New Tax Incentives to Create a Better Investment Climate in Indonesia
Head of the Finance Ministry's fiscal agency Bambang Brodjonegoro said that the Indonesian government is preparing tax incentives to spur foreign investments. The new regulation will extend the previous expired one and also provides new incentives that make investing in Indonesia more attractive. One possible change concerns the minimum value of investments. Currently, investments between IDR 1 trillion - 20 trillion receive the same benefits. However, this may be revised in such a way that the bigger the investment, the better the incentives.
Bambang also noted that the differences between tax holidays and tax allowances are currently not too significant. New regulations regarding tax incentives will be announced at the end of 2013 and will take effect in early 2014. These are also aimed to make a sharper distinction between tax holidays and tax allowances.
According to the current framework, foreign companies are eligible for a tax holiday (for the duration between five and ten years) when investments involve:
• an Indonesian legal entity
• a pioneering industry that provides high added-value, transfers high technology and is considered a strategic business for Indonesia's economy
• investments of at least IDR 1 trillion (USD $100 million) and store at least 10 percent of those funds in Indonesian banks
Tax allowance in the form of a 50 percent discount on income tax is valid for two years after the tax holiday.
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