Targeted to initially operate in 2024, Nusantara Capital City (IKN) needs to develop quickly and precisely. Intending to accelerate the process of Nusantara Capital City (IKN), the Government of Indonesia issued Government Regulation number 12 of 2023 (GR 12/2023) addressing the issuance of business licenses, ease of doing business for business actors who wants to do business in IKN and some of the regions in Kalimantan which is part of IKN economic superhub (“Partner Regions”).
While previously the government had issued investment incentives on the business licenses for business actors in general, this regulation, however, has even more interesting incentives for business actors, especially foreign business actors. This article will further explain the new and different incentives that the government offers for business actors who want to invest in IKN and Partner Regions. The incentives will be explained through three stages, which are, Business Licensing; Ease of Doing Business (EoDB); and Investment facilities.
The new and different incentives can be significantly seen from the business licensing for business actors operating in IKN and Partner Regions, specifically:
- Business actors that initiate and carry out business activities within IKN and Partner Regions are exempted from the requirement of taxpayer status confirmations; and
- The limitation of the foreign ownership of companies operating within certain business sectors as stipulated in Presidential Regulation number 49 of 2021 does not apply to business licensing within IKN. Instead, companies are required to partner with local micro-, small- and medium-scale enterprises, as well as local cooperatives
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Further, to enhance the ease of doing business, the government also offers facilities to ease burdens on business actors operating within IKN and Partner Regions. There are a few aspects of facilities that the government stipulate under GR 12/2023, which are:
- Granting of land rights
- Utilization of foreign workers
- Housing and residential areas
The significant difference in land rights grants is based on agreements between business actors and IKN Authority and the Land & Building Rights Acquisition Fees are exempted for the granting and land rights transfer.
As for the utilization of foreign workers, business actors operating in IKN are allowed to employ foreign workers without the obligation to pay compensation funds for the utilization of foreign workers for a certain period.
Lastly, Business actors who engage in housing and residential area businesses who have yet to fulfill the balanced housing obligation in other national regions are allowed to implement their obligations within the IKN area with the application addressed to the Head of IKN Authority.
Aside from special incentives on the issuance of business licenses, GR 12/2023 also offers investment facilities in the form of various fiscal and non-fiscal incentives, as follows:
- Incentives that are provided by the central government and that relate to income tax (“PPh”); value-added tax (“PPN”) and/or Luxury Goods Sales Tax (“PPnBM”) and/or Customs; and
- Incentives that are provided by the IKN Authority and that relate to the special tax and revenue facilities for IKN; and facilitation, provision of land, infrastructure, and facilities for investment activities within IKN (“IKN Facilitation”).
In conclusion, the issuance of GR 12/2023 is one of the efforts from the government to expedite the progress of IKN development by offering new and enhanced incentives for business actors, which is beneficial for foreign business actors, hoping that there will be some increase in investment within IKN and Partner Region that could contribute to IKN development.
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