JAKARTA (TheInsiderStories) – Government continues stimulate investors to bring more money to Indonesia by provide fiscal incentives to them. After cutting property income taxes, now the country offered an incentives manufacturing sector.

Minister of Industry Airlangga Hartato expect, the new policy to be implemented starting July 2019.

“The breakthrough was presented by President Joko Widodo at the limited cabinet meeting a few days ago. Especially facilities to support exports and investment,” he said in an official statement on Monday (06/25).

The ministry noted, the manufacturing industry is one sector that contribute significantly to Indonesian investment. In the first quarter (1Q) of 2019, investment from this sector contributed Rp44.06 trillion (US$3.10 billion).

The four sectors that deposited the largest investment value were the food industry amounting to Rp12.77 trillion, base metal industry Rp11.46 trillion, chemical industry and goods from chemicals Rp3.58 trillion, and the non-metal excavation industry Rp2.59 trillion.

While from export side, food industry recorded an export value of $8.25 billion or contributed 20.95 percent to the total processing industry exports. Furthermore, base metals were $5.09 billion (12.65 percent), chemicals were $4.12 billion (10.46 percent), paper were $2.75 billion (6.98 percent), and paper products were$ 2.36 billion (6 percent).

Hartato said fiscal incentives are needed in an effort to encourage investment and boost the the manufacturing industry growth in the country, as well as to boost the competitiveness around the globe.

The super deductible tax policy is one of the government’ efforts to foster a conducive business climate for the growth of the country’ industrial sector. He revealed that the implementation of the super deductible tax policy will support the Making Indonesia 4.0 initiative.

The benefits of this policy for industry players include fiscal incentives tax allowances as well as tax holidays. Hartato said it will accelerate the national manufacturing industry and prepare it for the Fourth Industrial Revolution.

In the new tax relief scheme, the government proposed up to 200 percent tax relief for industries that invest in vocational education. As for those involved with R&D activities in order to create innovation, the ministry proposed up to 300 percent tax relief. Both of these are included in the priority strategy of the Making Indonesia 4.0 roadmap.

If for instance a company built an innovation center for R&D in Indonesia and they invested around Rp1 billion, the Indonesian government will provide a reduction of taxable income worth Rp3 billion in over five years. The company will be receiving a reduction that is three times the cost of their initial investment.

On the other hand, if a company cooperates and works with vocational high schools to provide vocational training, industrial equipment, and apprenticeship activities at a cost of Rp1 billion, the government will provide an Rp2 billion taxable income to the company.

Property and Vehicle Tax

Furthermore, in order to encourage investment in the property sector, the government has issued five policy packages such as adjustments to the tax-free tax value-added limits in the area and tax exemptions on houses/buildings affected by natural disasters.

The government rising limit of the value of luxury building as a subject for income and luxury goods sales tax, from Rp5 billion to Rp30 billion and reduce income tax rates from 5 percent to 1 percent. Its also simplify the validating land or building sales tax process from 15 days to 3 working days.

Under the regulation, the provisions for imposing a luxury income tax of 1 percent only apply to houses and their land, whose selling price or transfer price is more than Rp30 billion. The luxury goods income tax also applies to buildings with an area of ​​more than 400 square meters.

This provision also applies to apartments, condominiums and the like, with a selling price or transfer of more than Rp30 billion with a building area of ​​more than 150 square meters.

Then, for the vehicles fewer than 10 people, with a selling price of more than Rp2 billion or with a cylinder capacity of more than 3,000 cc and two-wheeled or three-wheeled motorized vehicles, with a selling price of more than Rp300 million or with a cylinder capacity of more than 250cc.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com