Eight Companies with IDR 163.3 T Investment Get Tax Holiday

Jakarta - Minister of Finance Sri Mulyani Indrawati said there are already eight companies that have obtained tax holiday facilities for their investments in Indonesia. The total investment was IDR 161.3 trillion.

Ani mentioned the investors came from China, Hong Kong, Singapore, Japan, the Netherlands and Indonesia. The investment sectors are electricity projects, steel milling industries, basic iron and steel industries, and non-iron basic metal industries.

She explained the investor was proposing the tax holiday after the government issued the Minister of Finance Regulation No. 35 of 2018 on the Corporate Income Tax Reduction Facility in last April.

Ani emphasized that the granting of tax holiday shows the government’s efforts to attract investment had gone successfully. “We consider this number to be quite significant. We are indeed using this facility as a means of attracting investment to Indonesia,” Sri Mulyani explained in her office on Thursday (10/18).

Sri Mulyani said that the effectiveness was reflected from the previous tax holiday regulation before the government revised it. On the previous tax holiday implementation, the facility was not attractive to investors.

Although the government has provided the facility since 2011, only five companies have been granted the tax holiday. After that, the government issued tax holiday rules as stipulated in Minister of Finance Regulation (PMK) Number 159 in 2015 concerning the Corporate Income Tax Reduction Facility. Unfortunately, no company interested in using the tax holiday scheme after the regulation was issued.

However, Sri Mulyani explained that changes in the newest version of tax holiday regulations which was launched six months ago were very radical. The government equalize 100 percent reduction of all the income tax (Pph), without exception. It could be given for investments worth IDR 500 billion in 17 pioneer sectors. This regulation is easier than before, where the income tax reduction ranges from 10 percent to 100 percent and can only be given if the investment value is greater than IDR 1 trillion in eight sectors.

“Besides, we also provide tax holidays directly without specific assessment. This is a quite radical change, considering the simplification is carried out optimally,” she added.

Meanwhile, Head of the Ministry of Finance’s Fiscal Policy Agency (BKF) Suahasil Nazara said the government would soon revise the tax holiday regulations. Because, there is an aspiration that investment with a value below IDR 500 billion could get this facility.

“We will see, does it need more expansion? Should we lower the provisions on the investment value limit? The Coordinating Minister for Economic Affairs, Ministry of Finance, and related ministries will discuss more thoroughly later,” he explained.

The tax holiday regulation is based on Law (UU) Number 25 in 2007 concerning Investment. Article 18 paragraph 5 stated that the government can provide income tax (PPh) exemptions or deductions in a certain amount and time and can only be given for new investments in the pioneer industries.

The Indonesia Investment Coordinating Board (BKPM) data in the first semester of 2018 showed the realization of direct investment has reached IDR 361.6 trillion or 42.9 percent from this year’s target of IDR 765 trillion. From that number, Foreign Direct Investment (PMA) reached IDR 477.4 trillion and Domestic Direct Investment (PMDN) at IDR 277.6 trillion.

*adapted from CNN Indonesia (https://www.cnnindonesia.com/ekonomi/20181018141207-532-339512/delapan-perusahaan-berinvestasi-rp1613-t-dapat-tax-holiday)