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JAKARTA (TheInsiderStories) – Indonesian government has tightened the fiscal facilities in the form of exemption from import duties and value-added tax (VAT) on imported goods in the context of a work contract and a coal company cooperation agreement, said finance ministry yesterday (08/19).

In the recent regulation PMK No. 116/PMK.04/2019 issued by the ministry, the fiscal authority specifies that the provision of fiscal facilities must include the exemption or relief of import duties on imported goods in the work contract and a coal company cooperation agreement. In addition, the contractor is also required to include the period of release.

This also applies to contractors who want to get a fiscal facilities in the form of VAT exemption. In essence, both facilities in the form of exemption from import duty and exemption from VAT of each contractor need to include it in the contract.

In the previous regulation PMK No.259/PMK.04/2016, the contractor didn’t need to include the provisions regarding the period for granting exemption or relief of import duty and VAT on imported goods in the context of work contracts or cooperation agreements.

“In order to allow the exemption or relief of import duties to be more targeted, and in the context of improving policies, standardization, technical guidance, and harmonizing policies in the field of mining facilities,” article 31 of the regulation said.

Then, “The Director at the Directorate General of Customs and Excise who carries out duties and functions in the field of customs facilities can monitor and evaluate the implementation of the exemption or relief of import duties on imported goods for activities in the context of work contracts or cooperation agreements.”

The government said the implementation of the new policy was carried out following the mineral and coal law which in the implementation of mineral and coal mining business activities, work contracts and work agreements could change the form of mining operations to become a Special Mining Business License.

The regulation also emphasized that, with the granting of the fiscal acquisition period, the facilities in the form of relief or exemption from import duties, including VAT, would be effective from the signing of the contract until the 10th year of production operations.

However, the exemption from import duty can still be given until the end of the contract period for the four types of contracts. First, the contractor of the cooperation agreement whose contract was signed before 1990.

Second, the contractor of the cooperation agreement whose contract includes the provisions regarding the granting of exemption or relief of import duties on imported goods in the framework of the cooperation agreement.

Third, the contractor of the cooperation agreement whose contract does not include provisions concerning the time period for the exemption or relief of the import duties. Fourth, the contractor for a cooperation agreement whose imported goods is state property.

It said the regulation was issued to further improve taxation and customs services in the field of mineral and coal mining, orderly administration, supervision, and legal certainty in providing taxation and customs treatment of imported goods in the context of work contracts or coal mining concession work agreement.

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