Indonesia Grants Industry-Specific Tax Breaks

by Mary Swire, Tax-News.com, Hong Kong

05 January 2007

New legislation granting tax breaks to companies in fifteen industries, in an attempt by the government to attract higher volumes of investment to Indonesia, has come into force.

Director General for Taxation at the Department of Finance, Darmin Nasution told reporters that President Susilo Bambang Yudhoyono signed the decree January 1, with immediate effect.

Companies in, among others, the textile, chemical, pulp and paper board, pharmaceutical, rubber, iron and steelmaking, electronics, and automotive component industries will qualify for the tax breaks, which include a special 10% tax on dividends paid to foreign beneficiaries and accelerated depreciation on investment in fixed assets.

Both domestic and foreign direct investment are eligible for the tax breaks, either for new investment or expansion of existing plants.

However, Nasution said that the incentives are not directly granted, and companies will only receive the tax breaks on the recommendation of the Capital Marketing Coordinating Board and after a verification process has been completed by the Department of Finance.

Companies already enjoying some form of preferential tax treatment in Indonesia, such as those located in special investment zones, will not qualify for the new tax breaks, the official stated.

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