Page 7 - Newsletter (Taxation Provisions on Imports of Consigned Goods & the Simplification of Customs Registration)

DDTC Newsletter Vol.03 | No.02 I January 2020 Page 7 of 9

Taxation Provisions on Imports of Consigned Goods &
the Simplification of Customs Registration

Enacted on 31 December 2019, this regulation is to take as of the promulgation date shall be given through a
effect 60 days since its promulgation and concurrently Minister of Finance Decree. However, if the contract is in
revokes Minister of Finance Regulation Number 20/ the form of a production sharing contract with the period
PMK.05/2005 and Minister of Finance Regulation of less than 12 months, the exemption shall be valid until
Number 177/PMK.011/2007. the expiration of the contract.

Import duty exemption for upstream oil and gas business In the event that the project has reached the level of
activities is provided with the following six requirements. return on investment economically, the granting of the
First, the contract is a production sharing contract signed tax facilities is valid until the recommended date of the
prior to the enactment of Law Number 22 Year 2001 revocation of the import duty exemption on imports for
about Oil-Gas and Geothermal (Law 22/2001). Second, the exploitation stage. Moreover, 12-month exemptions
the contract is a production sharing contract signed shall be provided for the commercial production of gross
split profit-sharing contracts.
after the enactment of Law 22/2001 and prior to the
enactment of Government Regulation Number 79 Year Import Duty Exemptions on Imports
2010 concerning Refundable Operating Costs and Income
for Geothermal Business Activities
Tax Treatment for the Upstream Oil and Gas Business
Sectors (Gov Reg. 79/2010)
The Ministry of Finance has recently issued Minister
Third, the contract is a production sharing contract of Finance Regulation Number 218/PMK.04/2019
signed after the enactment of Gov Reg. 79/2010. Fourth, concerning the Exemption and/or Non-Imposition
the contract is a production sharing contract signed after of Import Duty on Imports of Goods for Geothermal
the enactment of Government Regulation Number 27 Business Activities (MoF Reg. 218/2019). Enacted on
Year 2017 concerning the Amendment of Government 31 December 2019, this regulation will come into force
Regulation Number 79 Year 2010 concerning Refundable 60 days as of its promulgation date. The issuance of this
Operating Costs and Income Tax Treatment for the regulation concurrently revokes Minister of Finance
Upstream Oil and Gas Business Sectors (Gov Reg. Regulation Number 78/PMK.010/2005 and Minister of
27/2017). Fifth, the contract is a gross split profit-sharing Finance Regulation Number 177/PMK.011/2007.
contract. Sixth, the contract has not been adjusted to Gov
Reg. 27/2017. This import duty exemption on imports for geothermal
business activities itself is aimed to increase the
The import duty exemption and non-taxation on imports production of national geothermal. The exemptions
are provided at two stages, namely exploration and are provided for geothermal business activities in the
exploitation. The importers entitled to such facilities form of indirect use including preliminary survey and
are contractors and suppliers (vendors) and provided exploration assignment (Penugasan Survei Pendahuluan
for contractors in the form of business entities or dan Eksplorasi/PSPE), exploration, exploitation, and
permanent establishments engaged in contracts with utilization. The import duty exemptions include anti-
work units that are responsible for the management of dumping import duties, countervailing import duties,
upstream oil and gas business activities or state-owned safeguard import duties, and discriminatory import
companies engaged in oil and gas energy. The import duties.
duty exemptions include for anti-dumping import duties,
countervailing import duties, safeguard import duties, Three types of goods are entitled to this fiscal facility,
and discriminatory import duties. namely goods that cannot be produced domestically,
goods that are already produced domestically but have
Three types of goods are entitled to import duty not met the required specifications, or goods that are
exemptions. First, goods that cannot be produced already produced domestically but with an insufficient
domestically. Second, goods that are already produced quantity to meet industrial needs. The parties to
domestically but have not met the required specifications. receive this tax facility are the Joint Operation Contract
Third, the goods are already produced domestically but Contractor (Kontraktor Kontrak Operasi Bersama/KKOB)
with an insufficient quantity to meet industrial needs. and business entities. To take advantage of the exemption
facility, a KKOB or business entity is required to submit
To obtain exemptions, the contractor or suppliers of an application to the Minister through the head of the
goods must first submit an application to the Head of DGCE regional office.
the Regional Office or Head of Prime Customs and Excise
Office who oversees the work area. If the application is If the application is accepted, the import duty exemption
accepted, an exemption for a maximum of 12 months may be utilized for 12 months as of the promulgation