Last year, President Joko Widodo launched the ‘Making Indonesia 4.0’ Road Map, which was an integrated roadmap designed by the Ministry of Industry to implement a number of strategies that provide a direction for the movement of Indonesia’s national industry in the future.
The roadmap requires a collaborative follow-up actions by multiple stakeholders, including government institutions, industry players, research and development centres, associations, as well as academic stakeholders.
The implementation of the road map is aimed to ensure that Indonesia is able to be one of the top-10 global economies by 2030, regain a 10% net export position, enhance the productivity-to-cost ration by two times, and build local innovation by allocating 2% of the research and development (“R&D”) spending to its GDP.
To reach the above objectives, the Indonesian government has set the 10 National Priorities consisting of:
New Tax Facility
As part of the abovementioned 10 National Priorities, the Indonesian government recently issued Government Regulation No. 45 of 2019 on Amendment to Government Regulation No. 94 of 2010 on Calculation and Settlement of Income Tax in the Current Year (“New Regulation”), which introduces new tax facilities that are commonly known as ‘super deductible tax’.
The New Regulation provides for three types of tax facility, namely:
An overview of each tax facility is provided below.
may receive an income tax facility in the form of 60% net income reduction from the total investment of tangible fixed assets, including lands used for the taxpayer’s main business activities, which will be charged for a certain period.
Under the New Regulation, competency-based activities are defined as activities that improve the labour quality through strategic job practice, apprenticeship and/or learning programs, which are designed to achieve effectiveness and efficiency of labour and are conducted as part of an investment in the human resources sector by the taxpayer.
These R&D activities are defined as activities that results in inventions, innovations, mastery in new technologies and/or transfer of technology that enhance the competitiveness of Indonesia’s national industry.
The New Regulation became effective on 26 June 2019. However, in order to be operative, the New Regulation requires the issuance of a Minister of Finance regulation, which is expected to be issued immediately.
Although the implementation of the New Regulation is still unclear, so far, these tax facilities have received a positive response from industry players.
AHP Client Alert is a publication of Assegaf Hamzah & Partners. It brings an overview of selected Indonesian laws and regulations to the attention of clients but is not intended to be viewed or relied upon as legal advice. Clients should seek advice of qualified Indonesian legal practitioners with respect to the precise effect of the laws and regulations referred to in AHP Client Alert. Whilst care has been taken in the preparation of AHP Client Alert, no warranty is given as to the accuracy of the information it contains and no liability is accepted for any statement, opinion, error or omission.