In this article, we will give you an overview of incentives in Indonesia to help you make the most out of opportunities that Indonesia offers for foreign investment companies.
To attract Foreign Direct Investment in Indonesia, Indonesia government had renewed some policies regarding FDI in Indonesia to make it easier for foreign investors to enter Indonesia market. Here are the incentives regarding FDI in Indonesia.
1. Import Duty Facility
Foreign investment can get two years of import duty exemption or directly apply for 4 years for companies using locally-produced machines (min. 30%). For industries which produce goods and/or services, including:
- Tourism and culture
- Public transportation
- Public health services
Imported machine, goods and raw material are:
Not yet being locally produced.
If the local machines are available, yet unable to fulfill criteria of required machines.
If the local machines are available, yet unable to fulfill the total required machines.
2. Tax Allowance
30% of investment value 145 business fields Eligible for tax allowance, expanded from 143 segments in the previous regulation with additional segment: textile industry. Under certain requirements among others: investment value or export orientation, manpower absorption, local content, and project location (especially outside Java island). Deduction of net corporate income which amounts 30% from total investment, carried over 6 years period (equal to 5% deduction per year).
Tax Allowance Calculation Illustration: PT ABC
Total Investment: US$ 10,000,000
Deduction per year: 5% x US$ 10,000,000 = US$ 500,000
Deduction for 6 years: 6 x US$ 500,000 = US$ 3,000,000
3. Tax Holiday
Corporate Income Tax reduction can be given for 5 – 20 fiscal years, based on investment value and eligible for projects that considered strategic for the Indonesian economy.
The 18 eligible pioneer industries are:
- Upstream basic metal
- Oil and gas refinery
- Petrochemicals from oil, gas, or coal
- Organic basic chemicals from agriculture, plantation, or forestry products
- Inorganic basic chemicals
- Pharmaceutical raw materials
- irradiation, electromedical, or electrotherapy equipment
- Main components of electronics or telematic equipment
- Machinery and main components of machinery
- Robotics components of power plant machinery
- Main components of power plant machinery
- Motor vehicles and main components of motor vehicles
- Main components of vessels
- Main components of trains
- Main components of aircraft and activities supporting the aerospace industry
- Agricultural, plantation, of forestry-based processing that produce pulp
- Economic infrastructure
- Digital economy which includes data processing, hosting, and related activities
4. Land Incentives
Foreign investors investing in the SEZs are allowed to have the building right on land (Hak Guna Bangunan), which is extendable up to 80 years; own property in the SEZs; and those who own property have the option to apply for the permanent stay permit in Indonesia.
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