President Jokowi Signs Gov’t Regulation on Facilities, Ease in SEZs

President Joko “Jokowi” Widodo on 20 February 2020 signed Government Regulation Number 12 of 2020 on Facilities and Ease in Special Economic Zones.

The regulation aims to boost investment and accelerate implementation of doing business in the Special Economic Zones (SEZs) that can support national economic development in certain regions and create more jobs.

Under this regulation, SEZs constitute areas with certain limits in the legal territory of the Unitary State of the Republic of Indonesia which are determined to carry out economic functions and to enjoy certain facilities.

Business entities and/or business players carrying out activities in the SEZs business sector, according to this Government Regulation, are provided with facilities and ease in the forms of taxation, customs, and excise, goods traffic, employment; immigration services; land and spatial planning, business licensing, and/or other facilities and ease.

Business sectors in the SEZs, as referred to in this Government Regulation, comprise development and management of the SEZs, provision of the SEZs infrastructure, upstream to downstream processing industries of certain commodities, certain product manufacturing industries, energy development, logistics centers, tourism, health, education, R&D in technology, financial services, creative industries, and other business fields stipulated by the National Council.

Facilities and ease for taxation, customs, and excise, according to this Government Regulation, are in the forms of an income tax, a value added tax and sales tax on luxury goods, import duty and import tax; and/or excise.

Business entities and/or business players that make investment in main activity may obtain a reduction in corporate income tax on the income received or obtained from the main activity made.

Value added tax and sales tax on luxury goods, under this Government Regulation, are free of charge for delivery of certain Taxable Goods and/or intangible Taxable Goods in the SEZs by the Entrepreneurs of Other Places in Customs Areas (TLDDP) or other than TLDDP to Business Entities and/or Business Players; import of certain Taxable Goods by Business Entities and/or Business Players; delivery of certain Taxable Goods between Business Entities, between Business Players, or between Business Entities and Business Players; delivery of Taxable Services and/or intangible Taxable Goods including rental services for lands and/or buildings for a minimum period of 5 (five) years in the SEZs by Business Entities and/or Business Players to other Business Entities and/or Business Players in the same SEZs or other SEZs; delivery of certain Taxable Services by Entrepreneurs from the TLDDP or other than TLDDP to Business Entities and/or Business Players: and utilization of intangible Taxable Services and/or Taxable Goods from outside customs area within the SEZs by Business Entities and/or Business Players.

Under Article 20, facilities and ease of customs provided for business entities in the SEZs include the exemption of import duties and are not subject to taxes in the framework of import for the importation of capital goods in the context of SEZs development.

Facilities and ease in the release of goods between Business Players in the SEZs, under this Government Regulation, are in the forms of suspension or exemption of import duties, exemption from excise insofar as the said goods are raw materials or supporting materials in the production of final products which are not excisable goods, not subject to tax in the framework of import, and/or not subject to Value Added Tax and Sales Tax on Luxury Goods.

Under this Government Regulation, business operators in the SEZs Tourism are given customs and/or excise facilities for the importation of capital goods and/or business raw materials for activities by means of provisions of accommodation, meeting and conference center, marina and/or special pier for tourist ships; special tourist airport, travel transportation services, resort and residential development, food and beverages services, shopping centers, entertainment and recreation centers, education and/or training centers, sports centers and facilities, health centers, retirement center, and/or other activities that support tourism established by the National Council.

Regional government stipulates reduction, relief, and exemption from regional taxes and/or regional levies to Business Entities and/or Business Players in the SEZs in accordance with the provisions of laws and regulations in the area of ​​regional tax and regional levies, which are given a minimum of 50% (five twenty percent) and a maximum of 100% (one hundred percent).

“Taxpayers who obtain facilities as referred to in Article 10; yet fail to meet the provisions as referred to in Article 30 paragraph (1) and/or Article 32 paragraph (1), the following conditions may apply, among others, Income Tax facilities that have been granted may be revoked; Income Tax facilities that have attached to assets used for purposes other than those provided or transferred are revoked and added to the taxable income in the tax year that the transfer of assets is carried out, subject to sanctions in accordance with the provisions of laws and regulations in taxation, and/or may no longer be given Income Tax facilities,” Article 33 reads.

Business players in the SEZs, under this Government Regulation, are responsible for import duties, excise and/or tax in the framework of payable import for imported goods and are exempt from the responsibilities as referred to in paragraph (1) in the event that imported goods are accidentally destroyed or destroyed under the tutelage of customs and excise officials.

Business entities and business players that obtain import duty exemption facilities as referred to in Article 20 must use imported goods in accordance with the purpose for their entry.

“This Government Regulation shall apply from the date of its promulgation,” reads Article 97 of this Government Regulation, promulgated by Minister of Law and Human Rights Yasonna Laoly on 24 February 2020. (EN)

Translator: Muhardi

Reviewed by: M. Ersan Pamungkas