Page 7 - Newsletter (The Terms of Service of The DGT and Tax Court Temporary Suspension in Response to COVID-19)

DDTC Newsletter Vol.03 | No.06 I March 2020 Page 7 of 8

The Terms of Service of The DGT and Tax Court

Temporary Suspension in Response to COVID-19

Changes in Goods Classification and
The labour-intensive industrial sectors that are entitled
Stipulation of Import Duties for the
to the investment allowance facility are listed in Table 2.
Means of Transport Industry
Tax facilities for tangible fixed assets including land will
be provided if three conditions are met. First, the assets
are acquired by taxpayers in new condition, except if the The Minister of Finance has released a regulation
acquisition is a complete relocation as one package of concerning amendments in import regulations, the
investment from another country. classification system of goods, and the imposition of
import duties on the means of transport industry. The
Second, listed in principle permit, investment permit,
amendments are aimed at attracting investments and
capital investment registration, which has been issued by
supporting the development of motor vehicle production.
Indonesian Investment Coordinating Board or Provincial
Department of Investment and Integrated One Stop The amendments to the provisions on imports,
Services or Regency/City Department of Investment and classification, and imposition of import duties are
Integrated One Stop Services or business permit issued outlined in the Minister of Finance Regulation Number
by Online Single Submission Institution (OSS) as the 17/PMK.010/2020 concerning the Third Amendment
basis for income tax facility provision. Third, owned and to the Minister of Finance Regulation Number 6/
used for main business activities. PMK.010/2017 concerning the Stipulation of Goods
Classification System and Imposition of Import Duty
On the other hand, tangible fixed assets other than
Tariff upon Imported Goods (MoF Reg. No.17/2020).
land must meet these three conditions and be acquired
after the principle permit, investment permit, capital Through the regulation promulgated on 11 March 2020,
investment registration, and/or business permit are the Minister of Finance has amended the notes of Chapter
issued by the OSS Institution. 98 regarding Special Provisions listed in Attachment
II of the Minister of Finance Regulation Number 6/
The regulation emphasizes that tangible fixed assets
PMK.010/2017 concerning the Stipulation of Goods
eligible for income tax facilities in the form of a net income
Classification System and Imposition of Import Duty
reduction of 60% of the total investment are prohibited
Tariff upon Imported Goods (MoF Reg. No.6/2017)
from being used other than for the purpose of providing
facilities. Further, this facility will also be revoked if the Under MoF Reg. No.17/2020, the title of Chapter 98 of MoF
tangible fixed assets are transferred before the end of the Reg. No. 6/2017 has been amended to Special Provisions
6 year period. for the Means of Transport Industry. Under the previous
regulation, Chapter 98 outlined the provisions on the
The prohibition, however, is excluded if the tangible
imports of goods under HS codes 98.01, 98.02 and 98.03.
fixed assets entitled to the investment allowance
In contrast, Chapter 98 of the new regulation outlines the
facilities are replaced with new tangible fixed assets. The
provisions on the import of goods under HS codes 98.01
replacement of tangible fixed assets must fulfil a number
and 98.02. This also implies that the provisions for HS
of requirements.
code 98.03 still refer to the old regulation.
First, the value as the basis for the income tax facility is
In this current regulation, imported goods under HS code
the lower value between the value of the tangible fixed
98.01 are defined as goods in the form of incompletely
assets that are to be replaced with replacement tangible
knocked down motor vehicles or chassis with
fixed asset values.
incompletely knocked down machines. Furthermore,
Second, if the acquisition value of replacement tangible motor vehicles under HS code 98.01 also include vehicles
fixed assets is lower than the acquisition value of the with subheadings 8701.20, 87.02, 87.03, and 87.04.
replacement tangible fixed assets, the income tax facility
The term ‘Completely Knocked Down’ in Subheading
may be utilized until the end of the remaining utilization
8701.20, HS code 87.02, 87.03, and 87.04 only applies
period with the acquisition value of replacement tangible
to vehicles approved by an official appointed by the
fixed assets. On the other hand, if the acquisition value of
Minister in charge of the industry and vehicles that meet
the replacement tangible fixed assets is higher than the
the requirements stipulated in Minister of Industry
acquisition value of the replaced tangible fixed assets, the
Regulation No. 5 of 2018 concerning Amendment to
income tax facility may be utilized until the expiration
the Minister of Industry Regulation Number 34/MIND/
of the remaining utilization period with the acquisition
PER/9/2017 concerning Four-Wheeled or More Motor
value of the replaced tangible fixed assets.
Vehicles Industry (Permenperin No.5/2018).
Third, taxpayers are obliged to submit written notification
In further detail, Chapter 98 in MoF Reg. No.17/2020 sets
to the Director General of Taxes prior to exchanging
forth that the goods under HS code 98.01 only include
tangible fixed assets. Taxpayers that have received other
motor vehicles that meet the following three criteria:
tax incentives such as tax allowance, tax holidays, and
income tax facilities in special economic zones (kawasan a. imported by four-wheeled or more motor vehicle
ekonomi khusus/KEK) are no longer eligible for these manufacturing companies;
facilities.