that to implement the provisions under Article 30 letter d of Government Regulation Number 45 of 2019 concerning the Amendment to Government Regulation Number 94 of 2010 concerning the Calculation of Taxable Income and Settlement of Income Tax in the Current Year, it is necessary to stipulate a Minister of Finance Regulation concerning the Granting of Gross Income Reduction for Certain Research and Development Activities in Indonesia;

 

 

 

 

1.

Article 17 paragraph (3) of the 1945 Constitution of the Republic of Indonesia;

2.

Law Number 39 of 2008 concerning State Ministries (State Gazette of the Republic of Indonesia of 2008 Number 166, Supplement to the State Gazette of the Republic of Indonesia Number 4916);

3.

Government Regulation Number 94 of 2010 concerning the Calculation of Taxable Income and Settlement of Income Tax in the Current Year (State Gazette of the Republic of Indonesia of 2010 Number 161, Supplement to the State Gazette of the Republic of Indonesia Number 5183) as amended by Government Regulation Number 45 of 2019 concerning the Amendment to Government Regulation Number 94 of 2010 concerning the Calculation of Taxable Income and Settlement of Income Tax in the Current Year (State Gazette of the Republic of Indonesia of 2019 Number119, Supplement to the State Gazette of the Republic of Indonesia Number 6361);

4.

Presidential Regulation Number 57 of 2020 concerning the Ministry of Finance (State Gazette of the Republic of Indonesia of 2020 Number 98);

5.

Minister of Finance Regulation Number 217/PMK.01/2018 concerning the Organisation and Work Procedures of the Ministry of Finance (Official Gazette of the Republic of Indonesia of 2018 Number 1862) as amended several times, last amended by Minister of Finance Regulation Number 229/PMK.01/2019 concerning the Second Amendment to the Minister of Finance Regulation Number 217/PMK.01/2018 concerning the Organisation and Work Procedures of the Ministry of Finance (Official Gazette of the Republic of Indonesia of 2019 Number 1745);

 

 

 

 

MINISTER OF FINANCE REGULATION CONCERNING THE GRANTING OF GROSS INCOME REDUCTION FOR CERTAIN RESEARCH AND DEVELOPMENT ACTIVITIES IN INDONESIA.

 

 

 

 

Referred to herein this Ministerial Regulation:

1.

Research is an activity carried out according to scientific methods to obtain data and information related to the understanding of natural and/or social phenomena, evidencing the accuracy or inaccuracy of an assumption and/or hypothesis and drawing scientific conclusions.

2.

Development is an activity to increase the benefits and supporting capacity of science and technology that has been proven correct and safe to increase the functions and benefits of science and technology.

3.

Intellectual Property is a property that arises as a result of human thought processes that produce a product or process that is useful for human life.

4.

Patent is an exclusive right granted by the state to an inventor for his/her invention in the field of technology for a certain period to self-implement the invention or give approval to another party to implement it.

5.

Plant Variety Protection Rights, hereinafter referred to as PVP Rights, are special rights granted by the state to breeders and/or holders of Plant Variety Protection rights to use their own varieties as a result of their breeding or to give approval to other persons or legal entities to use them for a certain period.

6.

Online Single Submission, hereinafter abbreviated to OSS, is a business permit issued by the OSS Institution for and on behalf of ministers, heads of institutions, governors or regents/mayors to entrepreneurs through an integrated electronic system.

7.

Tax Clearance Certificate is information concerning Taxpayers’ compliance during a certain period to fulfil the requirements to obtain services or in the context of carrying out certain activities provided by the Directorate General of Taxes.

8.

Commercialisation is production activities in Indonesia and sales of goods and/or services resulting from Research and Development.

9.

Taxpayers are resident corporate Taxpayers that have tax rights and obligations pursuant to statutory provisions.

 

 

 

 

(1)

Taxpayers conducting certain research and development activities in Indonesia may be given a gross income reduction of a maximum of 300% (three hundred per cent) of the total costs incurred for certain Research and Development activities in Indonesia which are expensed within a certain period.

