With regard to Indonesia fiscal policy, the Indonesian government has issued the Regulation of the Minister No. 122/PMK.03/2019 on Facilities of Value-added Tax or Value-added Tax and Luxury-goods Sales Tax, Land-and-Building Tax, and Tax Treatment upon Imposition of Sharing Facilities Operational Cost and Indirect Cost Budgeting Expense of the Headquarters.
This Indonesia fiscal policy has changed the tax circumstances for oil and gas contractors as it provides fiscal tax incentives of the mentioned tax for oil and gas operators, removing the major barriers for investments in oil and gas production in the exploration stage, and thus boosting the industry in the country.
This regulation was signed by the finance minister on August 27, 2019 and came into effect on September 27, 2019. This article outlines the relevant scopes and their details under Regulation 122/2019.
The key points in regard to the fiscal incentives for oil and gas contractors in Regulation 122/2019 are:
Value-added tax PPN and luxury-goods sales tax PPnBM, and land-and-building tax PBB are two taxes that are applicable for tax facilities.
Eligible KKKS to invoke the mentioned tax facilities include the following:
KKKS’ expenses from cost-sharing operations in the upstream oil and gas sector when utilising the state-owned goods are exempted from the income tax withholding. In addition, PPN does not apply for taxable services transfer when the KKKS meets the following criteria:
Apart from that, indirect-cost expenses are exempted from withholding income tax as well as PPN, when the KKKS fulfills certain requirements:
The following procedure is set out in order to secure the tax facilities for oil and gas contractors in Indonesia:
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