Incentive

Tax Holiday

A Tax Holiday is a Corporate Income Tax (CIT) reduction of up to 100% granted to companies investing in pioneer industry sectors that meet certain criteria. The duration of the reduction depends on the investment value, with the following details:

IKN (New Capital City) & Partner Regions: For investments in the financial sector within the IKN Financial Center and investments for establishing/relocating Corporate Headquarters, with a minimum investment of IDR 10 Billion and a tax exemption period of 10–30 years.
Pioneer Industries: For investments starting from IDR 500 Billion (~US$ 6.7 Million) with an exemption period of 5–20 years.
Special Economic Zones (SEZs): For companies located in SEZs with investments starting from IDR 100 Billion and an exemption period of 10–20 years.

The utilization period for the corporate income tax reduction ranges from 5 to 20 years based on the investment value; a larger investment qualifies for a longer utilization period. For the 100% CIT reduction, an additional 50% tax reduction may be granted for a 2-year transition period.

Meanwhile, a 50% tax reduction—also known as a Mini Tax Holiday—is granted for investments ranging from IDR 100 Billion to less than IDR 500 Billion in pioneer industry sectors. Companies can receive a 50% CIT reduction for the first 5 years, with a potential additional 25% reduction for 2 years during the transition period.

Points for Correction:

A Tax Holiday is a CIT reduction in accordance with PMK 130/2020, not a full tax exemption.
The minimum investment threshold for the tax holiday scheme is IDR 100 Billion, not IDR 500 Billion.
The tax holiday applies strictly to pioneer industries designated by the government, and the duration of the tax reduction varies.

Tax Allowance

A Tax Allowance is a tax facility that provides a corporate income tax (CIT) reduction equal to 30% of the total capital investment made, spread over 6 years (with a 5% reduction per year). This scheme is available for Specific Business Fields and/or Specific Regions designated by the government. In addition, the tax allowance includes several other facilities, such as:

Accelerated Asset Depreciation: Allows companies to depreciate assets faster than permitted under standard tax regulations.
Dividend Tax Rate Reduction: Applies to companies receiving domestic or foreign dividends.
Extended Tax Loss Carry-Forward: Extended up to a maximum of 10 years.

Points for Correction:

The tax allowance facility only applies to specific business fields listed in the designated business list stipulated by the government through Government Regulation No. 78 of 2019. The number of listed sectors is subject to change based on current government policies.

Super Tax Deduction

A Super Tax Deduction is a facility provided to encourage investment in Research and Development (R&D), as well as human resource (HR) education and training. This facility provides a corporate income tax (CIT) reduction under the following conditions:

A gross income deduction of 100% of the total costs incurred for R&D activities, plus an additional gross income deduction of up to 200% of the accumulated R&D costs.
A gross income deduction of up to 200% of the total costs incurred for activities, consisting of a 100% gross income deduction of the costs incurred plus an additional gross income deduction of up to 100% of the costs incurred.

This facility aims to incentivize companies to be more active in innovation and HR quality improvement through R&D and training programs.

Labor-Intensive Industries: There is a CIT reduction facility provided for labor-intensive industries in the form of a Net Income reduction equal to 60% of the total investment value over 6 years, which is expensed at 10% per year.

Points for Correction:

The Super Tax Deduction provides a higher CIT reduction for R&D and education activities compared to other schemes.
For labor-intensive industries, the CIT reduction provided is larger (60%) compared to other sectors.

Import Duty Facilities

Indonesia provides import duty exemption facilities for the import of machinery, goods, or raw materials used in the production process. The exemption period lasts up to 2 years and can be extended for another 2 years; further extensions are subject to the value range of the investment plan. This facility aims to support production capacity growth and efficiency within the domestic industrial sector.

Additionally, an exemption from Value Added Tax (VAT) is provided for the import and/or delivery of certain strategic taxable goods.

Regional & International Facilities:

Bonded Zones (Kawasan Berikat): Facilities provided include the suspension of import duties (on raw materials, auxiliary materials, machinery, and equipment), VAT exemption, and the elimination of Luxury Goods Sales Tax (PPnBM).
Special Economic Zones (SEZs/KEK): Facilities include import duty exemptions and non-collection of Import Taxes (PDRI) for capital goods during the construction phase, as well as suspension of import duties and non-collection of PDRI for machinery, raw materials, and auxiliary materials during the production phase.
Generalized System of Preferences (GSP): Indonesia is a beneficiary of the GSP program implemented by the United States, which offers lower import tariff benefits for Indonesian products entering the US market. However, this benefit applies only to specific products, covering over 3,500 product types.

Points for Correction:

The import duty exemption period for imported goods used in production is 2 years, not 3 years.
VAT facilities in FTZs (Free Trade Zones), Bonded Zones, and the GSP are not types of facilities issued/administered by the Ministry of Investment and Downstream Industry/BKPM to business entities.