(2)

The maximum reduction in gross income of 300% (three hundred per cent) referred to in paragraph (1) includes:

 

a.

a gross income reduction of 100% (one hundred per cent) of the total costs incurred for Research and Development activities; and

 

b.

an additional reduction in gross income of a maximum of 200% (two hundred per cent) of the accumulated costs incurred for Research and Development activities within a certain period.

(3)

The amount of the additional reduction in gross income of a maximum of 200% (two hundred per cent) referred to in paragraph (2) subparagraph b includes:

 

a.

50% (fifty per cent) if Research and Development results in Intellectual Property rights in the form of Patents or Plant Variety Protection Rights registered at the domestic Patent office or Plant Variety Protection office;

 

b.

25% (twenty-five per cent) if the Research and Development results in Intellectual Property rights in the form of Patents or Plant Variety Protection Rights which, in addition to being registered at the domestic Patent office or Plant Variety Protection office referred to in subparagraph a, are also registered at the Patent office or Plant Variety Protection office overseas;

 

c.

100% (one hundred per cent) if the Research and Development reach the Commercialisation stage; and/or

 

d.

25% (twenty-five per cent) if the Research and Development that results in Intellectual Property rights in the form of Patents or Plant Variety Protection Rights as referred to in subparagraph a, subparagraph b and/or reach the Commercialisation stage as referred to in subparagraph c, are carried out in collaboration with the Government’s Research and Development institutions and/or higher education institutions in Indonesia.

 

 

 

 

(1)

Commercialisation referred to in Article 2 paragraph (3) subparagraph c and subparagraph d may be carried out by:

 

a.

Taxpayers conducting Research and Development activities; or

 

b.

Other Taxpayers.

(2)

If Commercialisation is carried out by other Taxpayers as referred to in paragraph (1) subparagraph b, the additional reduction in gross income referred to in Article 2 paragraph (3) subparagraph c and/or subparagraph d is given to the Taxpayers conducting Research and Development activities.

(3)

Commercialisation by other Taxpayers referred to in paragraph (1) subparagraph b may be carried out if the Taxpayers conducting Research and Development activities referred to in Article 2 paragraph (1):

 

a.

have obtained Intellectual Property rights in the form of Patents or Plant Variety Protection Rights; and

 

b.

must receive income in the actual value or should be received from the utilisation of Intellectual Property rights in the form of Patents or Plant Variety Protection Rights, from the other Taxpayers conducting Commercialisation.

 

 

 

 

(1)

Certain Research and Development referred to in Article 2 paragraph (1) which may be given an additional reduction in gross income referred to in Article 2 paragraph (2) subparagraph b includes Research and Development:

 

a.

conducted by Taxpayers, other than Taxpayers conducting business based on production sharing contracts, contracts of work or mining concession cooperation agreements whose taxable income is calculated based on separate provisions in contracts that are different from general provisions in the field of Income Taxes;

 

b.

implemented starting no later than the enactment of Government Regulation Number 45 of 2019 concerning the Amendment to Government Regulation Number 94 of 2010 concerning the Calculation of Taxable Income and Settlement of Income Tax in the Current Year;

 

c.

that fulfil the following criteria:

 

 

1.

intended to obtain new inventions;

 

 

2.

based on an original concept or hypothesis;

 

 

3.

having uncertainty over the final result;

 

 

4.

planned and having a budget; and

 

 

5.

intended to create something that may be freely transferred or traded on the market; and

 

d.

is a priority Research and Development with the focus and themes listed in the Appendix which constitutes an integral part of this Ministerial Regulation.

(2)

Activities that are not given an additional reduction in gross income referred to in Article 2 paragraph (2) subparagraph b include the following activities:

 

a.

full application of engineering in production activities at the initial stage of commercial production;

 

b.

quality control during commercial production, including regular testing of the products;

 

c.

repair of damage occurring during commercial production;

 

d.

repair, addition, enrichment or other routine quality improvements of existing products;

 

e.

adjustment of existing capabilities to special requests or customer needs as part of ongoing commercial activities;

 

f.

seasonal or periodic changes in the design of existing products;

 

g.

routine design of equipment and molds;

 

h.

construction engineering and design in connection with the construction, relocation, rearrangement or start-up of facilities and equipment; and/or

 

i.

marketing research.

