Regulation Update
Incentive Policy Made Easier, IMB Terms Abolished at KEK

Friday, 13 March 2020

Incentive Policy Made Easier, IMB Terms Abolished at KEK

The Government relaxes the provisions on facilities and ease in Special Economic Zones (Kawasan Ekonomi Khusus/KEK), by issuing Government Regulation (Peraturan Pemerintah/PP) Number 12 of 2020 concerning Facilities in Special Economic Zones, which is a revision of Government Regulation Number 96 of 2015 which is considered to be no longer relevant. This fiscal policy relaxation was carried out to attract investors to invest in KEK, which in turn could boost the national economy. 

In general, there are seven facilities offered to businesses to invest in KEK, namely taxation, tax and excise facilities, goods traffic facilities, employment, land and spatial planning, business licensing, and other facilities. 

Some of the provisions have changed include the type of business that has the right to get facilities.? Previously, only the business sectors which were the main activities and other business sectors in KEK were entitled to receive facilities.? While in the latest regulation, the government describes in details the types of business fields. 

There are 12 business sectors stipulated by the government in the PP issued on 20 February, 2020). Of the 12 business sectors, the National Council (Dewan Nasional KEK) will designate several business sectors as the main business fields, and the rest as other business fields (see chart). 



No 

Old Regulations

New Regulations

1

Business sectors which are the main activities of KEK

KEK development and management

2

Business fields which are other activities (apart from the main activities of KEK) 

Provision of KEK infrastructure

3

Certain upstream to downstream processing industries 

4 

Energy development 

5

Logistic center 

6

Tourism


The second change is related to the type of taxation facilities provided.? Formerly, there were only Income Tax (Pajak Penghasilan/PPh), Value Added Tax (Pajak Pertambahan Nilai/PPN) and Sales Tax on Luxury Goods (Pajak Penjualan atas BarangMewah/PPnBM), customs and excise facilities.? Based on the latest regulations added Import Tax (Pajak Dalam Rangka Impor/PDRI). 
 
In addition, the government does not specifically regulate the requirements for obtaining PPh facilities, whether PPh facilities are not collected, net income reduction facilities, accelerated depreciation and amortization facilities, to longer loss compensation (see table).? The latest regulation only mentions that more technical provisions are regulated in a Minister of Finance Regulation (

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