JAKARTA (TheInsiderStories) – Indonesian government has said it will release tax super deduction up to 200 per cent in May for companies carrying out Research and Development (R&D) activities, aim the business to have the opportunity for the first time to claim a new tax relief, according to Minister of Industry Airlangga Hartarto.
“The rules have been discussed with the Coordinating Minister for Economic Affairs and Finance Minister have been approved,” Hartarto said on Friday (27/4).
This policy is expected to spur R&D activities as well as the development of human resources (SDM) to support the fourth generation industries (industry 4.0) development. This incentive will complement two other incentives, tax holidays and tax allowances, which the revised regulatory results will take effect immediately.
Industry 4.0 is a term that refers to the fourth industrial revolution in manufacturing and industry. It includes major innovations in the digital technology, biology and hardware automations, and also implies that cyber-physical systems can make their own basic decisions, hence becoming increasingly self-ruling.
In the “Making Indonesia 4.0” roadmap five sectors are named priority sectors: food and drinks, automotive, textile, electronics, and chemicals. These five sectors are all key sectors in the world economy and Indonesia should become among the leading global players in these sectors. As such, these sectors are envisaged to boost the country’s exports in the future and cause a thriving role of the manufacturing sector towards Indonesia’s gross domestic product (GDP).
In a bid to attract more investment to support the country’s economic growth, Indonesia recently issued a new regulation granting a 100 percent Corporate Income Tax (CIT) cut to new FDI-backed businesses.
Further, the new regulation grants tax holidays to new investors in any of the 17 pioneer industries including transportation, telecommunications, robotic components, oil and gas refinery, train engines, medical devices, pharmaceutical raw materials, power plant machinery, and processing of metals and agricultural products among others.
Pioneer industries are those that create added value, introduce advanced technology and have strategic value for the national economy. Previously, the provision was available to only eight such industries.
Under the latest regulation, the newly established companies with a minimum investment of Rp500 billion (US$36.4 million) can avail 100 percent CIT exemption for a period in proportion to the scale of their investment.
Investments starting from Rp500 billion (US$36.4 million) up to under Rp1 trillion (US$72.5 million) can enjoy exemption from CIT for the first five years, while those investing more than Rp30 trillion (US$2.2 billion) can enjoy a maximum CIT exemption for 20 years. In addition, investors can enjoy a 50 percent tax cut in the transition period of two years, following the expiry of the initial the tax holiday.
Earlier, the rate of tax allowance varied from 10 percent to 100 percent for a maximum of 15 years, and only those companies with a minimum investment of Rp1 trillion (US$72.5 million) could avail such benefit.