There is a wide range of attractive tax incentives in Indonesia:
Double tax relief
– Credit for WHT directly paid on income received or accrued in a foreign country. The credit is limited to the lesser of the tax payable in Indonesia on the foreign income or the amount of the foreign tax paid.
- Tax holiday
– Income tax reduction of between 10% and up to 100% are available for 5-15 years (might be extended up to 20 years).
– Industries eligible for tax holiday:
+ Upstream metal
+ Oil refinery
+ Organic basic chemicals based on oil and natural gas
+ Production of industrial machines
+ Processing based on agriculture, forestry and fisheries
+ Telecommunication, information and communication equipment
+ Maritime transportation
+ Processing industry that is the main industry in a Special Economic Zone
+ Economic infrastructure not included in the Governmental and Business project (KPBU) scheme.
- Tax allowance
– Total net income reduction of 30% of investment which is prorated at 5% per year for a six-year period
– Extension of tax loss carry forward period up to 10 years
– Reduction of WHT on dividends paid to non-residents to 10% (or a lower rate according to the applicable double taxable agreement)
– 145 business field eligible for tax allowance
- Direct tax incentives for new enterprises
– Tax exemption on the import of capital goods and raw materials
- Free trade zones and free port areas
– No import duties and other taxes on the import of goods
- Mergers and acquisitions
– Partial relief from 5% transfer of title tax on land and buildings, and a full relief from 2.5% income tax on the transfer of land and buildings
- Special economic zones (SEZ)
– Corporate income tax reduction granted to new tax payers with new capital invested in the production chain of main activities in a SEZ (reduction ranges from 20% to 100% for a period of 5-25 years)
- Import duty exemptions
– Import of machines, goods and materials for production exempt from import duty for a period of two years
– Import duty exemption is granted for two years based on the installed machine capacity for production purposes and can benefit from a one-year extension
– If the company uses at least 30% of local machines, import duty exemption is available for additional product for four years
– Imported machines, goods and raw materials can be exempt from import duty if:
+ Not produced locally
+ Local machines are available but do not meet requirements.
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