Regulation Update
Bonded Zone and KITE Entrepreneurs Get Additional Incentives

Thursday, 16 April 2020

Bonded Zone and KITE Entrepreneurs Get Additional Incentives

The government provides additional facilities for companies in the Bonded Zone (Kawasan Berikat/KB) and companies that obtain Import Facility for Export Purposes (Kemudahan Impor untuk Tujuan Ekspor/KITE) which are affected by the 2019 Corona Virus Disease pandemic (Covid-19). These fiscal facilities are given to maintain the employment and promote export. 

These additional facilities are a combination of fiscal incentives and simplification of procedures, as stipulated in the Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) Number 31/PMK.04/2020 on Additional Incentives for Bonded Zone Companies and/or Companies with KITE to Handle the Corona Virus (Covid-19) Disaster, which is applicable since it was promulgated on 13 April, 2020.  

Bonded Zone 

If the government had previously limited the sales quota of company production in bonded zone to a maximum of bonded zone companies to the local market by a maximum of 50%of the export value, with the issuance of PMK Number 31/PMK.04/2020 the limit is excluded as long as it does not reduce the sales quota for the year.   

Related to physical inspection by customs authority, the foregoing inpection was carried out randomly by officers based on risk management and self-service and was only allowed for companies that received independent bonded zone facility. With additional incentives, physical inspection is performed selectively using information technology and if bonded zone is included in the area affected by the Large Scale Social Restrictions (Pembatasan Sosial Berskala Besar/PSBB) policy, Bonded Storage Area (Tempat Penimbunan Berikat/TPB) can be given self-service approval.

The next facility is specialized in the importation of medical goods for the purpose of handling Covid-19, such as disinfectants; mask; personal protective equipment (Alat Pelindung Diri/APD); body temperature gauge; and other items for handling Covid-19. Previously, imports of medical goods were not excluded from the imposition of import duty, import tax, and import provisions in general. In the current state of national disaster, the importation of medical goods is suspended from the imposition of import duty and import tax, as long as these items are used in the bonded zone.

Then, the importation of goods from within the country to bonded zone - to be processed and then exported - is free of Value Added Tax (VAT) or sales tax on luxury goods (Pajak Penjualan atas Barang Mewah/PPnBM). Formerly, the import of local goods was the object of VAT or PPnBM.

The last policy related to bonded zone that the government allows the delivery of production results to be processed or combined with bonded zone or KITE productions. Previously, this practice was forbidden for bonded zone and KITE companies.


The next facility is intended for KITE Exemption companies and KITE Small and Medium Industries (Industri Kecil Menengah/IKM). Previously, the sale of products to the local market was forbidden for KITE Exemption companies and for KITE IKM was only allowed a maximum of 25% of total production. In the current critical conditions, restrictions are relaxed so that entrepreneurs of the KITE Exemption and KITE IKM are allowed to sell their products to the local market a maximum of 50% of the total production.

Another interesting thing is related to the delivery of production results for the handling of Covid-19 to the government or people who get exemption from import duty and import tax in the country. Formerly it was not regulated, through PMK Number 31 / PMK.04 / 2020 the delivery of the production is allowed without reducing local quota sales.

Then, the entry of local goods or from withing customs territory by  KITE exemption companies or KITE IKM-to be processed or combined with the results of production-does not charge for VAT or PPnBM. This facility is only provided to KITE exemption companies or KITE IKM whose products are 100% exported.

Since the time of entry of goods, bonded zone companies are given a maximum of 12 months to process, assemble, and / or install up to export. The deadline can be extended for 12 months in the event that: (a) there is a delay in exports from the buyer, (b) the cancellation of export or replacement of the buyer; and / or (c) there are force majeure conditions such as war, natural disaster, or fire. Furthermore, KITE exemption companies or KITE IKM are required to submit export realization reports not more than 30 days from the expiration of the export deadline or the export extension deadline. If the deadline exceeds, KITE exemption companies and KITE IKM are required to pay VAT or PPnBM which were not collected at the time of entry of goods. (AGS/KEN)


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