Govt issues ruling on Batam tax exemption

The Jakarta Post, Jakarta

The government has issued a regulation to extend the time period for tax incentives on Batam island in Riau, which exempts companies on the island from value-added tax (VAT) and luxury tax.

Batam's mayor Nyat Kadir said on Friday that government regulation No.85/2001, which was signed on Dec. 31, 2001, gave Batam the incentive scheme until June 30 this year.

"With this, I hope investors will no longer have any doubts or worries," the mayor said.

The Ministry of Finance had earlier warned that it would reimpose VAT and luxury taxes on the island once the government decree expired on Dec. 31, 2001.

As a matter of fact, the government has planned to turn the island into a free trade zone, but the law on the scheme has not yet been completed.

The Ministry of Finance's plan, however, drew protests from various parties, including the island's investors and the Minister of Industry and Trade, who called on the finance ministry to extend the tax facilities for another six months.

The Ministry of Industry and Trade expects the bill on Batam's free trade status to be completed and passed into law within six months.

The mayor said he was optimistic that the bill on Batam's free trade status would be passed into law on time.

"The bill is still being discussed. Hopefully, the wishes of investors and the government can be realized soon," Nyat Kadir told The Jakarta Post.