(3)

Research and Development costs which may be given an additional reduction in gross income referred to in Article 2 paragraph (2) subparagraph b include costs related to:

 

a.

assets other than land and buildings, in the form of:

 

 

1.

depreciation costs for tangible fixed assets and/or amortisation costs for intangible assets; and

 

 

2.

supporting costs for tangible fixed assets which include electricity, water, fuel and maintenance costs;

 

b.

goods and/or materials;

 

c.

salaries, honoraria or similar payments paid to employed employees, researchers and/or engineers;

 

d.

arrangements to obtain Intellectual Property rights in the form of Patents or Plant Variety Protection Rights; and/or

 

e.

considerations paid to Research and Development institutions and/or higher education institutions in Indonesia, which are contracted by Taxpayers to conduct Research and Development activities without having rights to the results of the Research and Development.

(4)

The costs referred to in paragraph (3) are expensed based on each Research and Development activity proposal.

(5)

If the costs referred to in paragraph (3) cannot be separated for each Research and Development proposal, the expensing based on each proposal is carried out proportionally based on the time of utilisation or assignment.

(6)

The additional reduction in gross income for costs referred to in paragraph (3) subparagraph a cannot be provided if the assets used are part of an investment that has received net income reduction facilities referred to in:

 

a.

Article 31A of Law Number 7 of 1983 concerning Income Taxes as amended several times, last amended by Law Number 36 of 2008 concerning the Fourth Amendment to Law Number 7 of 1983 concerning Income Taxes; or

 

b.

Article 29A of Government Regulation Number 94 of 2010 concerning the Calculation of Taxable Income Tax and Settlement of Income Tax in the Current Year as amended by Government Regulation Number 45 of 2019 concerning the Amendment to Government Regulation Number 94 of 2010 concerning the Calculation of Taxable Income Tax and Settlement of Income Tax in the Current Year.

 

 

 

 

(1)

The amount of the additional reduction in gross income that may be utilised amounts to the per centage of the additional reduction in gross income referred to in Article 2 paragraph (3) multiplied by the relevant accumulated research and development costs for the last 5 (five) Tax Years since whichever occurs earlier between:

 

a.

the registration of Intellectual Property rights in the form of Patents or Plant Variety Protection Rights; or

 

b.

when the Commercialisation stage is reached.

(2)

The additional reduction in gross income referred to in paragraph (1) starts to be expensed when the Taxpayer obtains Intellectual Property rights in the form of a Patent or Plant Variety Protection Rights and/or reaches the Commercialisation stage.

(3)

The amount of the additional reduction in gross income that may be expensed in each Tax Year is a maximum of 40% (forty per cent) of taxable income before deducted by the additional reduction in gross income referred to in Article 2 paragraph (2) subparagraph b.

(4)

If the additional reduction in gross income referred to in paragraph (1) is higher than 40% (forty per cent) of the taxable income before being deducted with the additional reduction in gross income referred to in paragraph (3), the excess of the additional reduction in gross income that is not yet utiilised may be taken into account for the following Tax Years.

(5)

The calculation of the amount of the additional reduction in gross income referred to in paragraph (1) and the expensing of the additional income reduction referred to in paragraph (2), paragraph (3) and paragraph (4) shall be carried out according to the examples listed in the Appendix which constitutes an integral part of this Ministerial Regulation.

 

 

 

 

(1)

Taxpayers conducting Research and Development to obtain the additional reduction in gross income referred to in Article 2 paragraph (3) subparagraph a, subparagraph b and/or subparagraph d must register Intellectual Property rights in the form of Patents or Plant Variety Protection Rights:

 

a.

on behalf of the Taxpayer receiving the additional reduction in gross income; or

 

b.

on behalf of the Taxpayer conducting cooperation in Research and Development activities in Indonesia.

(2)

Intellectual Property Rights in the form of Patents and/or Plant Variety Protection Rights resulting from Research and Development activities that receive an additional reduction in gross income referred to in paragraph (1) cannot be transferred to other parties.

