SPECIAL INDUSTRIES & ACTIVITIES
In Indonesia, there are specific concessions based on contracts available to certain industries. These contracts include Production Sharing Contracts (PSCs), Contract of Works (CoWs), and Mining Business Licences (Izin Usaha Pertambangan or IUP). Companies operating in upstream oil and gas sectors typically determine Corporate Income Tax (CIT) according to their PSC agreements. These PSCs may adhere to either 'conventional' terms, where CIT is essentially determined by cost recovery principles, or 'gross split' terms, which align more closely with general CIT regulations. Similarly, companies involved in metal, mineral, and coal mining operate under CoWs, which dictate CIT calculations, deductible expenses, and taxable income methods. It's important to note that such contract-based concessions are no longer granted to new mining projects since the implementation of the Mining Law in 2009. This law mandates that general tax laws and regulations govern mining projects, although specific tax provisions exist for mining IUPs. Furthermore, certain industries like shipping and airlines are subject to predetermined profit margins for taxation purposes.
6.1 Special Economic Zones (Kawasan Ekonomi Khusus/KEK)
Taxpayers engaged in business activities within Special Economic Zones (SEZs) may benefit from tax incentives, contingent upon the primary activities stipulated for each SEZ. The designation of an area as an SEZ is specified in dedicated government regulations.
Corporate Income Tax (CIT) reductions may be extended to taxpayers conducting primary activities within an SEZ. Those denied CIT reduction privileges and taxpayers engaged in alternative activities within an SEZ may seek comparable inbound investment incentives through income tax concessions.
|
Category |
SEZ Area |
|
Tax Holiday |
Tax Holiday applies on income received or obtained from the main activities carried out |
|
Tax Allowance |
Tax Allowance applies (for activities outside the KEK's main activities) regulated in PMK 237/2020 jo 33/2021 |
|
VAT or VAT and Luxury Tax |
VAT or VAT and Luxury Goods Tax Not Collected on the delivery of certain Tangible Taxable Goods from TLDDP, free zones and bonded storage places to Business Entities and/or Business Actors; import of certain Tangible Taxable Goods into KEK by Business Entities and/or Business Actors; import of Consumer Goods into tourism SEZs by Business Entities and/or Business Actors; etc |
|
Import Tax |
· Exemption from import duties in the context of SEZ construction or development. · For SEZs that have completed their construction and development stages, import duties are waived for consumer goods and there is a suspension of import duties for business sectors in the SEZ · For monitoring purposes, part or all of the SEZ can be designated as a Customs Zone |
|
Tax |
Exempted (raw materials or auxiliary materials in the manufacture of final products that are not excisable goods) |
|
Income Tax 22 on Imports |
· Import Tax Not Collected on import of capital goods in the context of construction or development of SEZs. · For SEZs that have completed their construction and development stages, Import Framework Tax is not levied. |
|
Inland FTA |
Import duty rate of 0% applies (TKDN of at least 40%) |
|
Goods Traffic |
Goods subject to import and export provisions may be granted exemptions and/or relaxations. |
|
Use of Foreign Workers |
The validity period of RPTKA for work more than 6 months, a maximum of 2 years and can be extended |
|
Immigration |
· VKSK is valid for 30 days and can only be extended once (maximum 30 days). · The Stay Permit is limited to a maximum of 2 years, each extension is given for a maximum of 2 years, the maximum overall stay permit is not more than 6 |
|
Land and Spatial Planning |
In accordance with applicable laws and regulations |
|
Business Licensing (tms Basic Requirements) |
· For regions that already have RDTR, business actors can use the automatic KKKPR mechanism, but if the area does not have RDTR, they can use PKKPR (from the results of spatial studies, consideration of the Spatial Planning Forum, and Pertek). · Issuance of risk-based business licenses in accordance with SLA · Business Actors fulfill environmental approvals (SPPL/UKL-UPL/Amdal) according to risk categories · In the event that a Business Actor requires the construction of a building, the Business Actor is obliged to obtain a PBG in accordance with the applicable laws and regulations |
|
Others |
- |
6.2 Integrated Economic Development Zones (Kawasan Pengembangan Ekonomi Terpadu/KAPET)
Enterprises operating within KAPETs may avail themselves of tax incentives akin to those offered for inbound investments under income tax concessions. The delineation of an area as a KAPET is outlined in a specific Presidential Decree.
