Member Article

The Minister of Finance has issued Regulation No. 130/PMK.011/2011 of 2011 on Income Tax Exemptions and Tax Reductions for Business Entities (“MOF 130/2011”) which constitutes an implementing regulation for Article 30 of Government Regulation No. 94 of 2010 on Taxable Income Calculations and Income Tax Payments for a Fiscal Year. This regulation has been in force since 15 August 2011.

Income tax exemptions can be granted to a business entity for 5 to 10 fiscal years provided that the business entity satisfies the following requirements:

1. the business entity is categorized as a ‘pioneer industry’ which includes (a) basic metals production, (b) oil refineries, (c) machinery production, (d) renewable resources industry and (e) telecommunication equipment production (the Minister of Finance may also grant a tax exemption to other industries or businesses at his/her own discretion);
2. the business entity must have an investment value of at least IDR 1 trillion (approximately US$ 90 million);
3. the business entity must place at least 10% of its total investment as meant in point (ii) above in an Indonesian bank, and no funds may be withdrawn before the commencement of its operations; and
4. the business entity must be an Indonesian legal entity.

The above tax exemptions and reductions can only be enjoyed after the business entity has completed its entire investment and commenced commercial activities. The Ministry of Trade and BKPM will conduct eligibility studies on the applicant, and final approval or rejection will be done by the Minister of Finance.

 

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