New tax measures announced<\/p>\n
JAKARTA (JP): The transfer of assets between two banks which
\nare in the process of merging has been exempted from capital
\ngains tax, under one of six new tax regulations announced by Tax
\nDirector General Fuad Bawazier yesterday.<\/p>\n
Faud said the exemption was designed to encourage smaller
\nbanks to merge with each other in order to strengthen their
\ncapital.<\/p>\n
The other five regulations cover the tax treatment of build,
\noperate, transfer (BOT) arrangements between land owners and
\ninvestors; equity participation of venture capital in small and
\nmedium-sized companies; and income from dividends and interest on
\nbonds.<\/p>\n
The tax director general said that, under the new regulations,
\nunaffiliated banks are permitted to merge with one another.<\/p>\n
Decree of the Minister of Finance No. 249\/KMK.04\/1995, which
\nwas issued on June 2, also eased bank merger requirements.<\/p>\n
\"Under the 1994 ruling on business mergers, only banks which
\nhad special relationships with one another could merge,\" Fuad
\nsaid while announcing the new regulations.<\/p>\n
The new ruling means that the transfer of assets from one bank
\nto other banks in the process of a merger process is exempted
\nfrom capital gains tax, even where the merging banks are not
\naffiliated.<\/p>\n
However, the requirement that there be a previously-existing
\nspecial relationship will remain in respect of companies outside
\nthe financial sector. Thus the transfer of assets from one non-
\nfinancial company to another will be exempted from capital gains
\ntax only when the merging companies are affiliated with one
\nanother and only when the merger is conducted in context of an
\ninitial public offering of shares.<\/p>\n
\"Despite tax incentives, banks still faced difficulties in
\nmerging under the old ruling because of the requirement of a
\nspecial relationship between the merging banks,\" Fuad said.<\/p>\n
He said he hoped the new rules would encourage smaller banks
\nto strengthen their capital by merging.<\/p>\n
\"If the merging banks are owned by different business groups,
\nso much the better,\" he added.<\/p>\n
BOT arrangements<\/p>\n
The new provision on the tax treatment of BOT arrangements
\nbetween land owners and investors is contained in Decree of the
\nMinister of Finance No. 248\/KMK.04\/1995, dated June 2.<\/p>\n
Faud said that the new regulation, specially designed to
\npromote BOT business deals in the country, allows investors to
\namortize all their investments on an annual basis during the BOT
\ncontract period.<\/p>\n
\"The most important element of this regulation is the
\nclarification that the transfer of land to the investor (under a
\nBOT contract) is not considered renting or leasing. It is,
\ntherefore, exempted from income tax,\" he said.<\/p>\n
He said that land owners were required to pay income tax after
\nthe term of the contract had been completed at a rate of five
\npercent of the gross value of the property transferred by the
\ninvestor.<\/p>\n
The revised tax treatment for capital ventures is contained in
\nDecree of the Minister of Finance No. 250\/KMK.04\/1995, which
\nstipulates, among other things, that the dividend income received
\nby venture capital companies from their equity participation in
\nsmall and medium-sized companies is exempted from income tax.<\/p>\n
The regulation defines small and medium-sized businesses as
\nthose with annual net sales turnovers of Rp 5 billion (US$2.2
\nmillion) or less.<\/p>\n
However, the regulation limits the equity ownership of venture
\ncapital companies in small and medium-sized enterprises to a
\nmaximum of 10 years.<\/p>\n
The regulation also requires venture capital companies to sell
\ntheir shares in listed companies within three years of the
\ninitial public offering.<\/p>\n
In a circular yesterday, Faud clarified that interest incomes
\nfrom bonds and dividend incomes from shares, whether listed on
\nthe capital market or not, were subject to income tax at the flat
\nrate of 15 percent of the gross amount.<\/p>\n
Another circular issued yesterday said that companies
\nintending to obtain the status of businesses operating in remote
\nareas could now apply for such status from the provincial office
\nof the tax directorate general, instead of from the tax director
\ngeneral, as was previously required.<\/p>\n
Companies classified as businesses operating in remote areas
\nare granted additional tax benefits. They are, for example,
\nallowed to deduct various allowances and perks granted in kind to
\ntheir employees from their taxable income. (hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/new-tax-measures-announced-1447893297",
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