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Indonesia: Income tax incentives for new investments

Indonesia: Income tax incentives for new investments

A regulation (No. 78 of 2019) expands the availability of certain income tax benefits with respect to new investments made in Indonesia.

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The tax benefits are available for a business that satisfies one of the following requirements:

  • Has a “high investment value”
  • Is “export oriented”
  • Creates a “higher” employment level, or
  • Has a high local content ratio


Tax incentives

If a business satisfies the appropriate criterion, new investments or an expansion of existing businesses will be entitled to additional loss carryforward periods. For instance:

  • An additional year for carrying forward losses is granted if investing in the renewable energy sector.
  • An additional year for carrying forward losses is granted if by the end of the second tax year, at least 70% of raw materials and/or components used in production are sourced domestically.
  • An additional year for carrying forward losses is granted under the higher employment level criterion if there are at least 300 new employees hired as well as maintaining that same number of employees for four consecutive years.
  • An additional two years for carrying forward losses is granted if hiring at least 600 employees as well as maintaining that same number of  employees for four consecutive years.

Another tax incentive is a taxable income reduction of 30% (5% a year) of the tangible fixed assets value, excluding new fixed assets for existing businesses. There are special rules concerning real property acquisitions.

Under the tax incentive program, additional accelerated tax depreciation or amortization of fixed and intangible assets is available if the property is owned and used in the taxpayer’s main business activities. The use of these assets must be solely for the identified business activities, and cannot be transferred (except if replaced by newer assets) for a period of six years from the start of commercial production or the useful life of the assets, whichever is greater.

Read a December 2019 report [PDF 1.28 MB] prepared by the KPMG member firm in Indonesia

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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