58 firms to get tax incentives

The Jakarta Post, Jakarta

In a bid to further promote new investment and business expansion, the government has agreed to provide special tax incentives to 58 companies.

"We have already approved the applications for tax facilities, and these approvals have been sent to the Investment Coordinating Board (BKPM) and to each of the companies," said the Finance Ministry's director general of taxes, Darmin Nasution, in Jakarta as quoted by Antara on Monday.

Darmin said the tax facilities had been extended to the 50 companies under Government Regulation No. 1/2007.

Under this regulation, a company can write off 30 percent of the total cost of an investment against tax. In order to secure this incentive, they have to apply to the Investment Coordinating Board (BKPM).

"So, if the total investment is Rp 100 billion, a company can deduct 30 percent of the total, or Rp 30 billion, from its corporate income tax," he said, adding that this would be spread out over the number of years the company needed to fully realize its investment.

"If the investment period is six years, then the company can deduct Rp 5 billion from its taxable income every year for six years.

Aside from the tax allowance, the regulation also allows certain companies to accelerate amortization to a maximum of 10 years, and offers reduced income tax of 10 percent on dividends paid to non-resident taxpayers.

Darmin did not name the companies, but said that notifications of the extending of the facilities would soon be sent to the tax offices within whose regions the companies were located.

"What the companies have to do now is visit the tax offices in whose areas they are located, and the designated tax officials will give effect to this facility," Darmin said.

For other companies that want the same treatment, he said, they should apply to the BKPM which will examine whether they are eligible.

The government is prioritizing 15 business sectors: food, textiles, pulp and paper, rubber, steel products, electrical generators, electronics and telematics, raw iron and steel, non-iron metal manufacturing, machineries and components, land transportation, shipbuilding, industrial chemicals and other chemicals.

Indonesian Chamber of Commerce and Industry (Kadin) chairman Mohammad Hidayat hailed the tax service's approvals, saying that it was not before time.

He also asked the tax service to increase the number of categories of companies eligible for tax allowances. "Incentives should also be given to those operating in remote areas, to business sectors that are labor intensive and to those that promote the use of local materials," he said.

Hidayat said that Kadin would soon meet with the government to discuss the sectors eligible for incentives in greater detail.