Revision of Government Regulation Number 79 of 2010

The Indonesian Government will revise Government Regulation Number 79 of 2010 on Operating Costs that can be Recovered and Treatment of Income Tax in Upstream Oil and Gas Business Sector.

Minister of Finance Sri Mulyani Indrawati in a press conference on Friday (23/9), explained the direction and policies of the Government Regulation Number 79 of 2010 that will be revised. According to the Minister, the revision covers five points, among others:

1. Tax facilities on the exploration period will be granted, including import VAT and duty as well as domestic VAT, and land and building tax;
2. Tax facilities on the exploitation period will be granted, including import VAT and duty as well as domestic VAT and land and building tax (considering the economics of the projects);
3. Tax holiday on cost sharing applied by the contractor to exploit State Property in upstream oil and gas sector, and Headquarters’ Overhead Cost Allocation;
4. The granting of tax facilities is stipulated in Finance Minister Regulation;
5. There is clarity in non-fiscal facilities (investment credits, accelerated depreciation, DMO Holiday); and
6. The concept of profit sharing of the State Revenue will use sliding scale scheme, in which the Government receives more profit if oil prices rise sharply and caused windfall profit.

Minister Sri Mulyani hopes the revision in the Government Regulation Number 79 of 2010 will enliven the activities in upstream oil and gas business sector. The Minister added that based on the calculation from team who compares the time when Government Regulation Number 79 of 2010 applies and when the insentive facilities will be applied, internal rate of return (IRR) will rise to 15.16 percent, from the previous 11.59 percent.

“Through tax and non-tax facilities that will be granted in exploration period and non- fiscal insentive that will be given in a form of investment credit, depreciation, and DMO Holiday with 15.16 percent of IRR, upstream oil and gas business sector is expected to be more attractive and will bring investors with new investment that will eventually increase oil production in Indonesia,” Sri Mulyani said.

(Humas Kementerian ESDM/ES)(RAS/EP/YM/Naster)