Friday, October 1, 2010

Investment Guide in Indonesia (Taxation)


1. Import Duties

All investment projects of PMA as well as PMDN projects which are approved by the Investment Coordinating Board or by the Office of Investment in the respective districts, including existing PMA and PMDN companies expanding their projects to produce similar product(s) in excess of 30% of installed capacities or diversifying their products, will be granted the following facilities:

  1. Relief from import duty so that the final tariffs become 0 %. Import duty which are mentioned in the Indonesian Customs Tariff Book. (BTBMI). This is stipulated in the Ministry of Finance's Decree No. 176/PMK.011/2009 dated November 16, 2009 which is effective from December 2009.

  • On the importation of capital goods namely machinery, equipments, spare parts and auxiliary equipments for an import period of 2 (two) years, started from the date of stipulation of decisions on import duty relief.
  • On the importation of goods and materials or raw materials regardless of their types and composition, which are used as materials or components to produce finished goods or to produce services for the purpose of two years full production (accumulated production time).
  • However, the decree as above mentioned is not applied to the assembling of cars and motor bikes except for its component industries.
b. Exemption from Transfer of Ownership Fee for ship registration deed / certificate made for the first time in Indonesia.

2. Tax Facilities

The government has introduced a Tax Bill No's 16, 17, 18, 19 and 20 of 2000 and applied since January 1, 2001. Based on this tax law, the domestic and foreign investors will be granted tax allowances in certain sector and/or area as follows :
  • An Investment Tax Allowance in the form of taxable income reduction as much as 30 % of the realized investment spread in 6 (six) years.
  • Accelerated depreciation and amortization.
  • A Loss carried forward facility for period of no more than 10 (ten) years.
  • A 10 % income tax on dividends, and possibly being lower if stipulated in the provisions of an existing particular tax treaty.
b. The government has also introduced provisions No's 146 of 2000 of 2000 and 12 of 2001 on the importation and/or delivery of Selected Taxable Goods, and or the provision of Selected Taxable Services as well as the importation and or delivery of Selected Strategic Goods which are exempted from Value Added Tax.

3. Export Manufacturing

There are many incentives provided for exporting manufacture products. Some of these incentives are as follows;

  • Restitution (drawback) of import on the importation of goods and materials needed to manufacture the exported finished products.
  • Exemption from Value Added Tax and Sales Tax on Luxury goods and materials purchased domestically, to be used in the manufacturing of the exported products.
  • The company can import raw materials required regardless of the availability of comparable domestic products.
4. Bonded Zones

The industrial companies which are located in the bonded areas are provided with many incentives as follows;

  • Exemption from import duty, excise, income tax of Article 22, Value Added Tax on Luxury Goods on the importation of capital goods and equipment including raw materials for the production process.
  • Allowed to divert their products amounted to 50% of their export (in term of value) for the final products, and 100% of their exports (in term of value) for other than final products to the Indonesian customs area, through normal import procedure including payment of customs duties.
  • Allowed to sell scrap or waste to Indonesian custom area as long as it contains at the highest tolerance of 5% of the amount of the material used in the production process.
  • Allowed to lend their own machineries and equipments to their subcontractors located outside bonded zones for no longer than 2 (two) years in order to further process their own products.
Exemption of Value Added Tax and Sales Tax on Luxury Goods on the delivery of products for further processing from bonded zones to their subcontractors outside the bonded zones or the other way around as well as among companies in these areas.

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