DGT Circular Letter No. SE-15/PJ/2015 dated March 9, 2015
AFFIRMATION ON IMPLEMENTATION OF DGT REGULATION NO. PER-41/PJ/2013 CONCERNING PROCEDURES FOR GRANTING INCOME TAX FACILITY, STIPULATION OF REALIZATION OF CAPITAL INVESTMENT, FILING OF REPORTING OBLIGATION, AND REVOCATION OF STATEMENT OF APPROVAL ON GRANTING INCOME TAX FACILITY TO TAXPAYER WHO CONDUCT CAPITAL INVESTMENT IN PARTICULAR BUSINESS SECTORS AND/OR PARTICULAR REGIONS
Implementation of granting of income tax facility
Proposal for granting income tax facility received from Head of Capital Investment Coordinating Board (BKPM) will be reviewed as follow:
1. Receiving date of such proposal.
2. Position of the officer in BKPM who sign the proposal, whenever necessary attached with copy of the appointment of that officer to sign the letter.
3. The addressee officer in the proposal.
4. Law and regulation as legal basis for such proposal.
5. Completeness of required documents:
a. Copy of taxpayer registration number;
b. Copy of application letter by taxpayer to head of BKPM;
c. Permission for capital investment or expansion of capital investment issued by Head of BKPM or other authorized institution in accordance with rule and regulation.
d. Detail of type and amount of capital investment;
e. Explanation letter for not yet commercially operating issued by Head of BKPM or other authorized institution in accordance with rule and regulation.
6. Identity of taxpayer in taxpayer registration number is similar to identity in the proposal and taxpayer database in DGT.
7. Permission for capital investment or expansion of capital investment issued by Head of BKPM or other authorized institution in accordance with rule and regulation:
a. Date of first issuance of Permission for capital investment or expansion of capital investment in the proposal meet with the regulation of time limit for submitting application from taxpayer to Head of BKPM and/or proposal for granting income tax facility from Head of BKPM;
b. All permits for capital investment or expansion of capital investment which project is proposed for income tax facility already adjusted.
c. Authorized officer who issue such permits;
d. Validity period of the permits in the proposal;
e. Business sector, classification of Indonesian standard business sector, product coverage, production capacity, number of workforce, amount of capital investment, currency type, source of fund, and/or location for capital investment;
f. Matching of all information in the permits including its amendments in the proposal.
8. Application for income tax facility from taxpayer to Head of BKPM:
a. Date of receiving application letter and its receipt in accordance with regulation of time limit for submitting application from taxpayer to Head of BKPM;
b. Taxpayer who sign such letter is the authorized one according to law and regulation;
c. Matching of capital investment in application letter, proposal from head of BKPM and permission for capital investment or its expansion and all its amendment:
1) Business sector;
2) classification of Indonesian standard business sector;
3) product coverage;
4) location
5) other requirements, among other:
a) minimum capital investment amount and its translation in Rupiah currency when such investment is in foreign currency;
b) production capacity;
c) number of workforce;
d) integrated business sector;
d. When necessary, written documents as technical justification and/or further information of the abovementioned requirements from authorized institution or other party according to law and regulation.
9. Detail of type and amount of capital investment in permission for capital investment or its expansion which proposed for income tax facility:
a. Detail of type and amount of capital investment in form of fixed assets which is granted for income tax facility, at least must contain following information:
1) Land (detail of its location and area in plan, also month and year of its acquisition when it is already acquired);
2) Building (detail of its type, location and building area in plan, also month and year of its acquisition when it is already acquired);
3) Machinery or equipment (detail of its type, name and trade mark of it in plan, also month and year of its acquisition when it is already acquired); and
4) Other assets (detail of its type, name and trade mark of it in plan, also month and year of its acquisition when it is already acquired);
b. Detail of type and amount of capital investment in term of fixed asset which does not get income tax facility, at least must contain following information:
1) Land (detail of its location and area in plan, also month and year of its acquisition when it is already acquired);
2) Building (detail of its type, location and building area in plan, also month and year of its acquisition when it is already acquired);
3) Machinery or equipment (detail of its type, name and trade mark of it in plan, also month and year of its acquisition when it is already acquired); and
4) Other assets (detail of its type, name and trade mark of it in plan, also month and year of its acquisition when it is already acquired);
c. Matching the amount and source of fund of capital investment attached with supporting documents, among others:
1) Loan agreement; and/or
2) Shareholder meeting deed.
