MoF Regulation No. 159/PMK.010/2015 dated August 14, 2015

GRANTING OF CORPORATION INCOME TAX REDUCTION FACILITY

Article 2

1)   Corporate taxpayer who make new capital investment in pioneer industry may get income tax reduction facility as mentioned in article 18 paragraph 5 Capital Investment Law and article 29 Government Regulation No. 94 Year 2010.

2)   Such income tax reduction facility will be granted on income received or obtained from main business activity which is pioneer industry.

3)   Main business activity is business activity as stated in principle license and/or taxpayer business license at the time of applying for income tax reduction including its amendment and extensions as long as still meet pioneer industry criteria.

Article 3

1)   Income tax reduction will be given at maximum 100% and at least 10% from income tax payable.

2)   Income tax reduction may be given for maximum 15 fiscal years and minimum 5 fiscal years, starting from its commercial production.

3)   Percentage of income tax reduction will remain constant during the period mentioned in paragraph 2.

4)   For maintaining national industry competitiveness and strategic value for particular industry, Minister of Finance may grant income tax reduction facility more than mentioned in paragraph 2 with maximum for 20 years.

Article 4

1)   Taxpayer who meet the following criteria may get income tax reduction:

a.    New taxpayer

b.    Pioneer industry

c.    Have new capital investment plan at least IDR 1 trillion which already approved by authorized institution

d.    Meet debt to equity ratio as mentioned in Minister of Finance Regulation

e.    Submit commitment letter to place at least 10% of total capital investment plan in Indonesia Bank which will not be withdrawn before capital investment realization; and

f.     Indonesia legal entity which legalized on or after 15 August 2011.

2)   When such taxpayer is directly owned by domestic taxpayer and/or foreign taxpayer in form of permanent establishment, such owner must obtain fiscal statement issued by DGT.

3)   Exempted from paragraph 2 when taxpayer:

a.    Directly owned by central government or local government

b.    Its ownership consists of stocks listed in Indonesia Stock Exchange.

4)   Pioneer industry as mentioned in paragraph 1 letter b consist of:

a.    Upstream metal industry;

b.    Oil refinery industry;

c.    Organic primary chemical industry which sourced from oil and natural gas;

d.    Machinery industry which produce industry equipment;

e.    Industry which process agriculture, forestry and fishery product;

f.     Telecommunication, information and communication industry;

g.    Sea transport industry;

h.    Processing industry which is main industry in special economic zone (KEK); and/or

i.     Economic infrastructure other than using government and corporation cooperation scheme (KPBU).

5)   Minimum new capital investment plan can be reduce to at least IDR 500 billion for pioneer industry as mentioned in paragraph 4 letter f and meet criteria of introducing high tech.

6)   Income tax reduction as mentioned in article 3 paragraph 1 can be given up to 50% for pioneer industry in article 5 with new capital investment between IDR 500 billion to IDR 1 trillion.

7)   Income tax reduction in article 3 can be obtained by taxpayer in paragraph 1 when meet following requirement:

a.    Already in commercial production;

b.    At the time of commercial production, taxpayer already realized its capital investment at least equal to its plan; and

c.    Its business match its plan and including in pioneer industry as mentioned in paragraph 4.

8)   DGT will state taxpayer who may utilize income tax reduction facility as mentioned in paragraph 7, which statement consist of:

a.    Date of commercial production started as basis for stipulating beginning of fiscal year for such facility;

b.    Amount of capital investment realized at the beginning of its commercial production; and

c.    Matching between business area and its plan and including in pioneer industry.

9)   Procedures for utilizing income tax reduction facility as mentioned in paragraph 8 will be stated by DGT Regulation.

10)Commencement of commercial production as mentioned in paragraph 7 is the first time its product sold to market and/or internally used for further process which include in main business activity.

Article 5

1.    To obtain corporate income tax reduction facility, taxpayer will propose an application to Capital Investment Coordinating Board.

