Tax Holiday Provisions
New ministerial regulation facilitating tax holidays
By Christ Ponderosa
Friday, May 18, 2018
Minister of Finance Sri Mulyani recently signed a Regulation of the Minister of Finance facilitating the provision of tax holidays (Ministerial Regulation No. 35 Year 2018).
Under the regulation, the reduction rate applied is 100 percent (Article 2 paragraph (2)), while previously the reduction rate applied ranged between 10 and 100 percent. The tax holiday period is adjusted based on investment value (Article 2 paragraph (3)):
- Five years for investment with value between Rp 500 billion and Rp 1 trillion.
- Seven years for investment totaling between Rp 1 trillion and Rp 5 trillion.
- 10 years for investment amounting between Rp 5 trillion and Rp 15 trillion.
- 15 years for investment with value of between Rp 15 trillion and Rp 30 trillion.
- 20 years for investment with value of more than Rp 30 trillion.
The regulation also provides for a transitional period of three years following the expiry of the tax holiday period. Companies are entitled to 50 percent reduction within the two years following the expiry, and will only be subjected to full tax rates in the third year. The number of industries eligible for tax holidays is increased to 17 types (Article 3 paragraph (2)).
Finally, the regulation also streamlined the application procedure, which shortened the expected processing time from 45 days to only five days after the request, along with all supplementing documents are submitted completely (Article 6). Please refer to Article 4 for the request requirements and supplementing documents.
The enactment of this regulation revoked the Regulation of the Minister of Finance No. 159 Year 2015 and No. 103 Year 2016. The regulation was signed on March 29, 2018 and it was enacted starting April 4, 2018.