10. When it is required by current law and regulation, statement of has not commercially operated issued by Head of BKPM:
a. Authorized officer who issued such letter according to law and regulation;
b. Date stated in such letter.
Implementation issuance of approval letter, rejection letter, returned proposal letter, or request for completeness letter for income tax facility, following information should be considered:
1. Received date of proposal for income tax facility and period for its completion.
2. Check list for document review whether taxpayer meet required term and criteria or not, including matching the proposal with business sector, Indonesia standard business sector classification, product coverage, term and condition, and/or region/province.
3. Underlying law as legal basis for issuance of approval letter, rejection letter, returned proposal letter, or request for completeness letter for income tax facility.
4. When taxpayer get its income tax facility approval based on Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 52 Year 2011, taxpayer must utilize its facility at least 80% from capital investment plan.
5. Matching the document format of approval letter, rejection letter, returned proposal letter, or request for completeness letter for income tax facility according to law and regulation with format valid in DGT.
6. Matching the Preparation and distribution of approval or rejection letter for income tax facility to other parties as required by law and regulation and the one valid in DGT.
7. Matching the returned proposal or request for completeness letter for income tax facility according to law and regulation with format valid in DGT.
Implementation of stipulation for income tax facility utilization time.
During field examination for stipulation for income tax facility utilization time, following information should be considered:
1. Received date of request for stipulation for income tax facility utilization time.
2. Taxpayer who sign such request has the authority according to law and regulation.
3. Addressee officer in request letter.
4. Law and regulation as legal basis in request letter.
5. Completeness of documents as requested by law and regulation, at least must contain following:
a. Copy of deed of incorporation;
b. Copy of income tax facility approval letter;
c. Audited financial statements for the last 3 years;
d. Hardcopy and softcopy of:
i. Total realization of capital investment up to completion of investment;
ii. Total production realization;
iii. Detail of fixed assets used for other purposes besides stated in the facility;
iv. Detail of partial or wholly transfer of fixed assets which get the facility; and
v. Detail of fixed assets are being transferred and replaced with new ones.
e. Hardcopy and softcopy of detail and type of fixed assets at the time of proposal and its amendment;
f. Special proxy when the proposal is submitted by taxpayer’s proxy;
g. All capital investment or its expansion permits as legal basis for issuance of approval letter.
6. Matching amount and detail between capital investment realization and its plan:
a. Separation of fixed asset between the one which get the facility and not;
b. Acquisition cost of fixed assets which get the facility according to article 10 and 18 income tax law;
c. Amount and detail of capital investment when it is realized compare to its plan in approval letter.
7. Matching business sector when capital investment is realized with criteria and condition in approval letter, including:
a. Business sector;
b. Indonesia business sector standard classification;
c. Product coverage;
d. Region/province;
e. Other criteria, including:
i. Minimum amount of capital investment;
ii. Production capacity;
iii. Number of workforce;
iv. Integrated business sector.
8. Should during field examination taxpayer has not met some requirements; taxpayer cannot use income tax facility. As consideration, taxpayer has not realized at least 80% of capital investment from its plan or taxpayer has not commercially operated.
Implementation of stipulation for income tax facility utilization time, following information should be considered:
1. Received date of request for stipulation for income tax facility utilization time and due date for its completion.
2. Examination report for stipulation for income tax facility utilization time, particularly for matching of amount and detail for capital investment realization and its business sector with requirement in government regulation.
3. Law and regulation as legal basis for issuance of stipulation letter.
4. Utilization of income tax facility:
a. Taxpayer who gets its income tax facility approval based on Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 52 Year 2011, taxpayer must utilize its facility at least 80% from capital investment plan.
b. Taxpayer who gets its income tax facility approval based on Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 62 Year 2008:
i. Income tax facility in term of net income discount amounting to 30% of total capital investment, could be charged for 6 consecutive years which 5% per annum, might be utilized when taxpayer meet starting commercial production criteria;
ii. Other facility could be utilized since approval was granted.
5. Date of income tax facility utilization:
a. Taxpayer who gets its income tax facility approval based on Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 52 Year 2011, taxpayer can utilize it when at least 80% of capital investment plan already realized;
b. Taxpayer who gets its income tax facility approval based on Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 62 Year 2008, net income discount amounting to 30% of total capital investment can be utilized when taxpayer already realized 100% of capital investment plan and start selling its product.
6. Matching the document format of stipulation letter for utilization of income tax facility according to law and regulation with format valid in DGT.
7. Matching the Preparation and distribution of stipulation letter for utilization of income tax facility to other parties as required by law and regulation and the one valid in DGT.
