Implementation of Regulation of the Investment Coordinating Board of the Republic of Indonesia Number 7 of 2020
Implementation of Regulation of the Investment Coordinating Board
of the Republic of Indonesia Number 7 of 2020
concerning
Details of Business Fields and Type of Production of Pioneer Industry Eligible for the Corporate Income Tax Reduction Facility as well as Guidelines and Procedures for the Granting of Corporate Income Tax Reduction
(“Rincian Bidang Usaha dan Jenis Produksi Industri Pionir Serta Tata Cara Pemberian Fasilitas Pengurangan Pajak Penghasilan Badan”)
By : A.M Oktarina Counsellor at Law
Drafted : I Nur P
Reviewed by : Noverizky Tri Putra Pasaribu, S.H., LL.M (Adv).
The Regulation issued by : Indonesian Investment Coordinating Board
On 4 December 2020, the Investment Coordinating Board (Badan Koordinasi Penanaman Modal or “BKPM”) issued Regulation of the Investment Coordinating Board of the Republic of Indonesia Number 7 of 2020 concerning Details of Business Fields and Types of Pioneer Industry Production and Procedures for Providing Corporate Income Tax Reduction Facilities (“BKPM Regulation No. 7/2020”) came into effect on December 4, 2020 signed by Bahlil Lahadalia as the Head of the Investment Coordinating Board of the Republic of Indonesia and Widodo Ekatjahjana as the Director General of Legislation and Regulations, Ministry of Law and Human Rights of the Republic of Indonesia. This regulation serves as the implementing of the Minister of Finance Regulation Number 130 / PMK.010 / 2020 concerning the Granting of Corporate Income Tax Reduction Facilities (“Minister of Finance Regulation No. 130/2020”), which came into effect on October 9, 2020. BKPM Regulation No. 7/2020 is also in lieu of the previous regulation that has been repealed, namely Regulation of the Investment Coordinating Board No. 6 of 2018 concerning Guidelines and Procedures for Licensing and Investment Facilities as well as changes, and Regulation of the Investment Coordinating Board No. 1 of 2019 concerning Details of Business Fields and Types of Production of Pioneer Industries that Can Be Provided With Corporate Income Tax Reduction Facilities and Guidelines and Procedures for The Provision of Corporate Income Tax Reduction Facilities and their changes.
Unlike the previous regulations, in BKPM Regulation No. 7/2020 does not contain the amount and time period for the reduction of income tax, but it is regulated in the Minister of Finance Regulation Number 130/2020, namely:
| NO | Value of New Investment (IDR) | First Period | Second Period | ||
| Period | Percentage Reduction | Period | Percentage Reduction | ||
| 1. | At least IDR 100,000,000,000.00 (one hundred billion Rupiah) – at most less than IDR 500,000,000,000.00 (five hundred billion Rupiah) | 5 tax year | 50% | 2 years | 25% |
| 2. | At least IDR 500,000,000,000 (five hundred billion Rupiah) – less than IDR 1,000,000,000,000.00 (one trillion Rupiah) | 5 tax years | 100% | 50% | |
| 3. | At least IDR 1,000,000,000,000.00 (one trillion Rupiah) – less than IDR 5,000,000,000,000.00 (five trillion Rupiah) | 7 tax years | |||
| 4. | At least IDR 5,000,000,000,000.00 (five trillion Rupiah) – less than IDR 15,000,000,000,000.00 (fifteen trillion Rupiah) | 10 tax years | |||
| 5. | At least IDR 15,000,000,000,000.00 (fifteen trillion Rupiah) – less than IDR 30,000,000,000,000.00 (thirty trillion Rupiah) | 15 tax years | |||
| 6. | At least IDR 30,000,000,000,000.00 (thirty billion Rupiah) | 30 tax years | |||
In order to get a corporate income tax reduction (“Tax Holiday”), the taxpayer must meet several criteria[[1]]:
- Corporate taxpayers who make new investment of at least IDR 100,000,000 in pioneer industries. The kinds of pioneer industries include[[2]]:
- Upstream base metal industry (steel or non-steel) without or with their integrated derivatives.
- Oil and gas refining or refining industry without or with their integrated derivatives.
- Organic basic chemical industry sourced from petroleum, natural gas, and / or their integrated derivatives, etc.
- The company has the status of an Indonesian legal entity;
- Making new investments that have never been issued:
- Decision regarding notification regarding the refusal of Corporate Income Tax reduction.
