Indonesia To Offer Tax Cut For Firms Going Public

by Mary Swire, Tax-News.com, London

14 August 2007

The Indonesian government is set to issue a decree by the end of this month that will grant a tax cut of up to 5% to companies that sell their shares through an initial public offering (IPO).

According to a report by AFX News, the Finance Ministry's director general for taxation Darmin Nasution said that companies floating up to 40% of their shares will be offered a tax cut of between 2% and 3%, while those offering more than 50% of their shares via an IPO will be granted a tax cut of 5%.

The move is part of a plan to encourage companies to list locally, the report stated.

The Indonesian government has been keen to use tax breaks to attract higher investment, particularly in projects to improve the national infrastructure.

In February 2007, legislation granting tax breaks to companies in fifteen industries to attract higher volumes of investment to Indonesia came into force.

Companies in, among others, the textile, chemical, pulp and paper board, pharmaceutical, rubber, iron and steelmaking, electronics, and automotive component industries 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.

In 2005, Indonesian President Susilo Bambang Yudhoyono announced that government was targeting an additional US$15 billion in investment over five years to help finance various infrastructure projects such as new roads and power plants, and to lift some 40 million Indonesians out of poverty.

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