(3)

Excluded from the provisions referred to in paragraph (2), if the transfer is carried out after the period of protection of Intellectual Property rights in the form of Patents and/or Plant Variety Protection Rights is no longer held by the Taxpayer pursuant to statutory provisions.

(4)

If a Taxpayer transfers Intellectual Property rights in the form of Patents and/or Plant Variety Protection Rights resulting from Research and Development activities that receive an additional reduction in gross income referred to in paragraph (2), the additional reduction in gross income that has been utilised is taken into account as the Taxpayer’s income and is subject to Income Tax payable upon the transfer of Intellectual Property.

 

 

 

 

(1)

To obtain an additional reduction in gross income referred to in Article 2 paragraph (2) subparagraph b, Taxpayers must apply through the OSS by attaching:

 

a.

the Research And Development activity proposal; and

 

b.

the Tax Clearance Certificate.

(2)

The Research and Development activity proposal referred to in paragraph (1) subparagraph a at least contains:

 

a.

the number and date of the Research and Development activity proposal;

 

b.

the name and Taxpayer Identification Number;

 

c.

the focus, theme and topics of Research and Development;

 

d.

achievement targets of the Research and Development activity;

 

e.

the name and Taxpayer Identification Number of the cooperation partner, if the Research and Development is carried out through cooperation;

 

f.

the estimated time needed to achieve the expected final results of the Research and Development activity;

 

g.

the estimated number of employees and/or other parties involved in the Research and Development activity; and

 

h.

the estimated costs and year of expenditure.

(3)

If the OSS does not run as it should, the application referred to in paragraph (1) may be submitted outside the network by the Taxpayer to the ministry that administers government affairs in the field of science and technology using a letter according to the sample Format of Notification of Research and Development Activity Plan listed in the Appendix which constitutes an integral part of this Ministerial Regulation.

(4)

In respect of the application referred to in paragraph (1) or paragraph (3), the ministry that administers government affairs in the field of science and technology verifies the conformity between the Research and Development activity proposal and the provisions of the proposal referred to in paragraph (2) and the Research and Development criteria referred to in Article 4.

(5)

For the verification of the conformity referred to in paragraph (4), coordination is carried out between ministry that administers government affairs in the field of science and technology and the Ministries and/or Government Agencies handling the field related to the Research and Development theme for which the application is submitted.

(6)

If the Research and Development activity proposal is declared to conform or not to conform to the provisions referred to in paragraph (2) and is declared to conform or not to conform to the Research and Development criteria referred to in Article 4, the results of the verification referred to in paragraph (4) are notified to the Taxpayer through:

 

a.

the OSS for the application referred to in paragraph (1); or

 

b.

the notice in the event of the conditions referred to in paragraph (3).

(7)

The notification of the results of the verification referred to in paragraph (6) is copied to the Director General of Taxes through the Director of Taxation Regulations II and the Ministries and/or Government Agencies handling the field related to the Research and Development theme referred to in paragraph (5).

 

 

 

 

(1)

If Research and Development activities are carried out through cooperation between one or more Taxpayers, and each Taxpayer bears part or all of the Research and Development costs, the cooperating Taxpayers must prepare 1 (one) joint Research and Development activity proposal.

(2)

The joint Research and Development activity proposal referred to in paragraph (1) in addition to containing the matters referred to in Article 7 paragraph (2) must also include activity plans and costs to be borne by each cooperating Taxpayer.

(3)

Each Taxpayer submits an application referred to in Article 7 paragraph (1) or paragraph (3).

(4)

The amount of the additional reduction in gross income referred to in Article 5 paragraph (1) for each Taxpayer is determined based on:

 

a.

the accumulated Research and Development costs borne by each Taxpayer; and

 

b.

the per centage of the additional reduction in gross income referred to in Article 2 paragraph (3), according to the ownership of Intellectual Property rights in the form of Patents or Plant Variety Protection Rights and/or the condition of reaching the Commercialisation stage of each Taxpayer.

