The Government of Indonesia has announced that exporters will receive tax relief on the interest earned from deposits in local bank accounts as part of a wider package of measures aimed at supporting the Indonesian Rupiah and encouraging investment.
Finance Minister Bambang Brodjonegoro said that a new regulation has been drawn up to provide lower rates of tax on interest income depending on whether the proceeds from exports are converted into rupiah and how long they are held in a local bank.
At present interest income is taxed at 20 percent. Under the changes, interest earnings from a one-month dollar-denominated account would be taxed at 10 percent. The tax rate falls to 2.5 percent on interest from deposits held for up to six month, and to 0 percent on deposits held for longer than six month.
However, exporters who convert proceeds into rupiah will benefit from a larger tax cut: to 7.5 percent on interest income from bank deposits held for one month; to five percent when the deposit is held for three months; and 0 percent on deposits held for six months.
The change was announced as part of the Government's 2nd Economic Policy Package, which is intended to improve the investment environment by stripping away unnecessary bureaucracy. One of the most eye-catching measures in this package is a new rapid licensing service, under which industrial license application will be processed within three hours.
In announcing the policy package, the Government admitted that complex licensing requirements have been one of the "biggest obstacles" for investors wishing to start a business in Indonesia. The World Bank ranks Indonesia in 120th place out of 189 countries in its 2015 Ease of Doing Business Index and it takes on average 52 days to get a business up and running, compared with an OECD average of nine days. It typically takes 15 days for the Ministry of Industry and Trade to issue a permanent business trading license, 14 days to obtain a company registration certificate, and 14 days to register with the Ministry of Manpower.
