Gov’t Provides Corporate Income Tax Reduction Facility to Pioneer Industry

By Office of Assistant to Deputy Cabinet Secretary for State Documents & Translation
Date 30 November 2018
Category: News
Read: 1.044 Views

30NovIn a bid to boost direct investment to pioneer industry so it will stimulate economic growth, and to synergize it with regulations on Ease of Doing Business, the Government deems it necessary to stipulate Finance Ministerial Regulation (PMK) on Facility to Reduce Corporate Income Tax.

In that consideration, Minister of Finance Sri Mulyani Indrawati on 26 November 2018 signed Finance Ministerial Regulation (PMK) Number: 150/PMK.010/2018 on Facility to Reduce Corporate Income Tax.

In the Regulation, entities (taxpayers) who make new investment to Pioneer Industry will be granted with corporate income tax reduction of income generated from their Main Business Activities.

“The investment as intended should be at least Rp100,000,000,000 (one hundred billion rupiah),” Article 2 paragraph (2) of the PMK reads.

Corporate income tax reduction will be granted in this following schemes: a. 100% (one hundred percent) of corporate income taxes due for new investment worths at least Rp500,000,000,000 (five hundred billion rupiah); and b. 50% (fifty percent) of corporate income taxes due for new investment worths at least Rp100,000,000,000 (one hundred billion rupiah) but no more than Rp500,000,000,000 (five hundred billion rupiah).

Corporate income tax reduction as intended will apply for a period of:

  1. 5 (five) tax years for new investment that its investment plan worths at least Rp500,000,000,000 (five hundred billion rupiah) but no more than Rp1,000,000,000,000 (one trillion rupiah);
  2. 7 (seven) tax years for new investment that its investment plan worths at least Rp1,000,000,000,000 (one trillion rupiah) but no more than Rp5,000,000,000,000 (five trillion rupiah);
  3. 10 (ten) tax years for new investment that its investment plan worths at least Rp5,000,000,000,000 (five trillion rupiah) but no more than Rp15,000,000,000,000 (fifteen trillion rupiah);
  4. 15 (fifteen) tax years for new investment that its investment plan worths at least Rp15,000,000,000,000 (fifteen trillion rupiah) but no more than Rp30,000,000,000,000 (thirty trillion rupiah);
  5. 20 (twenty) tax years for new investment that its investment plan worths at least Rp30,000,000,000,000 (thirty trillion rupiah).

After term to provide corporate income tax reduction ended, taxpayers will be given corporate income tax reduction as follows: a. 50% (fifty percent) of corporate income taxes due for the next two tax years for new investment as referred to in letter a; or b. 25% (twenty five percent) of corporate income taxes due for the next two tax years for new investment as referred to in letter b.

The Regulation also listed required criteria for corporates/entities to get income tax reduction facilities, among others: a. must be a pioneer industry; b. has status as an Indonesian legal entity; c. must be a new investment that has not been issued a notification regarding the granting or refusal to reduce corporate income tax; d. has new investment plan of at least Rp100,000,000,000 (one hundred billion rupiah); and e. complies with the requirement on ratio of debt and capital as referred to in Finance Ministerial Regulation (PMK) on the determination of the ratio of company debt and capital to calculate Income Tax.

According to this PMK, pioneer industry covers: a. upstream basic metal industry: 1. steel; or 2. non steel, with or without its integrated derivatives; b. oil and gas refinery or drilling industry, with or without its integrated derivatives; c. petroleum-, natural gas-, coal-based petrochemical industry, with or without its integrated derivatives; d. basic organic chemical industry based on agricultural, plantation, or forestry products with or without its integrated derivatives; e. inorganic basic chemical industry with or without its integrated derivatives; f. main pharmaceutical raw material industry with or without its integrated derivatives; g. industry for the manufacture of radiation, electromedical or electrotherapy equipment; h. industry for the manufacture of major components of electronic or telematics equipment, such as semiconductor wafer, backlight for Liquid Crystal Display (LCD), electrical driver, or display; i. industry for the manufacture of machines and its major components; and others.

“This Finance Ministerial Regulation (PMK) shall apply as of the date of its promulgation,” reads Article 19 of PMK Number: 150/PMK.010/2018 which was stipulated by Director General of Legislation, Indonesian Ministry of Laws and Human Rights Widodo Ekatjahjana on 27 November 2018. (JDIH Kemenkeu/ES)

 

 

 

Translated by : Rany Anjany Subachrum
Edited by : Yuyu Mulyani

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