 

 

 

 

(1)

Taxpayers that have received the notification referred to in Article 7 paragraph (6) must submit a report on Research and Development costs every Tax Year to the Director General of Taxes and the ministries that administer government affairs in the field of science and technology, through the OSS.

(2)

If the OSS does not run as it should, the report referred to in paragraph (1) may be submitted outside the network by the Taxpayers to the Director General of Taxes through the Head of the Tax Office where the Taxpayers are registered, with a copy to the Director of Taxation Regulations II of the Directorate General of Taxes and the ministry that administers government affairs in the field of science and technology.

(3)

The report referred to in paragraph (1) must be submitted no later than the filing of the Annual Corporate Income Tax Return for the Tax Year concerned.

(4)

The report referred to in paragraph (1) shall be submitted according to the sample Format for the Submission of the Report of Research and Development Costs for Each Tax Year listed in the Appendix which constitutes an integral part of this Ministerial Regulation.

(5)

If the Taxpayers do not submit the report referred to in paragraph (3) or submit the report but do not fulfil the provisions referred to in paragraph (4), the Head of the Tax Office where the Taxpayers are registered issues a reprimand letter to the Taxpayers to submit the report in a maximum period of 14 (fourteen) days since the reprimand letter is submitted.

 

 

 

 

(1)

To be able to utilise the expensing of the additional reduction in gross income referred to in Article 5, the Taxpayers submit notification along with supporting evidence that Research and Development have obtained Intellectual Property rights in the form of Patents or Plant Variety Protection Rights and/or reached the Commercialisation stage to the ministry that administers government affairs in the field of science and technology through the OSS.

(2)

The conformity between the proposal and the realisation of Research and Development activities is verified by the Ministry that administers government affairs in the field of science and technology.

(3)

For the verification of the conformity referred to in paragraph (2), coordination is carried out between the ministry that administers government affairs in the field of science and technology and the Ministries and/or Government Agencies handling the field related to the Research and Development theme for which the application is submitted.

(4)

The results of the verification referred to in paragraph (2) state that:

 

a.

Taxpayers may utilise the additional reduction in gross income, the per centage of additional reduction in gross income that may be utilised by the Taxpayers and the Tax Year when the Taxpayers may begin to utilise the additional reduction in gross income; or

 

b.

the Taxpayers cannot utilise the additional reduction in gross income.

(5)

The results of the verification referred to in paragraph (2) shall be submitted to the Taxpayers through the OSS with a copy to the Director General of Taxes through the Director of Taxation Regulations II.

(6)

Taxpayers that may utilise the additional reduction in gross income must submit a report on the calculation of the utilisation of reduction in gross income every year to the Director General of Taxes through the OSS no later than the filing of the Annual Corporate Income Tax Returns for the Tax Year of the utilisation of the additional reduction in gross income.

(7)

The report referred to in paragraph (6) shall be submitted according to the Format for the Submission of the Report of the Utilisation of the Reduction in Income listed in the Appendix which constitutes an integral part of this Ministerial Regulation.

(8)

If the Taxpayers do not submit the report referred to in paragraph (6) or submit the report but do not fulfil the provisions referred to in paragraph (7), the Head of the Tax Office where the Taxpayers are registered issues a reprimand letter to the Taxpayers to submit the report in a maximum period of 14 (fourteen) days since the reprimand letter is submitted.

 

 

 

 

(1)

If the Taxpayers do not receive notification of the conformity of the fulfilment of the provisions to obtain the additional reduction in gross income referred to in Article 7 paragraph (6) and/or do not receive the notification of being able to utilise the additional reduction in gross income referred to in Article 10 paragraph 4, the Directorate General Taxes may correct the additional reduction in gross income referred to in Article 2 paragraph (2) subparagraph b expensed by the Taxpayers.

(2)

If the Taxpayers do not submit the report on Research and Development activities and costs referred to in Article 9 paragraph (1) and/or do not submit a report on the calculation of the utilisation of the reduction in gross income referred to in Article 10 paragraph (6), the Directorate General of Taxes may correct the additional reduction in gross income referred to in Article 2 paragraph (2) subparagraph b expensed by the Taxpayers.