Additionally, Entrepreneurs in a Bonded Zone (Pengusaha di Kawasan Berikat/PDKB) within a KAPET may be eligible for tax benefits in the following categories:
|
Tax Benefit |
Description |
|
VAT and LST Exemption on Imports |
Exemption from Value Added Tax (VAT) and Luxury Sales Tax (LST) on the importation of specified goods. |
|
Waiver of Article 22 Income Tax on Imports |
Waiver of Article 22 Income Tax on the importation of designated goods. |
|
Import Duty Deferral |
Deferral of import duty on capital assets, equipment, and materials for processing. |
|
VAT and LST Exemption on Domestic Purchases |
Exemption from VAT and LST on domestic purchases of certain goods. |
6.3 Bonded Stockpilling Area
The Bonded Stockpiling Area, known as Tempat Penimbunan Berikat, encompasses various zones and facilities, including Bonded Zones, Bonded Warehouses, Duty-Free Shops, and more. For brevity, we will focus on three significant areas in the sections below.
These areas offer tax benefits such as non-collection of VAT and LST on specific imported or domestically purchased goods, exemption from Article 22 Income Tax, postponement of import duties, and excise duty exemption on certain goods.
6.3.1 Bonded Zones
The Bonded Zones, or Kawasan Berikat, cater to manufacturing companies geared towards exports, import substitution, and supporting downstream industries. They are also suitable for specific sectors like aircraft, shipbuilding, railways, and defense. A domestic sales quota of 50% of the previous year's export realization value and/or sales value to other Bonded Zones, Free Trade Zones, or Special Economic Zones applies
|
Category |
Bonded Zone |
|
Tax Holiday |
Explaining the general provisions of Tax Holidays (18 pioneer industries) |
|
Tax Allowance |
Applying general Tax Allowance provisions (specific sectors and locations) |
|
VAT or VAT and Luxury Tax |
VAT or VAT & Luxury Goods Tax Not Collected |
|
Import Tax |
Import Duty Suspended |
|
Tax |
Excise exemption |
|
Income Tax 22 on Imports |
Not Collected |
|
Inland FTA |
- |
|
Goods Traffic |
Provisions for the entry of goods prohibited from import and export of goods prohibited from export are applied |
|
Use of Foreign Workers |
· RPTKA validity period: maximum 5 years and can be extended. · For foreign workers who have positions as directors or commissioners, it is given once and is valid as long as the foreign worker concerned is a director or commissioner. |
|
Immigration |
· VKSK can be granted for a period of 30 days and can be extended 5 times with a period of 30 days each based on the recommendation of the SEZ Administrator. · Foreigners who will make a visit to SEZs may be granted a visit visa for several trips. · Limited Stay Visa to Foreigner who intends to stay limited stay in SEZ may be granted in the context of start-up business activities in SEZ, following the spouse of limited Stay Permit holder, following parents for legal children under 18 years old, second home; or owning a house in SEZ. · The limited Stay Permit is for a maximum of 5 years, each extension is given for a maximum of 5 years, the maximum overall stay permit is not more than 15 years. |
|
Land and Spatial Planning |
Land and spatial facilities and facilities include: 1. Implementation of land acquisition (can use land acquisition schemes for the public interest) 2. Land services and special procedures for granting, extending, and renewing land rights 3. Facilitation and coordination of spatial planning. |
|
Business Licensing (tms Basic Requirements) |
· Approval of the suitability of space utilization activities to Business Entities and Business Actors in SEZs is given through the OSS system without going through the stages of evaluating the proposed documents for space utilization activities (PKKPR automatically). · Issuance of business license 2 hours · Procedures for determining the fulfillment of criteria and submitting applications for offshore income tax facilities in SEZs have been regulated (BKPM Regulation No. 2 of 2021). · Business Actors conducting activities in SEZs are required to prepare a detailed RKL-RPL based on the SEZ RKL-RPL in the context of environmental approval. · Business Entities and/or Business Actors do not require Building Approval (PBG) as long as the Business Entity has established building guidelines or estate regulations. |
|
Others |
The establishment of industrial SEZs is also the establishment of Industrial Estates |
6.3.2 Bonded Warehouses
These facilities, known as Gudang Berikat, are designed for storing imported goods that can undergo one or more simple processing activities. The goods are then released within a specified period.
6.3.3 Bonded Logistic Centre
Similar to Bonded Warehouses, the Bonded Logistic Centre, or Pusat Logistik Berikat, serves as a storage facility. It accommodates imported goods from outside the Customs Area as well as goods from within Indonesia. These goods can undergo simple processing activities within three years of entry into the Bonded Logistic Centre.
