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 BKPM Regulation No. 7/2020 is also in lieu of the previous regulation that has been repealed, namely Regulation of the Investment Coordinating Board No. 6 of 2018 concerning Guidelines and Procedures for Licensing and Investment Facilities as well as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]]:
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]]:
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.