Posted on 24 Apr 2015
Govt offers lax tax to woo investors
The government has issued a new set
of tax allowances to attract more sizeable investments into Southeast Asia’s
largest economy.
Government Regulation (PP) No. 18/2015, signed by President Joko “Jokowi”
Widodo early this month, stipulates that any firms that have made significantly
valuable investments, intend to export their manufacturing output, have hired a
high number of workers, or used a large amount of local content are eligible to
obtain the tax incentives starting in early May.
“Investors who can fulfill one of the criteria will have the chance to benefit
from these tax allowances,” said Investment Coordinating Board (BKPM)
deregulation director Yuliot.
Similar to the previous stipulation in PP No. 5/2011, investors may obtain a
reduction of taxable income of up to 30 percent of their total investments
applied over six years. They can also receive accelerated depreciation and
amortization, imposition of income tax up to 10 percent for offshore taxpayers
and an extension of forward losses from five to 10 years.
According to Yuliot, another two-year extension of forward losses will be
awarded to firms willing to reinvest their after-tax earnings for business
expansion in the country, an incentive aimed to help prop up the depreciating
rupiah,
The new rule also expands the provision of the tax allowances from 129 business
sectors to 144. The new sectors include the shipbuilding and marine industries,
mineral processing and tourism.
Yuliot further said that applications for the facilities must be submitted to
the BKPM and they would undergo a selection process involving three parties:
the investment body, the Finance Ministry and related ministries, such as the
Industry Ministry, the Agriculture Ministry and the Maritime Affairs and
Fisheries Ministry.
The whole process until approval from the Finance Ministry would take no longer
than 28 days, he added.
The changes in the tax allowance provision is set to help the government meet
its target to generate direct investments totaling Rp 3.5 quadrillion
(US$270.19 billion) by 2019, more than double the figure recorded during the
2009 to 2014 period.
For this year, it expects to draw in Rp 519.5 trillion in investments, up 14
percent from last year. Investments, the second largest contributor of growth
in Indonesia, will be crucial to drive economic expansion throughout this year
amid continuing weak exports.
Business players have welcomed the new incentives, saying that the arrangement
offers more flexibility and may thereby allow many more firms to enjoy their
benefits.
Indonesian Textile Association (API) chairman Ade Sudrajat said that the fiscal
incentives would meet the government’s goals both to create jobs and collect
higher amounts of foreign exchange reserves through exports.
“Although the tax reduction will not be very significant, it still helps
relieve the burden of business players to a certain extent,” he said.
Ade added that the government would need to apply the tax cut through the
simplest method to allure firms to apply.
Echoing a similar view, Indonesian Furniture Entrepreneurs Association
(Asmindo) chairman Taufik Gani said that the new rule would enable furniture
firms, which ship a lot of their output overseas and use much locally produced
raw materials, to get the incentives.
“We do appreciate the new tax allowances and are optimistic new investments in
the sector will come,” he said.
The
government has issued a new set of tax allowances to attract more
sizeable investments into Southeast Asia’s largest economy.
Government
Regulation (PP) No. 18/2015, signed by President Joko “Jokowi” Widodo
early this month, stipulates that any firms that have made significantly
valuable investments, intend to export their manufacturing output, have
hired a high number of workers, or used a large amount of local content
are eligible to obtain the tax incentives starting in early May.
“Investors
who can fulfill one of the criteria will have the chance to benefit
from these tax allowances,” said Investment Coordinating Board (BKPM)
deregulation director Yuliot.
Similar to the previous stipulation
in PP No. 5/2011, investors may obtain a reduction of taxable income of
up to 30 percent of their total investments applied over six years.
They can also receive accelerated depreciation and amortization,
imposition of income tax up to 10 percent for offshore taxpayers and an
extension of forward losses from five to 10 years.
According to
Yuliot, another two-year extension of forward losses will be awarded to
firms willing to reinvest their after-tax earnings for business
expansion in the country, an incentive aimed to help prop up the
depreciating rupiah,
The new rule also expands the provision of
the tax allowances from 129 business sectors to 144. The new sectors
include the shipbuilding and marine industries, mineral processing and
tourism.
Yuliot further said that applications for the
facilities must be submitted to the BKPM and they would undergo a
selection process involving three parties: the investment body, the
Finance Ministry and related ministries, such as the Industry Ministry,
the Agriculture Ministry and the Maritime Affairs and Fisheries
Ministry.
The whole process until approval from the Finance Ministry would take no longer than 28 days, he added.
The
changes in the tax allowance provision is set to help the government
meet its target to generate direct investments totaling Rp 3.5
quadrillion (US$270.19 billion) by 2019, more than double the figure
recorded during the 2009 to 2014 period.
For this year, it
expects to draw in Rp 519.5 trillion in investments, up 14 percent from
last year. Investments, the second largest contributor of growth in
Indonesia, will be crucial to drive economic expansion throughout this
year amid continuing weak exports.
Business players have welcomed
the new incentives, saying that the arrangement offers more flexibility
and may thereby allow many more firms to enjoy their benefits.
Indonesian
Textile Association (API) chairman Ade Sudrajat said that the fiscal
incentives would meet the government’s goals both to create jobs and
collect higher amounts of foreign exchange reserves through exports.
“Although
the tax reduction will not be very significant, it still helps relieve
the burden of business players to a certain extent,” he said.
Ade added that the government would need to apply the tax cut through the simplest method to allure firms to apply.
Echoing
a similar view, Indonesian Furniture Entrepreneurs Association
(Asmindo) chairman Taufik Gani said that the new rule would enable
furniture firms, which ship a lot of their output overseas and use much
locally produced raw materials, to get the incentives.
“We do
appreciate the new tax allowances and are optimistic new investments in
the sector will come,” he said. - See more at:
http://www.thejakartapost.com/news/2015/04/24/govt-offers-lax-tax-woo-investors.html#sthash.hxMzArmJ.dpuf
