, Hong Kong and Japan occupy third and fourth positions with an investment realization value of USD 21.76 billion and USD 15.98 billion, respectively. The countries that invested their funds can be seen in the following table:
|
Project |
Investasi US$. Thousand |
|
|
Singapore |
50,542 |
51,101,341.3 |
|
Republic of China |
14,687 |
26,561,107.3 |
|
Hong Kong, RoC |
10,497 |
21,765,448.8 |
|
Japan |
26,230 |
15,987,776.9 |
|
United States |
6,030 |
9,749,565.1 |
|
Malaysia |
10,450 |
9,520,527.3 |
|
South Korea |
19,053 |
8,833,399.5 |
|
Dutch |
9,061 |
7,857,574.0 |
|
British Virgin Islands |
4,445 |
2,375,497.8 |
|
Bermuda |
97 |
1,981,450.6 |
|
Australia |
6,459 |
1,844,346.6 |
|
United Kingdom |
5,291 |
1,576,462.2 |
|
Taiwan |
3,157 |
1,326,276.9 |
|
Thailand |
1,483 |
1,234,105.8 |
|
Swiss |
2,044 |
1,127,575.3 |
|
Canada |
1,012 |
993,609.3 |
|
French |
5,920 |
835,791.6 |
|
Germany |
3,842 |
828,551.2 |
|
Mauritius |
810 |
779,206.6 |
|
Cayman Islands |
1,097 |
672,217.3 |
Fiscal incentives provided by the Indonesian government have led to many investments entering Indonesia. One of the provisions that regulate the fiscal incentives for investors is government regulation number 78 of 2019 concerning Income Tax Facilities for Investment in Certain Business Fields and/or in Certain Regions.
Through specific regulations, the government ensures that corporate taxpayers who invest in particular fields of business and areas can be granted income tax facilities. The government provides at least four income tax facilities for investments in specific fields, including:
- Net income deduction of 30% of the investment value of fixed assets, including land used for business activities. The net income reduction is carried out for six years. Thus, investors who invest in specific business sectors receive a 5% reduction in net income each year.
- Accelerated depreciation and amortization of fixed assets and other intangible assets acquired in the context of capital investment. Accelerated depreciation of the first group of fixed assets is done by reducing the useful life to two years. Meanwhile, accelerated depreciation of the second group of assets is carried out by changing the useful life of the assets to four years. Accelerated depreciation for the third group of assets is done by shortening the useful life to eight years. Furthermore, depreciation of fixed assets for the fourth group of assets is done by changing the useful life to ten years.
Similar to the depreciation of fixed assets, accelerated amortization of group one intangible assets is done by shortening the useful life of intangible assets to two years. Accelerated amortization of group two assets is done by changing the useful life of intangible assets to four years. Accelerated amortization for the third group of assets is done by shortening the useful life to eight years. Furthermore, accelerated amortization for the fourth group of intangible assets is done by changing the useful life to ten years.
- Increase the period of loss compensation from five years to a maximum of ten years with the following provisions:
- Taxpayers who invest in specific fields will get an additional loss compensation period of one year.
- Taxpayers who invest in certain fields in bonded zones will get an additional period of loss compensation for one year.
- Taxpayers who invest in certain fields in the field of new renewable energy will get an additional period of loss compensation for one year.
- Taxpayers who, within one year, incur infrastructure costs amounting to ten billion rupiah will get an additional compensation period of one year.
- Taxpayers who use 70% of domestic raw materials or components are entitled to an additional compensation period of one year.
- Taxpayers who incur research and development costs of at least 5% of the invested capital are entitled to an additional period of loss compensation for two years.
- Taxpayers who export at least 30% of the total sales value in one fiscal year are entitled to an additional compensation period of two years.
Procedure for applying for tax incentives
To obtain tax incentives as mentioned above, taxpayers must apply to the Directorate General of Taxes before they start commercial production. The application is submitted online through the Online Single Submission (OSS) at the same time as registration to obtain an NPWP for new taxpayers or no later than one year after the issuance of the business for investment expansion.
The taxpayer must attach some requirements before applying for the utilization of the income tax facility in OSS, including:
- A report on the realization of fixed assets, along with pictures and locations.
- Taxpayer's Fiscal Certificate.
- Documents related to sales transactions of production products to the market and/or documents related to reports on the use of own production products.
Furthermore, the OSS system will send a notification to the taxpayer that the investment has met the conditions for obtaining income tax facilities according to PP 78 of 2019. If the investment does not meet the provisions of PP 78 of 2019, the OSS system does not send a notification. This is as stipulated in Minister of Finance Regulation Number 11/PMK.010/2020 concerning the Implementation of Government Regulation Number 78 of 2019 concerning Income Tax Facilities for Investment in Certain Business Fields and/or Certain Regions.
Taxpayer applications that have been received in full through the OSS system are submitted by the OSS system to the Minister of Finance through the Director General of Taxes as a proposal for granting income tax facilities. Furthermore, the OSS system will send a notification to the taxpayer that the application has been forwarded to the Minister of Finance.
If the OSS system is unavailable, taxpayers can apply for income tax facilities offline by submitting the required documents to the Director General of Taxes through the Head of BKPM. That is a brief overview of the tax allowance application procedures related to investment in specific business fields and regions. In case you need further assistance, Ideatax is ready to help.
Related provisions
- Government Regulation Number 78 of 2019 concerning Income Tax Facilities for Investment in Certain Business Fields and/or Certain Regions.
- Minister of Finance Regulation Number 11/PMK.010/2020 on the Implementation of Government Regulation Number 78 of 2019 on Income Tax Facilities for Investment in Certain Business Fields and/or Certain Regions.
