Tax Holiday for Foreign Investor

Foreign Direct Investment (FDI) is one of the factor of the economic development in Indonesia. It pushes the government to keep regulating policies that gives an ease of doing business to foreign investors, one of them is Tax Holiday. This incentive is furher regulated in the Minister of Finance Regulation No. 130/PMK.010/2020 regarding Giving Corporate Income Tax Reducement Facilities (MoF Regulation 130/2020)

Tax Holiday is one of the tax incentive given in the form of  exemption of Corporate Income Tax (PPh Badan) or tariff reducement for PPh badan  to Companies who has just invested to Indonesia within a certain period of time

In its development, Indonesia has established several policies regarding tax holidays in the last few decades as an effort to encourage the development of the Indonesian economy.

A. Requirements to Obtain Tax Holiday

Article 3 of MoF Regulation 130/2020 stipulates that Corporate Taxpayer must comply with these criterias in order to get a reducement for its PPh Badan:

1. a Pioneer Industry
2. a legal entity in Indonesia
3. First time making investment in the form of PT PMA
4. Have a new investment plan, valued at least Rp. 100,000,000,000 (one hundred billion rupiah)
5. Meets the provisions of the ratio of debt and capital, which is a maximum of four to one (4:1) ratio
6. Committed to start realizing the investment plan no later than 1 (one) year after the issuance of the Corporate Income Tax reduction decision

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B. Pioneer Industry

There are many kinds of Pioneer Industries regulated through Article 3 (2) MoF Regulation 130/2020, among them are as follows:

1. upstream base metal industry:
   • steel; or
   • not steel, without or with its integrated derivatives;
2. oil and gas refining or refining industry without or with its integrated derivatives;
3. organic basic chemical industry originating from petroleum, natural gas, and/or coal without or with their integrated derivatives;
4. organic basic chemical industry originating from agricultural, plantation, or forestry products without or with their integrated derivatives;
5. inorganic basic chemical industry without or with its integrated derivatives;
6. main pharmaceutical raw material industry without or with its integrated derivatives;

Tax Holiday is one of the government’s very useful policy to improve the economy in Indonesia.This policy gives an ease of doing business for foreign investors. Because of that, business actor must know and carefully use the investmenr facilities provided by the Government of Indonesia

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ET Consultant is a Business Consultant and Legal Consultant Expert that provides support for local and multinational clients to start and manage their business operations in Indonesia. ET Consultant specializes in Business Incorporation, Licensing & Legal, Accounting & Taxes, Immigration, and Advisory Services.

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