Background
On 22 April 2016, Government of the Republic of Indonesia has Government Regulation Number 9 of 2016 on Amendment of Government Regulation Number 18 of 2015 on Income Tax Facilities on Capital Investment of Particular Business Fields and/or in Particular Regions (“GR No. 9/2016”).
This GR No. 9/2016 was enacted in order to (a) increase economic growth, equal development and accelerated development of particular business fields and/or in particular regions, and (b) accelerate and achieve the target of creating job opportunity for two million people as set forth in National 2015-2019 Medium Term Development Program, by boosting investment improvement on labour-intensive industries.
Income Tax Facilities Provisions
There are no changes on the provisions of income tax facilities that are provided by the government. Change lies in the scope of particular business fields and/or in particular regions that are given income tax facilities, as listed in Attachment-1 and Attachment-2 of GR No. 18/2015.
The income tax facilities as referred above are as follows:
- deduction from taxable income of 30% (thirty percent) of the amount of capital investment, in tangible fixed assets including land used for a main business activity, over a 6 (six) year period, or 5% (five percent) per year, starting from the time of commercial production;
- accelerated depreciation of tangible assets and accelerated amortization of intangible assets obtained in the context of new capital investment and/or business expansion;
- imposition of income tax on dividends paid to foreign taxpayers other than permanent establishments in Indonesia amounted to 10% (ten percent), or a lower rate based on applicable double taxation avoidance agreements; and
- compensation for losses that are longer than 5 (five) years but no more than 10 (ten) years.
Attachment-1
The change that can be found in Attachment-1 is the addition of particular business fields that receive income tax facilities. The intended particular business fields among others as follows:
| Business Field | KBLI Year 2009,Third Printing | Product Coverage | Requirement |
|---|---|---|---|
| Apparels made from Textile Industry | 14111 | All the products coverage included in this KBLI. | None |
| Apparels made from Leather Industry | 14112 | All the products coverage included in this KBLI. | None |
| Daily Shoes Industry | 15201 | All the products coverage included in this KBLI. | None |
| Sports Shoes Industry | 15202 | All the products coverage included in this KBLI. | None |
| Shoes for Industrial-purposes Industry | 15203 | All the products coverage included in this KBLI. | None |
Attachment-2
In the previous government regulation (GR No. 18/2015), the capital investment of Daily Shoes Industry, Sports Shoes Industry, and Shoes for Industrial-purposes Industry can be carried out in all provinces in Indonesia except DKI Jakarta, West Java and Banten, but in the GR No. 9/2016, those capital investments can be carried out in all provinces in Indonesia without exception.
Rahmaddiar Ibrahim, S.H.
