Page 4 - Newsletter (Latest Provisions on Indonesia’s Tax Allowance)

DDTC Newsletter Vol.03 | No.04 I February 2020 Page 4 of 6

Latest Provisions on Indonesia's Tax Allowance

and/or documents from the relevant authorities/ in Attachment of Gov. Reg. No. 78/2019. To obtain such a
agencies. facility, the taxpayer must submit an application through
Online Single System (OSS).
Further, the regulation emphasizes that a foreign marine
transport company may obtain exemptions in the event There are four forms of tax allowances provided by the
that the company’s country of domicile provides the same government. First, a reduction in net income of 30% that
treatment to Indonesian marine transport vessels (the is calculated according to the total investment value for
principle of reciprocity). DGT Circular No. SE-4/PJ/2020
Table 1. Accelerated Depreciation of Tangible Assets
also lists 41 countries that exempt or do not impose VAT
on the services of Indonesian marine transport vessels Depreciation Rates by
within their territories. Method
Tangible Assets Group Useful Life Straight Declining
Foreign sea transportation companies domiciled in Line Balance
countries other than the 41 countries listed in the I Non-Building
circular may obtain this facility as well provided that Group I 2 years 50% 100%
there is a certificate from the Competent Authority Group II 4 years 25% 50%
(CA). The certificate must state the company’s country Group III 8 years 12.5% 25%
of domicile and affirm that the country also provides Group IV 10 years 10% 20%
Indonesian marine transport vessels with the same VAT
II Building
treatment. The Port Business Entity may subsequently
Permanent 10 years 10% -
use the document as evidence for all marine transport
Non-Permanent 5 years 20% -
companies that are in possession of the Certificate of
Domicile (COD) from the same country.
Additionally, in the event that the requirements of not Table 2. Accelerated Amortization of Intangible Assets
transporting and the principle of reciprocity are not met,
Amortization Rates by
the marine transport company is to pay the VAT payable Method
no later than one month as of the date the requirements Intangible Assets Group Useful Life Straight Declining
are not fulfilled. If the stipulated time period is exceeded, Line Balance
the Director General of Taxes will subsequently issue Group I 2 years 50% 100%*
the Notice of Tax Underpayment Assessment (Surat Group II 4 years 25% 50%
Ketetapan Pajak Kurang Bayar/SKPKB) plus penalties in Group III 8 years 12.5% 25%
accordance with taxation legislative provisions.
Group IV 10 years 10% 20%
Latest Tax Allowance Provisions *note: charged at a time.

main business activities in the form of tangible fixed
The government emphasizes the requirements and
assets including land for business activities for 6 years. In
procedures for replacing tangible fixed assets including
addition, the corporate income tax rate for these 6 years
land that are entitled to income tax facilities in the form of
will be charged at 5% per annum.
tax allowance. The provisions are outlined in the Minister
of Finance Regulation Number 11/PMK.010/2020 Second, accelerated depreciation of tangible fixed assets
concerning the Income Tax Treatment for Investment and accelerated amortization of intangible assets for
in Certain Business Fields and/or Certain Regions (MoF investment with varying useful lives, depreciation rates,
Reg. No. 11/2020). amortization rates according to the group of assets and
their useful lives. Details on these provisions are shown
This regulation is the implementing regulation of
in Table 1 and Table 2.
Government Regulation Number 78 of 2019 concerning
the Granting of Income Tax Facilities for Investments in Third, the imposition of income tax on dividends paid to
Certain Business Fields and/or Certain Regions (Gov. foreign taxpayers other than permanent establishments
Reg. No. 78/2019). The issuance of the government in Indonesia is set at the rate of 10% or a lower rate
regulation simultaneously revokes the Minister of according to the tax treaty in force. Fourth, the provision
Finance Regulation Number 89/PMK.01/2015 (MoF Reg. of additional time period for compensation for losses
No. 89/2015). that is longer than 5 years but not more than 10 years
with the conditions specified in the Table 3.
This income tax facility is provided for domestic corporate
taxpayers who invest in business activities in certain For tangible fixed assets including land, these assets must
business fields and certain regions. The list of taxpayers’ be obtained by taxpayers in a new condition unless they
business fields and regions entitled to this facility is listed are relocated, and stated in principle permit, investments,