- Decisions regarding the granting of Income Tax facilities for investment in certain business fields and / or in certain areas based on Article 31A of the Income Tax Law.
- Notification regarding the provision of a reduction in net income for new investment or expansion in certain business fields which are labor-intensive industries based on Article 29A of the Government Regulation concerning the calculation of taxable income and payment of Income Tax in the current year; and
- Decree regarding the granting of Income Tax facilities in special economic zones.
- Satisfying the debt to equity ratio required for income tax purposes; and
- Committed to start realizing the investment plan no later than 1 (one) year after the issuance of the corporate Income Tax reduction decision.
In BKM Regulation No. 7/2020, for taxpayers (applicants for income tax reduction facilities) who have met the qualifications as above can apply through Online Single Submission (“OSS”), the procedure is as follows[[3]]:
- Fill out the application form for income tax reduction facilities, by completing the following documents:
- photocopy of Single Business Number (Nomor Induk Berusaha or “NIB”);
- photocopy of business license/principle license/expansion permit;
- photocopy of taxpayer identification number;
- a statement letter that has not started commercial production;
- a statement letter fulfilling the provisions on the ratio between debt and capital;
- a statement letter committing to start realizing the investment plan no later than 1 (one) year after the issuance of the decision to reduce corporate Income Tax;
- details of the taxpayer’s fixed assets in the planned investment value;
- Shareholders’ fiscal certificates recorded in the deed of incorporation or the latest amendment deed;
- power of attorney if the application is not submitted directly by the leadership of the company;
- study of compliance with the criteria for pioneer industry;
- self-calculation of the pioneer industry quantitative criteria with a score of at least 80.
- The Investment Coordinating Board verifies the fulfillment of the document criteria, in the event that verification is declared complete and correct, BKPM issues a receipt for the application, otherwise BKPM makes a return accompanied by a detailed verification note.
- BKPM conducts an assessment on the calculation of the score for the fulfillment of the quantitative criteria for the pioneer industry within a maximum period of 5 (five) days, in the event that the BKPM assessment results in a score of 80 (eighty) investment taxpayers are declared to meet the criteria for a pioneer industry Furthermore, the Head of BKM or the appointed official issues a Decree on the Granting of Corporate Income Tax Reduction Facilities and is issued no later than 5 (five) days after the application is declared complete and correct.
- If the assessment from BKPM is less than 80 (eighty), BKPM will issue a rejection letter on the application for corporate income tax reduction facility.
So, the Regulation of the Investment Coordinating Board of the Republic of Indonesia Number 7 of 2020 concerning Details of Business Fields and Types of Production of Pioneer Industry Eligible for the Corporate Income Tax Reduction Facility as well as Guidelines and Procedures for the Granting of Corporate Income Tax Reductions are guidelines for providing corporate income tax reduction facilities in Indonesia. The provision of income tax reduction facilities is implemented through the fulfillment of the required documents, as well as an assessment by BKPM so that taxpayers can be declared to meet the criteria of the pioneer industry. In addition, in the attachment to the Regulation of the Investment Coordinating Board of the Republic of Indonesia Number 7 of 2020 concerning Details of Business Fields and Types of Production of Pioneer Industry Eligible for the Corporate Income Tax Reduction Facility as well as Guidelines and Procedures for the Granting of Corporate Income Tax Reductions are explained regarding the details of the business fields and types of production of each pioneer industry scope, format of the application form for the corporate income tax reduction facility and technical instructions for filling out the application form for the corporate income tax reduction facility, the format of the details of the taxpayer’s fixed assets, the format of the power of attorney, the format of the receipt, the format of the rejection letter on the application for the corporate income tax reduction facility, and the format of the decision form of the corporate income tax reduction.
[[1]] .Article 3 letter (1) Minister of Finance Regulation Number 130 / PMK.010 / 2020 concerning the Granting of Corporate Income Tax Reduction Facilities.
[[2]] Appendix I Regulation of the Investment Coordinating Board of the Republic of Indonesia Number 7 of 2020 concerning Details of Business Fields and Types of Pioneer Industry Production and Procedures for Providing Corporate Income Tax Reduction Facilities.
[[3]] Regulation of the Investment Coordinating Board of the Republic of Indonesia Number 7 of 2020 concerning Details of Business Fields and Types of Pioneer Industry Production and Procedures for Providing Corporate Income Tax Reduction Facilities.
