Indonesia Invesment – Procedure of Applying for Facilities on Reduction of Entity’s Income Tax

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Background

On 3 September 2015, Head of Capital Investment Coordinating Board of Indonesia has issued the Head of Capital Investment Coordinating Board Regulation Number 13 of 2015 on the Procedure of Applying for Facilities on Reduction of Entity Income Tax as lastly amended by Head of Capital Investment Coordinating Board Regulation Number 19 ofr 2015.

Facilities for Reduction of Entity Income Tax/Tax Holiday (“Facilities”) may be granted to Obligatory Taxpayer Doing New Investment Being a Pioneer Industry

Pioneer Industry is an industry having broad, high and external relationship, producing added value, introducing new technology, and has strategic economic value nation-wide.

The pioneer industry includes:

a. Upstream metal industry;

b. Natural oil milling industry;

c. Organic basic chemical originating from natural oil and gas;

d. Machine industry producing industrial machine;

e. Agricultural, forestry and fishery-yields processing industry;

f. Telecommunication, information and communication industries;

g. Marine transportation industry;

h. Processing industry constituting prime industry within the Special Economic Zone of Kawasan Ekonomi Khusus (KEK); and/or

i. Economic infrastructure other than that using Government Joint Operation and Business Entity (KPBU).

Criteria for taxpayer having the Facilities are:

a.Is a new taxpayer;

b.Exercising new investment as pioneer industry;

c.Has new plan of investment that has been approved by authorized officials with a minimum of Rp 1.000.000.000.000,00 (one trillion Rupiah) or at least Rp 500.000.000.000,00 (five hundred billion Rupiah) for pioneer industry on telecommunication, information and communication, and complies with to the requirements in introducing high technology (hi-tech);

d.Complies with the provision on the comparative amount between debt and capital as referred to Minister of Finance Regulation on stipulation of comparative amount between debt and capital of the company for calculating Income Tax;

e.Submit statement letter of commitment to deposit fund in a bank in Indonesia of minimum 10% (ten percent) of the total value of investment fund and no withdrawal of the fund may be made before the investment is realized;

f.Status must be in the form of Indonesian legal entity which approval has been stipulated since or after 15 August 2011;

g.If the taxpayer owned by domestic taxpayer and overseas taxpayer in the form of permanent business, the taxpayer must have information letter on fiscal issued by the Directorate General of Taxes, in accordance with the provision regulating the procedure on the grant of information letter of fiscal.

Application for Facilities shall be submitted by the taxpayer to the front officer of One-Door Integrated Service (“PTSP”) Center at Coordinating Investment Board Head Office (“BKPM”) by supplying the following documents:

a.Application letter signed over duty stamp by the management of taxpayer;

b.Principle License/Investment License and its amendment issued by BKPM or PTSP of Province;

c.Copy of deed of establishment and its amendment supported by approval from the Minister of Law and Human Rights or the District Court;

d.Copy of taxpayer’s tax registration number (NPWP);

e.Study on compliance with the criteria of pioneer industry;

f.Original statement letter of commitment to deposit fund in a bank in Indonesia;

g.Information letter of fiscal for the taxpayer;

h.Clarification of source of fund of the company, supported by the required documents;

i.Clarification of compliance with the provision on comparative amount between debt and capital as referred to Minister of Finance Regulation on comparative amount between the company’s debt and capital for the purpose of Income Tax calculation; and

j.Power of attorney duly stamped if the application is not processed directly by the management of taxpayer.

PTSP Center will first clarify the Facilities application documents, with the following conditions:

a.If the Principle License /Investment License is issued by BKPM, clarification must be made in the presence of the taxpayer

b.If Principle License is issued by the BKPM and PTSP of Province, clarification must be made in the presence of the taxpayer and representative of the BKPM and PTSP of Province

If in the phase of clarification of application documents, the application is stated as complete and correct, a receipt will be issued.

As follow-up action to the clarification on compliance with the requirements thereof meeting on technical clarification will be held attended by the representative of the ministry of technical matter, the Ministry of Finance, experts, academics and association according to the field of business which facilities is requested for.

Based on the clarification on compliance with the requirements and the meeting on technical clarification, a meeting on decision making will be held whether to accept or reject the application

The result of clarification on compliance with the requirements, meeting of technical clarification, and meeting of decision making respectively must be made in minutes signed by all participants at the meeting.

If the application is accepted, the Head of BKPM will make a proposal for granting Facilities. Nonetheless, if the application is rejected, the Head of BKPM shall make the rejection letter.

Time Period

Period for clarification process to the issueance of proposal either to accept or reject the application is 25 (twenty-five) business days since the the date of application receipt. If during the process of technical clarification there is any shortcoming of documents but it has not been completed by the taxpayer until the deadline as stated in the minutes of the technical clarification of the obligatory taxpayer, the applied Facilities will be returned to the taxpayer.

  • If you require further information, please feel free to contact us at query@lekslawyer.com

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