Page 2 - Newsletter (Recent Regulations on Tax Holiday Incentives and Super Tax Deduction for R&D Activities)

DDTC Newsletter Vol.04 | No.08 I October 2020 Page 2 of 13

Recent Regulations on Tax Holiday Incentives and
Super Tax Deduction for R&D Activities

Changes to the Provisions on Tax There are, however, changes related to the criteria for
Holiday corporate taxpayers that are entitled to tax holidays.
Currently, there are six criteria for a corporate taxpayer
to be entitled to tax holidays, as follows:
The government has revised provisions related to
the granting of tax holidays. The restipulation of
(i) is a pioneer industry;
the provisions on tax holidays is the government’s
effort to provide legal certainty and assist business (ii) has the status of an Indonesian legal entity;
development in pioneer industries. In addition, the
provisions have been changed to encourage ease of (iii) making new investments for which the
doing business for the pioneer industry by adjusting following has never been issued:
the mechanisms for the granting of and applying for
a. a decree on the granting or notification
tax holiday facilities..
regarding the rejection of Corporate Income
The amendments to the provisions on the granting Tax reduction;
of tax holidays for pioneer industries are outlined
b. a decree on the granting of Income Tax
in the Minister of Finance Regulation No. 130/
facilities for investments in certain business
PMK.010/2020 concerning the Granting of Corporate
sectors and/or in certain areas based on
Income Tax Reduction Facilities (MoF Reg. 130/2020).
Article 31A of the Income Tax Law;
Promulgated on 24 September 2020, this regulation
comes into force 15 days thereafter. The enactment c. a notification regarding the granting of net
of this regulation simultaneously revokes the former income reduction for the new investments
regulation, i.e. the Minister of Finance Regulation or expansion of business in certain business
No.150/PMK.010/2018 concerning the Granting of sectors that are labour-intensive industries
Corporate Income Tax Reduction Facilities (MoF Reg. based on Article 29A of the Government
150/2018). Regulation concerning the calculation of
taxable income and payment of Income Tax
Similar to the former regulation, corporate taxpayers
in the current year; and
that perform new investments of at least IDR 100
billion in pioneer industries are entitled to a corporate d. a decree on the granting of Income Tax
income tax reduction on income received or earned facilities in Special Economic Zones (Kawasan
from the main business. The provisions on the amount Ekonomi Khusus/KEK) based on the
of corporate income tax reduction remain the same as Government Regulation concerning Facilities
the former regulation, as briefly summarized in Table and Ease in Special Economic Zones;
1.1.

Table 1.1 The Amount of Corporate Income Tax Reduction for Investments in Pioneer Industries

No Amount of Tax Holiday Tax Holiday Period Value of New Investment Plan

1 100% 5 tax years at least IDR 500 billion and less than IDR 1 triliun
7 tax years at least IDR 1 triliun and less than IDR 5 triliun
10 tax years at least IDR 5 triliun and less than IDR 15 triliun
15 tax years at least IDR 15 triliun and less than IDR 30 triliun
20 tax years at least IDR 30 triliun
After the period of the granting of the tax holiday as referred to in point 1 ends, the taxpayer is granted a corporate income tax
reduction by 50% of the corporate income tax payable for the next 2 tax years.
2 50% of the Corporate Income Tax 5 tax years at least IDR 100 billion and at most less than IDR 500
payable billion
After the period of the granting of the tax holiday as referred to in point 2 ends, 25% of the corporate income tax payable for the
next 2 tax years.
Source: MoF Reg. 130/2020, processed by the Author.