Tax incentives offered to new investors
Tax incentives offered to new investors
JAKARTA (JP): The Indonesian government is offering new
investors in pioneering industries income tax holidays of up to
eight years in a new bid to boost investment in the country.
The additional tax facilities are laid out in Presidential
Decree No.7/1999 and take immediate effect.
They apply to 22 categories of industry, including textiles,
chemicals, pharmaceuticals, steel, seamless pipes, turbine
engines, automotive components, machine tools, processing
machines, heavy machinery components, oil refineries, electronics
components, information technology, instrumentation equipment and
oil and mining equipment.
New investments in the 22 industries located in Java and Bali
will receive a three-year tax holiday, while investments located
elsewhere in the country will receive a five-year tax holiday.
An additional one-year tax exemption is available to projects
which employ a minimum of 2,000 workers and a second one-year tax
break is available for ventures which are at last 20 percent
owned by cooperatives. Both conditions must be met at the start
of commercial operations.
A third one-year tax break can be obtained by projects worth
US$200 million and over, not including land and buildings.
Losses incurred during the period of tax relief cannot be
deducted from taxable profits after the facility ends.
Unlike tax exemptions offered by the Soeharto administration,
which were granted directly by the president to individual
ventures on a case-by-case basis, all new investors in the 22
industries stand to gain from the new facilities on offer.
The decree states that tax exemption shall begin at the start
of commercial operations, or five years after the project is
licensed, which ever comes first.
If a project begins operating in less than five years after
being licensed, time remaining within the five-year construction
period can be added onto the period of tax exemption.
If construction exceeds five years, the tax holiday will be
shortened by the extra time spent on construction.
The state minister of investment/chairman of the Investment
Coordinating Board (BKPM) has the authority to grant tax breaks
to domestic and foreign investment projects licensed by BKPM.
Tax holidays for domestic investment projects licensed by
agencies other than BKPM are awarded at the discretion of the
minister of finance.
The decree stipulates that tax exemptions should be awarded on
the basis of recommendations made by the Team for the Assessment
of Tax Incentives for Certain Industries.
Categories of chemical and pharmaceutical industries entitled
to the new exemptions includes olefins and aromatics, phenol,
butadiene, caprolactam, polycarbonate resin, methyl tertiary
butyl, phenacetine, antibiotics, antipyrene and aminopyridine.
Only oil refineries outside Java and Bali are entitled to the
tax breaks. (das)