Page 3 - 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 3 of 13

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

(iv) having a new investment plan of at least IDR 100 The most significant change in MoF Reg. 130/2020 is
billion; related to taxpayers whose business sectors are not
included in pioneer industries but wish to apply for a
(v) comply with the provisions on the ratio
tax holiday.
between debt and capital as referred to in the
Minister of Finance Regulation concerning the Currently, taxpayers that invest in business sectors
determination of the ratio between debt and that are not listed as pioneer industries as referred to
company capital for the purpose of calculating in Article 3 paragraph (2) of MoF Reg. 130/2020 may
Income Tax; and apply for a tax holiday if they meet the following three
criteria:
(vi) is committed to starting realizing the investment
plan no later than one year after the issuance of (i) the criteria referred to in Article 3 paragraph (1)
the decree on the tax holiday. subparagraph b to subparagraph f of MoF Reg.
130/2020;
The criterion of the commitment to starting realizing
the investment plan no later than one year after the (ii) the Pioneer Industry quantitative criteria score
tax holiday decree is issued is a new criterion that did at least reaches 80 (eighty); and
not exist before. Furthermore, MoF Reg. 130/2020
(iii) the requirements referred to in Article 3
does not change the scope of pioneer industries that
paragraph (4).
are entitled to tax holidays.
The pioneer industry quantitative score criterion
As such, the coverage of pioneer industries entitled
is a new criterion that did not exist in the former
to tax holidays remain the same as under MoF Reg.
regulation. In the former ministerial regulation, the
150/2018, i.e. 18 industrial sectors. Details of the
granting of the tax holiday facilities to investments
business fields and types of production of each pioneer
outside the list of pioneer industries was only possible
industry scope also remain based on the Indonesian
Investment Coordinating Board (Badan Koordinasi through inter-ministerial discussions. The score for
the pioneer industry quantitative criteria is calculated
Penanaman Modal/BKPM) Regulation.
based on the results of an assessment on pioneer
The compliance with the criteria of taxpayers entitled industries conducted by the taxpayer.
to tax holidays is determined online through the Online
Details of the pioneer industry quantitative criteria
Single Submission (OSS) system. The OSS system will
scores are listed in Appendix A of MoF Reg. 130/2020.
notify taxpayers if the new investment meets the
Based on the appendix, there are 4 groups of criteria,
criteria or does not meet the criteria for obtaining a
i.e. having broad linkages, having high added values/
tax holiday.
externalities, introducing new technologies, and
Taxpayers that are notified if they meet the tax holiday priority on the national industrial scale.
requirements may continue their application online
The four criteria groups are then re-segmented into
through the OSS system. This, however, is rather
11 criteria, each of which has a score and a score
different from the previous provisions, application
percentage. In further detail, 11 quantitative criteria
for tax holidays can now be submitted by uploading
for pioneer industries include filling the industrial
documents which include:
trees, use of main domestic raw materials, the ability
(i) digital copies of details of fixed assets in the of products to serve as import substitutes, and the
investment value plan; and number of similar companies in a region.
(ii) digital copies or electronic documents of the In addition, there are the criteria of the ability of
shareholders’ fiscal certificates. a business to employ a large number of workers,
investment locations, use of eco-friendly technologies,
Applications for tax holiday facilities that have use of new technologies in production equipment,
been received in full are to be submitted by the OSS
support for national strategic projects, production
system to the Minister of Finance as a proposal for
base, and contribution in building infrastructure
the granting of tax holidays, and the OSS system will
facilities independently.
send a notification to taxpayers that the tax holiday
application is in process. The result of the score for each criterion is multiplied
by the weight for each criterion then totaled. If the