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Tax incentives for investments in certain industries — Orbitax Tax News & Alerts

From 1 January 2007, by virtue of Government Decree No. 1/2007, the Indonesian government has granted tax incentives to 24 industries provided the conditions stated below are satisfied. The incentives are provided to both domestic and foreign parties, either for new investments or expansion of existing investments.

he industries consist of:

-   15 general industries, e.g. pulp and paper board, chemical, pharmaceutical and rubber; and
-   9 industries in specific areas, e.g. furniture (outside Java Island) and processed food and cement (Papua).

The incentives include:

-   a notional deduction from net profits of 30% of the total investments, which will be spread over 6 years, amounting to 5% of the total investments per annum;
-   accelerated depreciation in fixed assets and amortization;
-   a 10% tax on dividends paid to non-resident beneficiaries; and
-   carry forward of losses between the 6th year and 10th year of operation

To qualify for such incentives:

-   the company must obtain a recommendation from the Capital Marketing Coordinating Board;
-   the company must invest in fixed assets including land for carrying on the business; and
-   the company has not previously obtained tax facilities e.g. facilities provided for companies located in bonded or industrial zones.