|
Category |
Bonded Logistic Centre |
|
Tax Holiday |
Explaining the general provisions of Tax Holidays (18 pioneer industries) |
|
Tax Allowance |
Applying general Tax Allowance provisions (specific sectors and locations) |
|
VAT or VAT and Luxury Tax |
VAT or VAT & Luxury Goods Tax Not Collected (entry comes from PLB, TPB other than PLB, and other areas within the customs area) |
|
Import Tax |
Import Duty Suspended |
|
Tax |
Excise exemption (for consumption needs of people living in free zones) |
|
Income Tax 22 on Imports |
Not Collected |
|
Inland FTA |
- |
|
Goods Traffic |
Provisions for the entry of goods prohibited from import and export of goods prohibited from export are applied |
|
Use of Foreign Workers |
· RPTKA validity period: maximum 5 years and can be extended. · For foreign workers who have positions as directors or commissioners, it is given once and is valid as long as the foreign worker concerned is a director or commissioner. |
|
Immigration |
· VKSK can be granted for a period of 30 days and can be extended 5 times with a period of 30 days each based on the recommendation of the SEZ Administrator. · Foreigners who will make a visit to SEZs may be granted a visit visa for several trips. · Limited Stay Visa to Foreigner who intends to stay limited stay in SEZ may be granted in the context of start-up business activities in SEZ, following the spouse of limited Stay Permit holder, following parents for legal children under 18 years old, second home; or owning a house in SEZ. · The limited Stay Permit is for a maximum of 5 years, each extension is given for a maximum of 5 years, the maximum overall stay permit is not more than 15 years. |
|
Land and Spatial Planning |
Land and spatial facilities and facilities include: 1. Implementation of land acquisition (can use land acquisition schemes for the public interest) 2. Land services and special procedures for granting, extending, and renewing land rights 3. Facilitation and coordination of spatial planning. |
|
Business Licensing (tms Basic Requirements) |
· Approval of the suitability of space utilization activities to Business Entities and Business Actors in SEZs is given through the OSS system without going through the stages of evaluating the proposed documents for space utilization activities (PKKPR automatically). · Issuance of business license 2 hours · Procedures for determining the fulfillment of criteria and submitting applications for offshore income tax facilities in SEZs have been regulated (BKPM Regulation No. 2 of 2021). · Business Actors conducting activities in SEZs are required to prepare a detailed RKL-RPL based on the SEZ RKL-RPL in the context of environmental approval. · Business Entities and/or Business Actors do not require Building Approval (PBG) as long as the Business Entity has established building guidelines or estate regulations. |
|
Others |
The establishment of industrial SEZs is also the establishment of Industrial Estates |
6.4 Free Trade Zones
Free Trade Zones (Kawasan Perdagangan Bebas) are designated areas where goods entering and being exchanged among companies within the zone can benefit from tax privileges. The designation of an area as an FTZ is determined by a specific Presidential Decree.
|
Category |
Free Trade Zones |
|
Tax Holiday |
Explaining the general provisions of Tax Holidays (18 pioneer industries) |
|
Tax Allowance |
Applying general Tax Allowance provisions (specific sectors and locations) |
|
VAT or VAT and Luxury Tax |
Exemption from VAT or VAT & Luxury Tax |
|
Import Tax |
· Import Duty Exemption · The masterlist is issued by PTSP BKPM |
|
Tax |
Excise exemption |
|
Income Tax 22 on Imports |
Not Collected |
|
Inland FTA |
Valid |
|
Goods Traffic |
Provisions for the entry of goods prohibited from import and export of goods prohibited from export are applied |
|
Use of Foreign Workers |
· RPTKA validity period: maximum 5 years and can be extended. · For foreign workers who have positions as directors or commissioners, it is given once and is valid as long as the foreign worker concerned is a director or commissioner. |
|
Immigration |
· VKSK can be granted for a period of 30 days and can be extended 5 times with a period of 30 days each based on the recommendation of the SEZ Administrator. · Foreigners who will make a visit to SEZs may be granted a visit visa for several trips. · Limited Stay Visa to Foreigner who intends to stay limited stay in SEZ may be granted in the context of start-up business activities in SEZ, following the spouse of limited Stay Permit holder, following parents for legal children under 18 years old, second home; or owning a house in SEZ. · The limited Stay Permit is for a maximum of 5 years, each extension is given for a maximum of 5 years, the maximum overall stay permit is not more than 15 years. |
|
Land and Spatial Planning |
Land and spatial facilities and facilities include: 1. Implementation of land acquisition (can use land acquisition schemes for the public interest) 2. Land services and special procedures for granting, extending, and renewing land rights 3. Facilitation and coordination of spatial planning. |
|
Business Licensing (tms Basic Requirements) |
· Approval of the suitability of space utilization activities to Business Entities and Business Actors in SEZs is given through the OSS system without going through the stages of evaluating the proposed documents for space utilization activities (PKKPR automatically). · Issuance of business license 2 hours · Procedures for determining the fulfillment of criteria and submitting applications for offshore income tax facilities in SEZs have been regulated (BKPM Regulation No. 2 of 2021). · Business Actors conducting activities in SEZs are required to prepare a detailed RKL-RPL based on the SEZ RKL-RPL in the context of environmental approval. · Business Entities and/or Business Actors do not require Building Approval (PBG) as long as the Business Entity has established building guidelines or estate regulations. |
|
Others |
The establishment of industrial SEZs is also the establishment of Industrial Estates |
6.5 Industrial Zones (Kawasan Industri/KI)
Industrial Zones (Kawasan Industri or KIs) are designated areas determined and licensed by the government. The tax incentives provided depend on the classification of the Industrial Development Area (IDA) (Wilayah Pengembangan Industri or WPI) within the KI, which include:
- Advance IDA (WPI Maju or WPIM).
