President Joko Widodo calls all local leaders to create business friendly policies to accelerate country Ease of Doing Business (EoDB) index. (Photo: President Office)

JAKARTA (TheInsiderStories) – Indonesia’s Ministry of Finance offered some new fiscal incentives to both corporate and individual taxpayers to improve investment climate in the country.

In a statement released on Monday (04/02), the ministry said the government is keen to improve the country’s ranking in the World Bank’s annual flagship report of Ease of Doing Business by offering relaxation in taxations and an eased customs policies.

Indonesia has progressed significantly in deregulating its policies, part of a reason it was able to climb 19 places to rank 72nd in the east of doing business (EODB) index for 2018. However, the administration of President Joko Widodo, is keen to further improve the country’s level and seeks to further deregulate troubling regulations.

The following is the details of the new fiscal incentives:

*) In taxation, the ministry offers a tax holiday scheme, which allow companies in pioneering industry to scrap their obligation to pay corporate income tax for 5-20 years. Companies eligible for such facility are those that invest from a range of Rp 500 billion to more than Rp 30 trillion.

Upon completion of the first period, the government offers a transition period by charging only a half of corporate income tax companies must pay. Corporate entities in Indonesia are taxed at a rate of 25%, whether they secure their revenue from both domestic and international sources.

The preliminary return of tax over payment (restitution) was increased by 900% and some taxpayers can accelerate the revenue process. Meanwhile, the ministry also increase the restitution limit for corporate income taxpayer to Rp 1 billion from previously Rp 100 million and to Rp 100 million from Rp 10 million for personal income tax non-employees. The ministry sets specific criteria for taxpayers considered eligible to receive this incentives.

There are 17 pioneering industries will be able to get the new incentives. New inclusions are producers of pharmaceutical raw materials and robotic components, as well as manufacturers of key components of medical equipment, airplanes, train engines and power plant machinery.

The tax holiday will remain in place for investments in industries such as oil and gas refining, basic metals, information and communication technology equipment and components, main components used in machinery and shipbuilding, as well as some infrastructure projects.

*) In customs area, the ministry said it is committed to improve custom process in the second generation of bonded logistic centers (the government seeks to create eight new bonded logistics center that will serve finished, goods including e-commerce products). The government, since 2016, has been successfully establishing more than 50 bonded logistics zone as part of the first generation of such scheme.

Establishment of bonded logistics center is backed by Government Regulation No. 85 of 2015, which introduces the concept of such facility as a new type of stockpiling areas to improve logistics industry. Such concept is believed to offer some benefits to companies, including reducing dwelling time, offers cost efficiency for logistics handling, and more importantly there are now more imported goods that previously need to be transited in Singapore and Malaysia’s ports could be processed directly in Indonesia.