Investment Procedure : Fiscal Insentive



All investment projects of PMA as well as Domestic Direct Investment or DDI (Penanaman Modal Dalam Negeri or PMDN) projects which are approved by BKPM or by the office of investment in the respective districts, including existing FDI and DDI companies expanding their projects to produce similar product(s) in excess of 30% of installed capacities or diversifying their products, will be granted the exemption of Import Duty so that the final tariffs become 0%. This facility applicable on:

  1. The importation of capital goods namely machinery, equipment, and auxiliary equipment for an import period of 2 years, started from the date of stipulation of decisions on import duty relief.
  2. The importation of goods and materials or raw materials regardless of their types and composition, which are used as materials or components to produce finished goods or to produce services for the purpose of 2 years full production (accumulated production time).
  3. The importation of machines, goods, and materials which:
    • Are not produced in Indonesia.
    • Are produced in Indonesia but they don’t meet the required specifications.
    • Are produced in Indonesia but the quantity is not sufficient for the need of the industry.

The exemption of import duty will also be granted to the importation of capital goods of electricity for an import period of 2 years and can be extended by a maximum 1 year. This facility is not applicable for transmision, distribution, supporting services, and repairing equipment.

For the importation of goods in term of Contract of Work or CoW (Kontrak Karya or KK) or Coal Mining Business Work Agreement (Perjanjian Karya Pengusahaan Pertambangan Batubara or PKP2B) will be granted the exemption and/ or relief from import duty based on the contract.

The application can be requested by attaching recommendation letter from Directorate General of Mineral and Coal, Ministry of Energy and Mineral Resources of the Republic of Indonesia.


Based on the latest Government Regulation No. 18 of 2015, pertaining to Income Tax facilities for investment in certain business sectors and/ or in certain locations, the domestic and foreign investors will be granted tax allowances in certain sector and/ or area. This latest regulation replace its previous preceding Government Regulation No. 52 of 2011.

Facilities provided by the new Government Regulation No. 18 of 2015 are:

  1. Reduction of net income by 30% of the total investment in the form of tangible fixed assets, including any land used for the business main activities, shall be charged for 6 years, respectively at 5% per year calculated from the commencement of commercial production.
  2. Accelerated depreciation on tangible assets and amortization on intangible assets acquired in the framework of new investment and/ or business expansion, with the usefull lives and depreciation rates as well as amortization rates.
  3. The imposition of income tax on dividens paid to any non-resident taxpayer other than the form of permanent establishment in Indonesia of 10% or lower tariffs in accordance with any applicable double taxation treaty.
  4. Compensation for losses that are later than 5 years but not more than 10 years, for:
    • Company located in the Industrial Area and/ or Bonded Zone.
    • Company operating in construction development for infrastructure sector.
    • Company that use domestic raw materials at least 70%.
      Company that is absorbing 500-1,000 of domestic workforces.
    • Company that is conducting research and development (R&D).
    • Company that is doing a re-investment.
    • Company that exports at least 30% of its sales value.

For detailed information on the list of business sectors that are eligible for tax allowance, please refer to the Attachment I & II of Government Regulation No. 18 of 2015. There are 66 business sectors listed in Attachment I and 77 business sectors listed in Attachment II.


For new applicant or application of new project for tax allowance, below is the framework on the application procedures:

  1. Corporate Taxpayer (company) will need to submit application of tax allowance incentives directly by attaching its supporting documents.
  2. FO of BKPM OSS-C, which consist of representatives from the 3 main government bodies: BKPM, Directorate General of Tax and technical ministry (according to the applicant business sector) will receive and process the application.
  3. Once the application assessment is completed, the BKPM will arrange for a ‘Clarification Meeting’ between the company and representative from Directorate General of Tax. The meeting is held for the purpose of:
    • Company presentation on the project and business plan intended to receive the tax allowance facility.
    • Inquiries by technical ministry(s), if needed, to provide further clarification in regards to the presentation and/ or application.
  4. Based on the clarification meeting, one (or more) of the following will occur:
    • Ministry will issue ‘Certificate on Compliance of Quantitative Requirements’.
    • BKPM will issue Change in Principle License (IP) [if needed].
    • Applicant will be required to furnish additional supporting documents.
  5. In the case that clarification and document are completed, BKPM will issue ‘Receipt of Application’ and schedule for a ‘Trilateral Meeting’.
  6. Trilateral Meeting is held for final discussion in regards to the tax allowance application, to be proposed by BKPM to Ministry of Finance of the Republic of Indonesia (with Directorate General of Tax). The Trilateral Meeting will be headed by BKPM officials and attended by representatives from BKPM, Ministry of Finance of the Republic of Indonesia, and Directorate General of Tax.
  7. The Trilateral Meeting produce agreement that is recorded in meeting minutes and decision from the Chairman of BKPM pertaining to one of the following outcome:
    • Approval on the tax allowance application to be submitted to Ministry of Finance of the Republic of Indonesia.
    • Rejection on the tax allowance application.
    • Pending decision on the tax allowance application.
  8. In the case of pending decision on the tax allowance, BKPM will arrange for the ‘Extension Trilateral Meeting’. At the end of this meeting, decision will need to be issued pertaining to:
    • Approval on the tax allowance application.
    • Rejection on the tax allowance application.
  9. The outcome of Trilateral Meeting and the arrangement for Extension Trilateral Meeting will need to be issued 15 days from the Clarification Meeting.
  10. In the case of approval on the tax allowance application, Chairman of BKPM will issue ‘Recommendation Letter’ on the grant of tax allowance to Ministry of Finance of the Republic of Indonesia, latest 3 working days since the Trilateral Meeting or Extension Trilateral Meeting.
  11. In the case of rejection on the tax allowance application, Chairman of BKPM will need issue Rejection Letter, within 3 working days since Trilateral Meeting or Extension Trilateral Meeting.

