How To Get Indonesia Tax Incentives via OSS

The Indonesian government has been taking a number of bold initiatives, including tax incentives Indonesia in recent years to increase the ease of doing business in the country. The clarity in business guidelines, process transparency, and improved system infrastructure are all part of these recent developments. To cut through the red tape even further, the Indonesian government has modified Online Single Submission (OSS) to align with the newly established Risk-based business license system, in effect from July 2021.

Apart from its primary purpose of securing business licenses online, OSS also serves as a platform for companies to apply for Indonesia tax incentives. This article will discuss what kind of incentives are available to investors and how to take advantage of them through the OSS.

Indonesia Tax Incentives Available via OSS

In order to enhance the ease of doing business, the Indonesian government has devised a number of incentives to entice both domestic and foreign investors. The following are some of the financial advantages of conducting business in Indonesia:

Tax Holiday

Depending on the investment amount, the Ministry of Finance (MoF) may provide a tax holiday of 100% of the Corporate Income Tax (CIT) due for 5 to 20 years from the commencement of commercial production, followed by a 50% CIT reduction for the next two years.

Furthermore, on a capital investment plan of IDR 100 to 500 billion, the MoF grants Indonesia tax holiday of 50% of CIT due for 5 years, followed by a 25% CIT reduction for the next two years to companies with Indonesian Standard Classification of Business Field (KBLI).

An application can be submitted through the OSS system to be further ratified by the MoF for approval.

Some of the business sectors that are eligible for Indonesia Tax Holiday:

• Oil and Gas refinery
• Activities in Aerospace Industry
• Pharmaceutical (Raw Materials)
• Electromedical Irradiation Equipment
• Robotic and main components for machinery
• Motor Vehicles
• Train main components
• Ship Main components
• Agriculture, Forestry, & plantation-based processing
• Economic Infrastructure
• Digital Economy

Tax Allowance

With accelerated fiscal depreciation and amortization deductions, the MoF may also offer a decrease in the net taxable income of 30% of the amount invested in tangible fixed assets (including land).

Furthermore, companies may be eligible for a Withholding Tax rate reduction of 10% or the relevant lower tax treaty rate on dividends paid to non-residents. Applicants with high investment value, high absorption power, or high local content are eligible for these tax benefits.

Investment Allowance

The scheme entails reducing net income by 60% of the entire investment value over a period of six years at a rate of 10% each year. It can be allowed to domestic taxpayers, those who invest with KBLI, and/or to companies employing at least 300 people in the nation.

Indonesia Tax Incentives in SEZ (Special Economic Zone)

Some available tax facilities for a ‘business entity’ that develops or manages an SEZ include the following:

Tax Holiday for Primary Industry

• Corporate income tax reduction
• Up to 100% for 10 to 25 years for investment more than US$68.32 million
• Up to 100% for 5 to 15 years for investment between US$34.16 million and US$68.32 million.
• At a rate decided by the MoF for 5 to 15 years for investment below US$34.16 million.

Tax Allowance for other industries

• A reduction in the net taxable income of up to 30% of the amount invested in the form of fixed assets, pro-rated at 5% for 6 years of commercial production;
• Accelerated depreciation and/or amortization;
• Extension of the five-year tax loss carry forward to a maximum of 10 years; and
• A reduction in withholding tax on dividends paid to non-residents to 10%, or applicable treaty rate.

How To Get Indonesia Tax Incentives via OSS

In general, the OSS system will inform business owners if their investment qualifies for one of Indonesia tax incentives listed above, but you have to submit an application by submitting papers after you receive this notification.

The following papers must be submitted in order to qualify for Indonesia tax holiday incentive:

• Digital copy of the details of fixed assets in the investment value plan
• Digital copies or electronic documents of the shareholders’ fiscal statement
• Digital copy of the study on the fulfillment of the Pioneer Industry criteria
• Digital copy of self-assessment on Pioneer Industry’s quantitative criteria
• Application for tax holiday can be submitted to the MoF until 8 October 2024.

The following papers must be provided by the applicant for a tax and investment allowance:

• Digital copy of the details of fixed assets in the investment value plan
• Digital copies or electronic documents of the shareholders’ fiscal statement
• Digital copies of fixed assets’ realization documents
• Digital copies of documents related to sales transactions of finished products

For Indonesia tax incentives in SEZ, the applicant must provide the following documents:

• Digital copy of the details of fixed assets in the investment value plan
• Digital copies or electronic documents of the shareholders’ or business owner’s fiscal statement
• Digital copy of a stipulated document for a Business Entity to build and/or manage a business in SEZ

Note that:

• All Indonesia tax incentive applications must be submitted prior to the start of the business
• All of these documents will be evaluated by MoF, and the outcome will be communicated via OSS

How Can InCorp Indonesia Help?

InCorp’s smooth business registration process saves you a lot of time and effort. To rule out any loopholes, InCorp performs due diligence and market research. InCorp is happy to assist you in obtaining the required paperwork and licenses, such as business and import licenses. With our HR and recruiting services, we also ensure that you stay on top of all legal compliances.