The Finance Minister No. 130/PMK.011/2011 regulates that Corporate Taxpayer may have a Tax Holiday within 10 (ten) Fiscal Year and minimum 5 (five) Fiscal Year, starting from the Fiscal Year when the commercial production is commenced. When the facility has been expired, 50% Income Tax Reduction from Income Tax payable within 2 (two) Fiscal Year is given to Taxpayer. However, considering the purpose of maintaining national industry competitiveness and strategic value from certain business activity, in practice, the Finance Minister may give the Income Tax exemption or reduction facility in the period of time exceeding the time limit.
However, Taxpayer who may have the facility is the new Corporate Taxpayer fulfilling the criteria as follows:
a. Taxpayer shall engage in Pioneer Industry, such as:
- basic metal industry,
- manufacturing industry of natural oil and/or organic basic chemical from natural oil and gas,
- machinery industry,
- industry in the renewable resources, and/or
- communication devices industry;
b. Taxpayer has the new capital investment plan which has obtained validation from authorized institution minimum IDR 1,000,000,000,000 (one trillion);
c. Taxpayer allocates its fund in Indonesian bank minimum 10% (ten percent) of the capital investment plan total as stated in letter b, and cannot be withdrawn before the capital investment realization is started; and
d. Taxpayer shall be as an Indonesian legal body in which its validation is determined at the latest 12 (twelve) months before this regulation is stipulated or after this regulation prevails.
Corporate Income Tax exemption or reduction facility may be obtained by Taxpayer as long it meets the following conditions:
a. Taxpayer has realized all of its capital investment; and
b. Taxpayer has produced commercially.
PMK No. 130/PMK.011/2011 also regulates that to obtain the facility of Corporate Income Tax exemption or reduction, Taxpayer shall submit the application to Minister of Industry or the Head of Coordinating Board of Capital Investment (BKPM).
For Corporate Income Tax exemption or reduction facility, the Minister of Industry or the Head of BKPM, after coordinating with the related minister, conveyed a proposal to the Finance Minister, by enclosing the following copies:
a. Tax ID Numbers card;
b. Agreement letter of new capital investment issued by the Head of BKPM, completed by its details; and
c. The slip of fund allocation in Indonesian bank.
The proposal submission shall enclose the investigation on the following:
a. The availability of infrastructure in the investment location;
b. Domestic labor absorption;
c. Study on the criteria fulfillment as pioneer industry;
d. Clear and concrete plan of technology expert stages; and
e. The presence of provision concerning tax sparing in the domicile country.
In case Taxpayer has obtained the Decree of the Finance Minister concerning the provision of the facility, Taxpayer shall submit the report periodically to DGT and the verification committee assigned upon the following matters:
a. Report of fund spending allocated in Indonesian bank; and
b. Report of capital investment realization which has been audited.
As the other facilities in the taxation world, the facility of Corporate Income Tax exemption or reduction can be also revoked, in case Taxpayer:
a. Does not meet the required criteria stipulated; and/or
b. Does not fulfill the report submission provision.
PMK No. 130/PMK.011/2011 also regulates the income received or obtained by Taxpayer having the facility of Corporate Income Tax exemption shall comply with the following provisions that the income received or obtained by Taxpayer shall be:
a. from business activity obtaining Corporate Income Tax exemption, and tax collection and withholding are not conducted within the period of facility provision referring to the period of time stipulated;
b. outside the business activity as stated in letter a, tax collection and withholding are still conducted in accordance with the taxation law.
Taxpayer obtained the Corporate Income Tax exemption or reduction facility still conduct its liability of withholding and collecting tax to other parties referring to taxation law. And, Taxpayer obtained the facility cannot obtain the facility stated in Article 31A of Income Tax Law for certain sectors. Otherwise, Taxpayer obtained the facility stated in Article 31A of Income Tax Law cannot obtain the Corporate Income Tax exemption or reduction facility.