The following procedures are the simplified framework on tax allowance application procedure. The full and complete details of it is available in the Regulations of Chairman of BKPM No. 18 of 2015.


There are many incentives provided for exporting manufactured products. Some of these incentives are as follows:

  1. Restitution (drawback) of import on the importation of goods and materials needed to manufacture the exported finished products.
  2. Exemption from Value Added Tax or VAT (Pajak Pertambahan Nilai) and Sales Tax on Luxury Goods and materials purchased domestically, to be used in the manufacturing of the exported products.
  3. Can import raw materials required regarding of the availability of comparable domestic products.


The industrial companies which are located in the bonded areas are provided with many incentives as follows:

  1. Exemption from import duty, excise, income tax of imported goods (Income Tax Article 22), VAT on Luxury Goods, of the importation of capital goods and equipment including raw materials for the production process.
  2. Allowed to divert their products amounted to 50% of their export (in term of value) for the final products, and 100% of their exports (in term of value) for other than final products to the Indonesian customs area, through normal import procedure including payment of customs duties.
  3. Allowed to sell scrap or waste to Indonesian custom area as long as it contains at the highest tolerance of 5% of the amount of the material used in the production process.
  4. Allowed to lend their own machineries and equipment to their subcontractors located outside bonded zones for no longer than 2 years in order to further process their own products.
  5. Exemption of VAT and Sales Tax on Luxury Goods on the delivery of products for further processing from bonded zones to their subcontractors outside the bonded zones or the other way around as well as among companies in these areas.


The companies operating in Free Trade Zone or FTZ (Zona Bebas Perdagangan) areas enjoy several incentives such as exemption of import duty and excise, import-related taxes (VAT, Withholding Tax/ Income Tax) not collected. Additionally, FTZ also offer faster issuance on investment related licenses and immigration clearance in terms of foreign employee. The limitation for operating in FTZ is that exporting goods out of FTZ into Indonesian custom area, will apply the tax duty and excise back on the previously duty exempted goods.


According to the Regulation of the Ministry of Finanance No. 159/PMK.010/2015 and the Regulation of the Chairman of BKPM No. 19 of 2015 the applicant or company should meet the following criteria:

  1. The company was established as an Indonesian business entity after 15th August 2011.
  2. Having new investment plan which has institution of no less than IDR 1,000,000,000,- (trilion Rupiah).
  3. Submitting statement of ability to place fund in Indonesia banking of not less than 10% of the total investment plan as refered to in letter point 2, and such fund shall not be withdrawn before the commencement of investment realization implementation.
  4. Be involved in ‘Pioneer Industry’ such as:
    • Upstream metal industry.
    • Oil refinering industry.
    • Industry of organic basic chemicals derived from oil and natural gas.
    • Industry of machinery that produces industrial machinery.
    • Processing industry of agricultural, forestry and fishery products.
    • Industry of telecommunications, information and communication.
    • Marine transportation industry.
    • Processing industry which is a major industry in the Special Economic Zone or SEZ (KEK); and/ or Economic infrastructure in addition to the use of Government and Business Entity or Public Private Partnership (PPP/ KPBU) Scheme.

It is, then, eligible for the following incentives:

  1. An exemption from corporate income tax for a period from 5 and up to 15 years, beginning from the first date of commercial production.
  2. Corporate Income Tax Reduction shall be granted not exceeding 100% and not less than 10% of the total amount of payable Corporate Income Tax.