Requirements for Tax Holiday Application: Minimum Investment of IDR 1 Trillion

The Investment Coordinating Board (BKPM) has issued a mechanism for applying for tax relief, commonly known as a tax holiday. The procedure is regulated in BKPM Chairman Regulation No. 13 of 2015 concerning the Procedure for Applying for Corporate Income Tax Reduction Facilities, which was enacted on 7 September 2015. This regulation explains the process and mechanism for submitting a tax holiday application. The application for tax relief must first obtain approval from the Head of BKPM, Franky Sibarani. As stated in Article 5 of Minister of Finance Regulation No. 159/PMK.010/2015 concerning the Provision of Corporate Income Tax Reduction Facilities, the proposal for granting a tax holiday facility is a proposal from the Head of BKPM addressed to the Minister of Finance as consideration for discussion at the Verification Committee. Since the regulation was issued, we have continuously coordinated with relevant ministries to obtain input on the application mechanism and requirements for the tax holiday. The Deputy for Investment Services, Lestari Indah, explained that taxpayers applying for the relief must meet the criteria set out in PMK No. 159/PMK.10/2015. One of the requirements is a minimum investment plan of IDR 1 trillion, or IDR 500 billion for the telecommunications, information, and communication sector, and they must meet the requirements for introducing high technology. Taxpayers must submit application documents to the Central PTSP Front Officer at BKPM. The process then involves a clarification meeting attended by the taxpayer. This is followed by a technical clarification meeting attended by representatives from relevant technical ministries, the Ministry of Finance, experts, academics, and associations related to the business sector for which the facility is being applied. The next stage is a Decision-Making Meeting to accept or reject the application. The timeframe for the clarification process up to the issuance of the acceptance/rejection proposal is 65 working days from the date the receipt is issued. When this regulation comes into force, tax holiday facility applications that were received before the regulation’s enactment will be processed based on this regulation. Investors whose tax holiday facility proposals are rejected may be granted Income Tax facilities for investment in certain business fields and/or in certain regions, provided they meet the requirements stipulated in Government Regulation No. 18 of 2015 and its implementing regulations within the Minister of Finance Regulation on Tax Holidays. These include nine pioneer industries eligible for corporate income tax reduction, such as upstream metal industry, petroleum refining industry, basic organic chemical industry sourced from oil and natural gas, machinery industry producing industrial machinery, processing industry based on agricultural, forestry, and fishery products, telecommunications, information and communication, marine transportation industry, processing industry which is the main industry in Special Economic Zones, and economic infrastructure other than those using the Public-Private Partnership scheme.