Implementing Minimum Tax Provisions, Indonesia Changes Tax Holiday Scheme

JAKARTA. The government will change the scheme of providing tax exemption facilities or tax holidays, as a result of the implementation of the 15% global minimum tax provision.

Quoting cnbcindonesia.com, Head of the Fiscal Policy Agency of the Ministry of Finance Febrio Kacaribu revealed that the Indonesian government will not be able to provide tax facilities up to 0% in the future.

However, Febrio did not want to elaborate on the details of the changes to the Tax Holiday scheme. In general, he only said that with a minimum provision of 15%, the Income Tax rate cannot be below that. 

In addition, he mentioned that alternative incentives will be introduced to replace the Tax Holiday to attract investment. This is because investment is still regarded as one of the key factors in boosting the national economy.

Among these alternatives are non-fiscal incentives included in the policy package. Potential incentives could involve the establishment of special economic zones and the provision of permit acceleration facilities to appeal to investors.

As we know, Indonesia recently signed the Multilateral Instrument Subject to Tax Rule (MLI STTR), one of the tools for implementing Global Taxation Provisions, particularly those outlined in Pillar 2, related to the imposition of a global minimum tax.

By signing the MLI STTR, Indonesia is now committed to applying additional taxes on transactions such as royalty payments, interest, and certain other types of services until they reach the minimum threshold of 9%.