- Developing IDA (WPI Berkembang or WPIB).
- Potential I IDA (WPI Potensial I or WPIP I).
- Potential II IDA (WPI Potensial II or WPIP II).
Here are the tax incentives available for each type of WPI:
|
Tax and customs facility |
WPIM* |
WPIB |
WPIP I |
WPIP II |
|
CIT reduction of 10% to 100% of the CIT due for 5 to 15 years from the start of commercial production |
Yes |
– |
– |
Yes |
|
Income tax facilities similar to inbound investment incentives under the income tax concessions |
Yes |
Yes |
Yes |
– |
|
VAT exemption on the imports/purchase of machines and equipment (excluding spare parts) that are directly used to produce VATable goods |
Yes |
Yes |
Yes |
Yes |
|
Import duty exemption on the imports of machines or materials that are used to produce goods/services** |
Yes |
Yes |
Yes |
Yes |
Notes
* WPIM may choose to apply income tax facility in the form of CIT reduction or tax allowance.
** The applicable period of import duty exemption varies depending on the KI classification and the business cycle of the respective taxpayer (e.g. construction or developing stage).
Source: PWC
6.6 Carbon Tax
Carbon taxes are levied on carbon emissions, which have adverse effects on the environment. Those subject to carbon tax include individuals or businesses that purchase goods containing carbon or engage in activities resulting in a certain level of carbon emissions over a specific period. Participants in carbon taxation include both collectors of carbon tax and the aforementioned subjects. These parties are obligated to report, pay, and record their carbon tax obligations.
The carbon tax rate must be at least equivalent to the carbon price in the domestic carbon market per kilogram of CO2e, with a minimum rate of IDR 30 per kilogram of CO2e. Carbon tax is payable upon the purchase of carbon-containing goods, at the conclusion of each calendar year in which carbon-emitting activities occur, or at other designated intervals. The implementation of carbon tax will be phased in accordance with market readiness.
Taxpayers involved in carbon emissions trading, offsetting, and other mechanisms as stipulated by environmental laws and regulations may qualify for reductions in carbon tax and/or other incentives for fulfilling their carbon tax obligations.
6.7 Businesses players in IKN
In 2023, the government introduced a Government Regulation to offer support for projects within the National Capital to be named 'Nusantara' (Ibu Kota Negara bernama Nusantara or IKN). These encompass capital investment incentives under the jurisdiction of the Central Government (including income tax, VAT/LST, and import duties) and incentives under the authority of the IKN Authority (special taxes and revenues, as well as facilitation, land allocation, and infrastructure for investment activities within the IKN).
|
Tax Incentive |
Description |
|
Corporate Income Tax (CIT) Reductions |
CIT reductions in the IKN and Partner Regions. |
|
CIT Reductions and Withholding Tax (WHT) Exemptions |
CIT reductions and WHT exemptions in Financial Centers. |
|
CIT Reductions for Headquarters |
CIT reductions for establishing/relocating headquarters/regional offices to the IKN. |
|
Super Deductions for Internships/Vocational Training |
Super deductions for internship programs and/or vocational training. |
|
Super Deductions for R&D Activities |
Super deductions for Research and Development (R&D) activities. |
|
Super Deductions for Donations/Facilities |
Super deductions for donations and/or constructing public, social, and/or other non-profit facilities. |
|
Final Article 21 Income Tax Facilities |
Final Article 21 Income Tax facilities funded by the government for specific employees in the IKN. |
|
Zero-rated Final Tax for MSMEs |
Zero-rated final tax for micro, small, and medium enterprises. |
|
Income Tax Reduction on L&B Transfers |
Income tax reduction on the transfer of land and/or building (L&B) rights. |
|
Non-collection of VAT |
Non-collection of VAT for certain deliveries or imports. |
|
LST Exemption |
LST exemption for certain deliveries. |
|
Import Duty Exemptions and VAT Non-collection |
Import duty exemptions, Article 22 exemptions, and/or non-collection of VAT for certain imports. |
