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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

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