Page 5 - Newsletter (Latest Provisions on Indonesia’s Tax Allowance)

DDTC Newsletter Vol.03 | No.04 I February 2020 Page 5 of 6

Latest Provisions on Indonesia's Tax Allowance

Table 3. Provisions on Compensation for Losses

Additional Period Terms and Condition
Addition of 1 year If investments are made in industrial zones and/or bonded zones.
Addition of 1 year If investments are made in the field of new and renewable energy.
Addition of 1 year If there is company expense for economic and/or social infrastructure in the business location
for a minimum of Rp10,000,000,000.
Addition of 1 year Using raw materials and/or components of domestic products of at least 70% in the 2nd
taxable year at the latest.
Addition of 1 year Employing at least 300 Indonesian workers for 4 consecutive years.
Addition of 2 year Employing at least 600 Indonesian workers for 4 consecutive years.
Addition of 2 year Paying the cost of domestic research and development to develop products or production
efficiency of at least 5% of the total investment in the period of 5 years.
Addition of 2 year Exporting at least 30% of the total value of sales for investments made outside the Bonded
Zone.

registrations, or issued business permit, and are owned the lower between the value of the replaced assets and
and used for main business activities (Kegiatan Usaha the replacement assets.
Utama/ KUU).
If the value of the replacement tangible fixed assets
In the context of there is a replacement of asset, tax is lower than the value of the assets replaced, this tax
allowance will be revoked if the tangible assets are allowance may be utilized until the end of the remaining
utilized not for the purposes of this facility or transferred. utilization period by using the value of the replacement
However, this revocation, will not be conducted if the tangible fixed assets as basis to calculate tax allowance.
assets are replaced with new tangible fixed assets before However, if the value of the replacement assets is
the expiry whichever longer than a period of 6 years from higher, the tax allowance may be utilized until the end
the commencement of commercial production or before of the remaining utilization period with the value of the
the end of the useful life of the assets. replaced tangible fixed assets as tax allowance basis.
MoF Reg No. 11/2020 also sets forth that if the In addition, the value of tangible fixed assets used as the
replacement of tangible fixed assets occurs prior to basis of depreciation is the acquisition value of the new
commercial production, the value of tangible fixed assets tangible fixed assets. The depreciation method used must
used as the basis of depreciation is the acquisition value be in accordance with the provisions of depreciation
of the new tangible fixed assets. The depreciation method stipulated in the Income Tax Law 2008. Before tangible
is adjusted to the provisions of Law Number 36 of 2008 fixed assets are replaced, taxpayers are to submit a
concerning Income Tax (Income Tax Law 2008). written statement to the Director General of Taxes. For
the replacement tangible fixed assets, however, the
If the replacement of tangible fixed assets occurs after
accelerated depreciation facility for the tangible fixed
the commencement of commercial production, the value
assets as outlined in MoF Reg. No. 11/2020 cannot be
of tangible fixed assets that serves as the basis of tax
provided.
allowance in the forms of 30% net income reduction is

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