When DGT on behalf of minister of finance issued decision letter for granting income tax facility after taxpayer meet the following criteria:
1. At least 80% of capital investment plan already realized under Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 52 Year 2011; or
2. Date of commercial production under Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 62 Year 2008;
then income tax facility might be used when all the criteria are met and decision letter is issued by DGT on behalf of Minister of Finance.
Amount of capital investment which got the facility, is value of fixed assets in capital investment plan as stated in Decision Letter for granting income tax facility and/or capital investment permit or its expansion permit at the date approval letter is issued;
When there is amendment on approval letter or capital investment permit or its expansion permit, basically income tax facility is rely on capital investment in form of fixed assets as stated in Decision Letter for granting income tax facility and/or capital investment permit or its expansion permit as consideration for approval letter.
When taxpayer change capital investment plan, then capital investment amount which get the facility is the amount in Decision Letter for granting income tax facility and/or capital investment permit or its expansion permit as consideration for approval letter.
Implementation of stipulation for additional period for fiscal loss compensation
During field examination for stipulation for additional period for fiscal loss compensation, following information should be considered:
1. Received date of request for additional period for fiscal loss compensation is completely received.
2. Taxpayer who signs such request has the authority according to law and regulation.
3. Addressee officer in requisition letter.
4. Law and regulation as legal basis in request letter.
5. Completeness of documents as requested by law and regulation, at least must contain following:
a. Audited financial statements for the last 3 years;
b. Copy of new capital investment in industrial zone and bonded zone approval from authorized institution;
c. Statement from taxpayer which stated taxpayer already employed at least 500 Indonesian employees for 5 consecutive years with supporting documents;
d. Statement of investment/expenditures for economic and social infrastructures in business location at least IDR 10 billion attached with supporting documents;
e. Statement of research and development expenditures in Indonesia for product development and efficiency at least 5% from investment within 5 years attached with supporting documents;
f. Statement of usage of domestic raw material and/or components at least 70% since the fourth year in accordance with article 11 paragraph 8 Minister of Finance Regulation No. 144/PMK.011/2012 attached with supporting documents, including local content achievement certificate issued by authorized party.
g. Copy of income tax facility report, and/or
h. Special proxy when the proposal is submitted by taxpayer’s proxy;
6. Additional period for fiscal loss compensation facility will valid with following condition:
a. Additional 1 year will valid for losses in all fiscal years when new capital investment in particular business sector as stated in Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 52 Year 2011 is conducted in industrial and bonded zone related to capital investment which got the income tax facility;
b. Additional 1 year will valid for fiscal loss in the year after taxpayer employ least 500 Indonesian employees for 5 consecutive years related to capital investment which got the income tax facility;
c. Additional 1 year will valid for losses in all fiscal years when new capital investment need investment/expenditures for economic and social infrastructure in business location at least IDR 10 billion related to capital investment which got the income tax facility;
d. Additional 1 year will valid for fiscal loss in the year research and development expenditures in Indonesia for product development and efficiency at least 5% from investment within 5 years related to capital investment which got the income tax facility;
e. Additional 1 year will be valid for loss in fiscal year:
i. Since the fourth year after taxpayer got capital investment or its expansion permit and used local raw material and/or components at least 70%; and
ii. In corresponding year, when taxpayer use at least 70% of local raw material and/or component related to capital investment which got the income tax facility;
Implementation of Additional period for fiscal loss compensation decision letter should consider the following:
1. Received date of request for stipulation for Additional period for fiscal loss compensation and due date for its completion.
2. Examination report for stipulation for Additional period for fiscal loss compensation, particularly matching for term and condition required and its business sector which get income tax facility.
3. Law and regulation as legal basis in stipulation letter.
4. Utilization for income tax facility in term of additional period for fiscal loss compensation:
a. Taxpayer who gets its income tax facility approval based on Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 52 Year 2011, taxpayer can utilize it when at least 80% of capital investment plan already realized and get stipulation letter;
b. Taxpayer who gets its income tax facility approval based on Government Regulation No. 1 Year 2007 concerning income tax facility for capital investment in particular business sectors and/or particular region as amended by Government Regulation No. 62 Year 2008, income tax facility in term of additional period for fiscal loss compensation can be used at the time taxpayer get approval letter.
5. Income tax facility in term of additional period for fiscal loss compensation can be granted to fiscal loss derived from capital investment which gets income tax facility as stated in government regulation.
6. Matching the document format of stipulation letter for additional period for fiscal loss compensation according to law and regulation with format valid in DGT.
