The DGT, on behalf of the Minister of Finance (MoF) and based on the recommendation of the Investment Coordinating
Board (Badan Koordinasi Penanaman Modal/BKPM) Chairman, may provide the following tax concessions to PT companies following their investment in certain designated business areas or in certain designated regions:
- A reduction in net income of up to 30% of the amount invested, prorated at 5% for six years of the commercial production, provided that the assets invested are not transferred out within six years;
- Acceleration of fiscal depreciation deductions;
- Extension of tax loss carry-forwards for up to ten years;
- A reduction of the withholding tax rate on dividends paid to non-residents to 10%.
For new investments (starting in 2012), the tax facilities can only be utilized after the taxpayer has realized at least 80% of its investment plan.
Recommendation from the BKPM Chairman must firstly be obtained, together with the application of the investment approval, before DGT approval for the tax facilities can be sought.
The same tax facilities can be granted by the DGT to companies conducting business in an Integrated Economic Development Zone (Kawasan Pengembangan Ekonomi Terpadu/KAPET). Specifc approval must be obtained from the DGT for these tax facilities. If the company has bonded zone (Kawasan Berikat/KB) status, the tax facilities will also include those typically enjoyed by a KB company, for example:
- Non-collection of Value Added Tax (VAT) and Luxury-goods Sales Tax (LST) on certain luxury goods transactions;
- Exemption from prepaid income tax on the importation of capital goods and other equipment (Article 22) directly related to production activities;
- Postponement of import duty on capital goods and equipment, and goods and materials for processing;
- Exemption from import duty for four years on machinery and certain spare parts.
The designation of an area as a KAPET is set out in a specific presidential decree. Currently there are 14 areas designated as KAPETs.