Tax Incentives Policy in the Investment Business Sector

s Denny Vissaro
s Lenida Ayumi
By Denny Vissaro, Lenida Ayumi
Denny Vissaro
Lenida Ayumi
The Indonesian government has released a new policy in the investment business sector. This policy is outlined in Presidential Regulation No. 10 of 2021 concerning the Investment Business Sector (Pres. Reg. 10/2021). This regulation is an implementing regulation of Law no. 11 of 2020 concerning Job Creation (Law 11/2020).
 
This policy, broadly speaking, stipulates the open investment business sectors and the available tax and non-tax incentives. The business sectors open to investment consist of (i) priority business sectors; (ii) allocated business sectors or partnerships with cooperatives and MSMEs; (iii) business sectors with certain conditions; (iv) other business sectors that can be operated by all investors.
 
Further, a list of priority business sectors covering business sectors, Indonesian Standard Industrial Classifications (Klasifikasi Baku Lapangan Usaha Indonesia/KBLI), product coverage, and requirements are listed in Appendix I of this regulation. This regulation stipulates that the priority business sectors will be given fiscal and non-fiscal incentives.
 
The fiscal incentives for priority business sectors consist of tax incentives and customs incentives. In further detail, the granted tax incentives include:
  1. income tax for investment in certain business sectors and/or in certain areas (tax allowance);
  2. reduction of corporate income tax (tax holiday); or
  3. reduction of corporate income tax and net income reduction facilities for investment as well as a reduction in gross income for certain activities (investment allowance) which includes:
    1. reduction of net income for new investment or business spin-offs in certain business sectors that constitute labor-intensive industries; and/or
    2. reduction of gross income for the organization of internship, apprenticeship, and/or learning in the framework of fostering and developing certain competency-based human resources.
In contrast, details of customs incentives provided for the priority business sectors are in the form of exemption from import duties. The exemption from import duty applies to imports of machinery, goods, and materials for industrial development or development in the context of investment.
 
The non-fiscal incentives provided for priority business sectors include ease of business licensing, provision of supporting infrastructure, guaranteed energy availability, guaranteed availability of raw materials, immigration, employment, and other conveniences as per statutory provisions.
 
Promulgated on 4 March 2021, this regulation shall come into effect 30 days thereafter. When this regulation takes effect, Presidential Regulation No. 76 of 2007 concerning the Criteria and Requirements for the Establishment of Closed Business Sectors and Open Business Sectors with Requirements in the Investment Sector (Perpres 76/2007) and Presidential Regulation No. 44 of 2016 concerning the List of Closed Business Sectors and Open Business Sectors with Requirements in the Investment Sector (Perpres 44/2016) shall be revoked and declared invalid.