2.    Such application must enclose following documents:

a.    Copy of taxpayer registration number card;

b.    Copy new capital investment principle license attached with its details;

c.    Original letter of commitment to place funds in Indonesia Bank as mentioned in article 4 paragraph 1 letter e; and

d.    Statement of fiscal for taxpayer who meet criteria in article 4 paragraph 2.

3.    Chief of Capital Investment Coordinating Board will review all documentary completeness and whether it meet pioneer industry criteria in article 4 paragraph 4.

4.    To propose corporate income tax reduction facility to Minister of Finance, Chief of Capital Investment Coordinating Board will coordinate with related minister to:

a.    Review its compliance with pioneer industry criteria in paragraph 3.

b.    Prepare review description about:

1)   Availability and contribution of infrastructure construction plan in investment site;

2)   Local workforce absorption;

3)   Study regarding compliance with pioneer industry criteria; and

4)   A clear and concrete stage of transfer of technology plan.

5.    Based on such review Chief of Capital Investment Coordinating Board can propose the facility attached with all documents in paragraph 2 and review description.

Article 6

1.    Based on the proposal in article 5 paragraph 5, Minister of Finance will assign a verification committee for granting corporate income tax reduction to review and verify such proposal.

2.    Minister of Finance will set a verification committee as mentioned in paragraph 1.

3.    The committee will submit review and verification report to Minister of Finance along with its recommendation and consideration, including amount of tax reduction as mentioned in article 3 paragraph 1 and period of the facility as mentioned in article 3 paragraph 2.

4.    Recommendation for tax reduction and period of the facility will be based on assessment on description review report as mentioned in article 5 paragraph 3.

5.    Minister of Finance will decide tax reduction facility based on consideration and recommendation by verification committee.

6.    Minister of Finance will grant period of the facility as mentioned in article 3 paragraph 4 with following condition:

a.    Asking consideration and recommendation from verification committee; or

b.    Granting the facility without asking consideration and recommendation from verification committee.

7.    When Minister of Finance approve the proposal as mentioned in article 5 paragraph 2:

a.    Minister of Finance will issue a decision on granting corporate income tax reduction facility; and

b.    Taxpayer will place the funds at least 10% of total capital investment plan as mentioned in article 4 paragraph 1 letter e in Indonesia bank.

8.    Placement of such funds no later than 7 days after date of decision and it cannot be withdrawn before capital investment realization started.

9.    When Minister of Finance refuse the proposal, such refusal will be notified in written to taxpayer with a copy to Chief of Capital Investment Coordinating Board.

Article 7

1.    Taxpayer, who received a refusal written notification from Minister of Finance, will get income tax facility for capital investment in particular business sector and/or regions as long as it meet criteria in Government Regulation No. 18 Year 2015.

2.    Procedures for granting facility for capital investment in particular business sector and/or regions will comply with Minister of Finance Regulation which regulate it.

Article 8

1.    Taxpayer who receive income tax reduction facility must submit regular report to DGT and chief of verification committee regarding:

a.    Report of funds usage as mentioned in article 4 paragraph 1 letter e;

b.    Audited capital investment realization report; and

c.    Production realization report during period of facility.

2.    Procedures for such reporting will be set by DGT regulation.

3.    Besides mandatory report in paragraph 1, taxpayer must fulfill DGT requirement regarding affiliate transaction data as mentioned in article 18 paragraph 4 income tax law.

Article 9

1.    Corporate taxpayer who get the facility is not allowed to:

a.    Import or purchase used capital goods which relocated from other country or company related to capital investment which get the facility.

b.    Do main business activity which not match its plan and not included in pioneer industry criteria during the period of facility;

c.    Transfer of assets and/or ownership of corporate taxpayer during the period of facility;

d.    Relocate capital investment to other province in Indonesia or overseas starting the effectiveness of facility up to 5 fiscal years after expiration of the facility; and/or

e.    Change accounting policy in order to transfer profit or loss period of facility to subsequent period and vice versa, including revenue and/or expense recognition method and depreciation and/or inventory valuation method, starting the effectiveness of facility up to 5 fiscal years after expiration of the facility

2.    Excluding from restriction in paragraph 1 letter c:

a.    Transfer and replace assets with more productive ones;

b.    Transfer of ownership to taxpayer who already get statement of fiscal;

c.    Transfer of ownership by going public.