7. Matching the Preparation and distribution of stipulation letter for additional period for fiscal loss compensation to other parties as required by law and regulation and the one valid in DGT.
Implementation on monitoring of reporting submission obligation.
Head of tax office where taxpayer who get income tax facility is registered must monitor the submission of income tax facility report with following condition:
1. Capital investment realization report will be submitted to head of tax office every semester each year since it is realized to completion of all capital investment, no later than 10 working days after end of each semester.
2. When approval letter is issued after taxpayer already realized partial or whole capital investment, taxpayer must submit capital investment realization report starting from approval letter issued to completion of all investment, no later than 10 working days after end of each semester.
3. Reports regarding:
a. Total of production realization;
b. Detail of fixed assets used for other purposes besides stated in the facility;
c. Detail of partial or wholly transferred of fixed assets which get the facility; and
d. Detail of fixed assets are being transferred and replaced with new ones,
Submitted to head of tax office every semester no later than 10 working days after end of each semester for 6 years since stipulation of income tax facility issued.
4. Matching product coverage and gross revenue between production realization report and accounting record in financial statement.
5. Matching type and amount of capital investment in form of fixed assets in following reports:
a. Capital investment realization;
b. Detail of fixed assets used for other purposes besides stated in the facility;
c. Detail of partial or wholly transferred of fixed assets which get the facility; and
d. Detail of fixed assets are being transferred and replaced with new ones,
with accounting record in financial statement.
When based on review on income tax facility report, data and/or other information there is any indication of certain requirement is not met:
1. Before 6 years period since date of utilization of facility, taxpayer is forbidden for:
a. Using fixed assets which get the facility for any other purposes;
b. Transfer partial or all fixed assets which get the facility except replace with new one, or
2. Misuse of income tax facility,
Head of tax office where taxpayer is registered and/or other work unit in DGT must propose to Director of Examination and Collection to conduct field examination.
When taxpayer who get approval for income tax facility:
1. Does not submit income tax facility report;
2. Submit income tax facility reports but not in detail or contain sufficient information on production realization and/or fixed assets which can be used to identify each product coverage and/or type of fixed assets (each type, location/area and fixed assets utilization in plan, month and year of fixed assets acquisition);
3. Does not attach audited financial statement when filing annual income tax return; or
4. Does not maintain separate booking for fixed assets which get income tax facility and not,
Head of tax office must appeal taxpayer.
When after head of tax office appeal taxpayer and within 2 consecutive reporting period such taxpayer:
1. Does not submit income tax facility report;
2. Submit income tax facility reports but not in detail or contain sufficient information on production realization and/or fixed assets which can be used to identify each product coverage and/or type of fixed assets (each type, location/area and fixed assets utilization in plan, month and year of fixed assets acquisition);
3. Does not submit audited financial statement; or
4. Does not maintain separate booking,
Head of tax office where taxpayer is registered must propose to Director of Examination and Collection to conduct field examination.
Implementation revocation of approval for income tax facility.
DGT on behalf of Minister of Finance ex-officio or by request of taxpayer can revoke approval letter for income tax facility
Taxpayer can request revocation of approval letter for income tax facility to head of tax office where taxpayer is registered;
On such request, head of tax office propose to Director of Examination and Collection to conduct field examination.
Based on field examination for:
1. Stipulation date of utilization of income tax facility by Director of Examination and Collection; or
2. Follow up by Examination Implementation Unit on proposal by Head of tax office to Director of Examination and Collection,
Director of Examination and Collection propose to DGT through Director of Taxation Regulation II to revoke income tax facility as stipulated by DGT on behalf of minister of finance.
When revocation of income tax facility conducted based on field examination result with following consideration:
1. Taxpayer use fixed assets which get the facility for other purposes;
2. Transfer partial or all fixed assets which get the facility except for such assets are replaced with new one; and/or
3. Misuse income tax facility;
Taxpayer will be charged with penalty according to tax rules and regulation and cannot get any income tax facility.
When revocation letter is issued on request by taxpayer and field examination result consider the following:
1. Taxpayer does not use fixed assets which get the facility for other purposes;
2. Taxpayer does not transfer partial or all fixed assets which get the facility except for such assets are replaced with new one; and/or
3. Taxpayer does not Misuse income tax facility;
Taxpayer would not be charged by any penalty according to tax rules and regulation and for next capital investment expansion can be granted income tax facility, as long as taxpayer has not utilized income tax facility in approval for income tax facility which is being requested for revocation.