Page 4 - 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 4 of 13

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

taxpayer obtains a score of ≥80, the taxpayer may substitutes, the ability of businesses to employ large
apply for a tax holiday. The calculation format and numbers of workers, investment locations, use of eco-
examples of the completion of the quantitative criteria friendly technology, as well as the production base.
score are listed in appendix B of MoF Reg. 130/2020.
In addition, MoF Reg. 130/2020 outlines the provisions
If taxpayers that are not included in the pioneer on the granting of tax holidays for taxpayers that
industry have met the required conditions, they may have been assigned by the government to accelerate
continue their tax holiday application online through national strategic projects. This regulation states that
the OSS system. The application shall be submitted by taxpayers that are assigned to accelerate national
uploading 4 documents, including: strategic projects may apply for tax holidays and
receive certain treatment insofar as they meet the
(i) digital copies of details of fixed assets in the
provisions under Article 3 or Article 5 of MoF Reg. No.
investment value plan;
130/2020.
(ii) digital copies or electronic documents of the Certain treatment given to taxpayers that implement
shareholders’ fiscal certificates; the acceleration of national strategic projects
includes, among others, first, being exempted from
(iii) digital copies of assessments on compliance
the obligation to submit a tax holiday application
with Pioneer Industry criteria; and
before the commencement of commercial production.
(iv) a digital copy of the self-calculation of the Pioneer Second, the application can be performed together
Industry’s quantitative criteria as referred to with the registration of a Business Identification
in paragraph (2) subparagraph b according Number (Nomor Induk Berusaha/NIB) or no later than
to the format contained in Appendix B of MoF 1 year after the issuance of a new investment business
Reg. 130/2020. The digital copy of the self- license.
calculation of the pioneer industry quantitative
Third, the investment value that determines
criteria shall be treated as a statement of the
the period of the tax holiday is the investment
Taxpayer’s commitment to fulfilling the Pioneer
value when the taxpayer has realized all of the
Industry criteria.
investment plans. Fourth, tax holidays begin to be
Based on the taxpayer’s application, the Head of used by taxpayers when commercial production
BKPM shall assess the calculation of the score for the has commenced and the entire investment plan is
fulfillment of the pioneer industry quantitative criteria realized.
within a maximum period of five working days after
the application is received in full. Further, MoF Reg. 130/2020 emphasizes that if the
implementation of government assignments is carried
In the event that the results of the Head of BKPM’s out with a spin-off scheme, the investment entitled to
assessments on the taxpayer’s pioneer industry a tax holiday includes all the value of the investment
quantitative criteria obtain a minimum score of 80, the resulting from the spin-off and new investment. If
taxpayer’s investment is declared to meet the criteria the value of the new investment is greater than the
as a pioneer industry. The taxpayer’s application investment resulting from the spin-off, the period for
for investments declared to meet these criteria is the granting of the tax holiday is based on the entire
subsequently processed by the Head of BKPM as a value of the investment, both new investments and
proposal for the granting of tax holidays. The tax that resulting from the spin-off.
holiday application process will continue to be notified
to taxpayers through the OSS system. Conversely, if the investment resulting from the spin-
off is greater than the new investment, the period of
This regulation, however, emphasizes that the Director the granting of the tax holiday is based on the value of
General of Taxes has the authority to reassess some of the new investment. Provisions on the granting of tax
the pioneer industry quantitative criteria during field holidays for taxpayers implementing the acceleration
audits based on the taxpayer’s application for the use of national strategic projects with a spin-off scheme
of the tax holiday facilities. were not included in the former regulation.

Of the 11 pioneer industry quantitative criteria, six Through MoF Reg. 130/2020, the authority to grant
criteria may be reassessed by the Director General of tax holiday facilities is officially delegated from the
Taxes, i.e. the use of main raw materials from within Director General of Taxes for and on behalf of the
the country, the ability of products to serve as import Minister of Finance to the Head of BKPM. Moreover,