Article 10

1.    Corporate income tax reduction facility will be void when taxpayer:

a.    At the commencement of commercial production, capital investment realization is less than its plan;

b.    Does not place funds in Indonesia banks as mentioned in article 6 paragraph 7 letter b and/or such funds is withdrawn before capital investment realization;

c.    Does not submit report as mentioned in paragraph 8 article 1 and DGT data request as mentioned in article 8 paragraph 3;

d.    Break the restriction as mentioned in article 9;

e.    Does not propose advance pricing agreement for export oriented taxpayer who has related parties transactions as mentioned in Minister of Finance Regulation which regulate such provisions.

f.     Based on investigation, violate the facility for tax avoidance or evasion, among others conduct transfer pricing.

2.    Minister of Finance will revoke such facility:

a.    After getting recommendation from verification committee; or

b.    Based on proposal from DGT to verification committee.

c.    Taxpayer, whose facility has been revoked under this regulation, will get sanction in accordance with tax regulation and cannot get any tax reduction facility.

Article 11

1.    Income received by taxpayer who get the facility as mentioned in article 2, following condition will be applied:

a.    Must prepare separate accounting record from other income which does not get income tax reduction facility; and

b.    No tax withholding and collection during period of facility as mentioned in article 3 paragraph 2 or article 3 paragraph 4;

2.    Taxpayer who get other income from other than main business activity as mentioned in paragraph 1, tax withholding and collection will be applied according to tax rules and regulation.

3.    Other income which is not include in the facility:

a.    Capital gain from sale or transfer of assets other than product produce from main business activity as mentioned in principle license and/or business license;

b.    Tax refund which already charged to expense and additional tax refunds;

c.    Interest including premium, discount and compensation for sinking funds;

d.    Dividend in any name and form, including dividend from insurance company to its policy holder and distribution of cooperative retained business income;

e.    Royalties or compensation for rights usage;

f.     Rental and other income related to utilization of assets;

g.    Gain from loan written off, except for certain amount set by government regulation;

h.    Excess value from revaluation of assets;

i.     Additional net income from non taxable income;

j.     Interest compensation as mentioned in tax law;

4.    Joint expenses which cannot be separated for taxable income calculation which arise from:

a.    Income received or obtained by taxpayer who get the facility; and

b.    Income received or obtained by taxpayer which not get the facility,

Will be charged to expense proportionally.

5.    Taxpayer who get the facility as mentioned in article 2, have to withhold and collect tax to other party as regulated in tax rules and regulation.

Article 12

1.    Corporate taxpayer who get income tax facility under article 31A income tax law, cannot get income tax reduction facility under this regulation.

2.    Corporate taxpayer who get income tax reduction facility under this regulation, cannot get income tax facility under article 31A income tax law.

Article 13

Proposal for granting corporate income tax reduction facility under this regulation must be submitted by Chief of Capital Investment Coordinating Boards in accordance with article 5, within 3 years after the effectiveness of this regulation.

At the effective date of this regulation:

1.    Proposal for corporate income tax exemption or reduction from Minister of Industry or Chief of Capital Investment Coordinating Boards since 15 August 2011 up to before the effectiveness of this regulation, which has not get any decision written refusal from Minister of Finance will be processed under Minister of Finance Regulation No. 130/PMK.011/2011 as amended by Minister of Finance Regulation No. 192/PMK.011/2014.

2.    Corporate taxpayer who already get and/or utilize corporate income tax exemption or reduction under Minister of Finance Regulation No. 130/PMK.011/2011 as amended by Minister of Finance Regulation No. 192/PMK.011/2014 may keep utilizing such facility until end of its periods.

At the effective date of this regulation, Minister of Finance Regulation No. 130/PMK.011/2011 as amended by Minister of Finance Regulation No. 192/PMK.011/2014 is void and no longer valid.

This regulation will be effective on 16 August 2015.