Recently, the Ministry of Finance issued Regulation number 35/PMK.010/2018 (Regulation 35/2018) on Provision of Corporate Income Tax Reduction Facility. This new regulation supersedes and revokes the Ministry of Finance Regulation number 103/ PMK.010/2016. In this column we will discuss the tax incentives provided to certain pioneering industries and the criteria to obtain such incentives.
The companies eligible for the reduction of corporate income must meet the following criteria:
Companies will need to apply for the corporate income tax facility no later than 1 year after the issuance of the business registration to the Investment Authority (BKPM) for assessment of above criteria. BKPM will issue a recommendation to the Minister of Finance if all criteria are met by the applicant. The Minster will issue a decree for income tax reduction within 5 working days as of the date of receipt of the recommendation from BKPM.
Income tax facility
The corporate income tax facility is a corporate income tax deduction of 100% of the total corporate income tax payable. Under the old regulation, the deduction varied from 10% – 100%. The duration of the reduction of corporate income tax depends on the investment value of the company:
|5 years||Between 500 Billion Rupiah and 1 Trillion Rupiah|
|7 years||Between 1 – 5 Trillion Rupiah|
|10 years||Between 5 – 15 Trillion Rupiah|
|15 years||Between 15 – 30 Trillion Rupiah|
|20 years||More than 30 Trillion Rupiah|
Obligations for Corporate Income Tax Receivers
A company which successfully has obtained the decree for income tax reduction is subject to the following obligations: