Indonesia Proposed Amendments to Special Economic Zones Regime and Tax Cuts for Certain Sectors

; posted on
June 26th, 2019

Jakarta - Finance Minister of Indonesia, Sri Mulyani Indrawati, provides information to the media crew about the Government's plan to cut taxes in certain industrial sectors to attract investment.

Lowering Corporate Income Tax

The finance ministry is currently identifying several potential industrial sectors for tax reduction. some of these sectors have different characters, such as the food, beverage, textile, automotive, electronic, and chemical industries. The President himself gives orders to the Ministry of Finance to provide tax reduction facilities that can be immediately implemented and not just fiscal instruments.

The government plans to give a 50% tax exemption for five years, followed by a 25% exemption for two years. Further, tax cuts and incentives also will be provided as these instruments considered promoting investment. Tax cut options being considered include tax holidays, tax allowances, or a reduction in the tax rate to 20%.

With regard to the tax rate reduction, the government will re-consider the measure as it has the potential to lose taxes from the Corporate Income Tax amounting to IDR 53.16 trillion. Therefore rigid measures need to be taken to make sure the decrease in tax revenue will give significant impact to the investment in the designated industries.

Other types of tax planned to be reduced

in addition, the amendment also planned to reduce the bond interest rate for infrastructure from 15% to 5%. The amendment is awaiting the results of the study of the Coordinating Ministry for Economic Affairs in determining how many industry groups will get the tax allowance.

Regarding super tax reduction, especially for motorized vehicles, including electric cars and emission reduction issues, the amendment is awaiting the harmonized regulation can be issued in the near future.

Source: Ministry of Finance Indonesia

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