(3)

If the Taxpayers do not report the amount and type of Research and Development costs correctly, the Directorate General of Taxes may correct the additional reduction in gross income referred to in Article 2 paragraph (2) subparagraph b expensed by the Taxpayers.

 

 

 

 

(1)

Taxpayers conducting Research and Development activities referred to in Article 4 paragraph (1) before the promulgation of this Ministerial Regulation, may be given an additional reduction in gross income referred to in Article 2 paragraph (2) subparagraph b.

(2)

The additional reduction in gross income referred to in paragraph (1) may be granted if the results of Research and Development:

 

a.

have not been registered to obtain Intellectual Property rights in the form of Patents or Plant Variety Protection Rights; and/or

 

b.

have not yet reached the Commercialisation stage.

 

 

 

 

Taxpayers referred to in Article 12 paragraph (1) must apply as referred to in Article 7 paragraph (1) or Article 7 paragraph (3) no later than 3 (three) months after the promulgation of this Ministerial Regulation, by attaching:

a.

the proposal referred to in Article 7 paragraph (2) with additional information in the form of activities and interim results of Research and Development activities that have been carried out until the submission of the proposal; and

b.

the Tax Clearance Certificate.

 

 

 

 

(1)

Taxpayers referred to in Article 12 paragraph (1) are required to submit the report on costs referred to in Article 9 paragraph (1) for the 2019 Tax Year, not later than the submission of the report on Research and Development costs for the 2020 Tax Year.

(2)

If the notification of conformity referred to in Article 7 paragraph (6) is given after the filing deadline of the 2020 Corporate Income Tax Return, the Taxpayers referred to in Article 12 paragraph (1) must submit a report on costs referred to in Article 9 paragraph (1) for the 2019 Tax Year and 2020 Tax Year, submitted no later than 3 (three) months after the notification of conformity referred to in Article 7 paragraph (6) is given.

(3)

If the Taxpayers referred to in Article 12 paragraph (1) do not submit the report referred to in paragraph (1), (2) or submit the report but do not fulfil the provisions referred to in Article 9 paragraph (4), the Head of the Tax Office where the Taxpayers are registered issues a reprimand letter to the Taxpayers to submit the report within a maximum period of 14 (fourteen) days after the reprimand letter is submitted.

 

 

 

 

(1)

The amount of the additional reduction in gross income that may be utilised by the Taxpayers referred to in Article 12 paragraph (1) is the per centage of the additional reduction in gross income referred to in Article 2 paragraph (3) multiplied by the accumulated related research and development costs in the period since the Research and Development activities are carried out until whichever occurs earlier between:

 

a.

the registration of Intellectual Property rights in the form of Patents or Plant Variety Protection Rights; or

 

b.

when the Commercialisation stage is reached.

(2)

If the accumulation period of costs referred to in paragraph (1) is more than 5 (five) Tax Years, the amount of the additional reduction in gross income that may be utilised by the Taxpayers referred to in Article 12 paragraph (1) is the per centage of the additional reduction in gross income referred to in Article 2 paragraph (3) multiplied by the accumulated related research and development costs for the last 5 (five) Tax Years since whichever occurs earlier between:

 

a.

the registration of Intellectual Property rights in the form of Patents or Plant Variety Protection Rights; or

 

b.

when the Commercialisation stage is reached.

 

 

 

 

This Ministerial Regulation comes into force on the date of promulgation.

 

 

 

 

For public cognisance, this Ministerial Regulation shall be promulgated by placement in the Official Gazette of the Republic of Indonesia.

 

 

 

 

Stipulated in Jakarta
on 9 October 2020

MINISTER OF FINANCE OF THE REPUBLIC OF INDONESIA,

signed

SRI MULYANI INDRAWATI

 

Promulgated in Jakarta
on 9 October 2020

DIRECTOR GENERAL OF LEGISLATION OF THE MINISTRY OF LAW AND HUMAN RIGHTS,

signed

WIDODO EKATJAHJANA

 

 

 

 

STATE GAZETTE OF THE REPUBLIC OF INDONESIA OF 2020 NUMBER 1173