The government readjusts the taxation policy regarding the use of book value for the transfer and acquisition of assets in the context of mergers, split-ups, business spin-offs, or taking over of a business.

The adjustments to the policy on the use of book value are outlined in the Minister of Finance Regulation No. 56/PMK.010/2021 concerning the Second Amendment to the Minister of Finance Regulation No. 52/PMK.010/2017 concerning the Use of Book Value for the Transfer and Acquisition of Assets in the Context of Mergers, Split-ups, Spin-offs, or Taking Over of a Business (MoF Reg. 56/2021).

MoF Reg. 56/2021 has been released to provide convenience in the transformation of State-Owned Enterprises (Badan Usaha Milik Negara/BUMN) and the achievement of SOE missions through SOE restructuring. Moreover, this policy has been issued to encourage companies to conduct initial public offerings. Promulgated on 4 June 2021, MoF Reg. 56/2021 has come into force thereafter.

Through MoF Reg. 56/2021, the government expands the scope of taxpayers permitted to use book value in the context of business spin-offs. Based on MoF Reg. 56/2021, resident corporate taxpayers can now use the book value in the context of business spin-offs insofar as the business entity resulting from the business spin-offs receives additional capital from foreign investors of a minimum of IDR500 billion.

In addition, SOE taxpayers that receive additional capital participation from the Republic of Indonesia may use the book value in the context of business spin-offs. The book value, however, can be used insofar as the business spin-offs are carried out in the context of the establishment of an SOE holding company. Moreover, corporate taxpayers performing splitting in connection with the restructuring of SOEs can now also use book value in the context of business spin-offs.

To use the book value, the taxpayer must apply to the Director General of Taxes no later than six months after the effective date of the business spin-off. The submitted application must be attached with the following documents:

i.	a statement letter stating the reasons and objectives for mergers, split-ups, spin-offs, or taking over of a business;
ii.	a statement letter outlining that the merger, split-ups, business spin-offs, or taking over of a business fulfill the requirements of the business purpose test as referred to under Article 2 paragraph (2); and
iii.	tax clearance certificate from the Director General of Taxes for all resident taxpayers and relevant Permanent Establishments.

Application submitted by resident corporate taxpayers whose business entity as a result of the business spin-offs receives additional capital from foreign investors of a minimum of IDR500 billion must also be attached with:

i.	deed of establishment or deed of amendments of the taxpayer resulting from the business spin-offs which states the amount of new investments from foreign investors; and
ii.	proof of realization or full payment of additional capital in the deed of establishment or deed of amendments.

On the other hand, applications submitted by SOE taxpayers that receive additional capital must also be attached by a letter of approval from the Minister of State-Owned Enterprises. Furthermore, applications submitted by SOE taxpayers that perform business split-ups in connection with the SOE restructuring must be attached by a letter of approval from the Minister of State-Owned Enterprises and a deed of business split-up or business acquisition.

In addition, MoF Reg. 56/2021 states that taxpayers who intend to sell their shares on the stock exchange, within a maximum period of two years since approval from the Director General of Taxes to carry out business spin-offs using book value, must have submitted a statement of registration to the Financial Services Authority (Otoritas Jasa Keuangan/OJK) for the initial public offering and registration statements have become effective.

Changes in Terms of Use of Book Value in the Context of Business Spin-offs