The Indonesian Government Has Broadened Forms of Regional Investment Incentives and Facilities

Over the past years, Indonesia’s foreign direct investment (FDI) has grown multi-fold, contributing to Indonesia’s unceasing economic growth. Therefore, in order to further facilitate investment and development of various regions for entrepreneurs doing business in Indonesia, the government of Indonesia has recently issued the Regulation No. 24 of 2019 (Regulation 24/2019) on the Granting of Investment Incentives and Facilities in Regional Areas.

Regulation 24/2019 will be used to replace Regulation 45/2008 on Guidelines for the Granting of Investment Incentives and Facilities in Regional Areas. This article mainly provides you with an update of this new regulation and certain changes that have been made.

The new regulation 24/2019 covers the following matters:

• Criteria of incentives and facilities
• Forms of incentives and facilities
• Granting of incentives and facilities
• Transitional provisions

Criteria for Incentives and Facilities

Investment incentives and facilities will only be granted to businesses that meet the following requirements, by regional governments in Indonesia:

• Employing local workforce who make practical contributions to the company in exchange for monetary income
• Being environmentally friendly and sustainable
• Being a pioneering industry
• Taking the form of infrastructure development
• Being export-oriented

However, the following business sectors will also be considered and prioritised for incentives and facilities:

1.Micro and small enterprises

2.Businesses that meet the requirements of the following elements:

• Capital ownership
• Partnerships
• Special licensing
• Certain locations

3.Businesses prioritising regional benefits

4.Businesses that have acquired facilities for investments from central government

Forms of Incentives and Facilities

Investment incentives and facilities are granted in various forms depending on the regional laws, regulations and capabilities. The types of incentives and facilities are listed in the following:

1.Regional tax relief, deductions, or exemptions

• Adjustment of NJOP and NJOPTKP tax incentives
• Granting of relief, deductions or exemptions pertaining to regional tax principals and sanctions, and BPHTB
• Regional tax payment in stages

2.Regional levy relief, deductions, or exemptions

• Inclusion of relief, deductions or exemptions for levies pertaining to IMB for low-income group’s public housing

3.Regional micro and small businesses’ aid

• Capital aid
• Vocational training aid
• Research and development aid

4.Low interest loans

Now with the new regulation, the investment and facilities for vocational training, research and development aid, and low-interest loans are available:

• Data and information provision related to investment opportunities
• Public infrastructure and facilities provision such as sanitation, drinking water and healthcare
• Procurement facilitation pertaining to locations or lands such as land ownership, dispute settlement mediation, and data and information provision.
• Technical aid granting
• Accelerated and simplified licensing processes with online one-stop integrated submission system
• Direct construction investment facilities
• Production outputs market access
• Access to skilled and ready human resources
• Access to ready-to-use raw materials

Granting of Incentives and Facilities

The granting of incentives and facilities is performed by regional government by complying to regional regulations. The difference is mostly related to the time and length of the procedure.

Regional heads of regional governments must undertake the following steps to grant the incentives and facilities:

• Laying out SOP (Standard Operating Procedure)
• Verifying the granting procedure
• Evaluating the granting effectiveness every year to ensure the business is still qualified for the granting
• Reviewing for any non-compliance or violation

Transitional Provisions

Regulation 24/2019 has been effective and enforced starting from April 2, 2019. Granting processes that were approved before April 2, 2019 and are still in progress must follow the procedures that were set out in the previous Regulation 45/2008.

On top of that, incentives and facilities currently granted under Regulation 45/2008 remain effective until their validation dates expire.

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