Incentives for FDI in Indonesia

Trường Lăng

November 20, 2019

In this article, we will give you an overview of incentives in Indonesia to help you make the most out of opportunities that Indonesia offers for foreign investment companies.
To attract Foreign Direct Investment in Indonesia, Indonesia government had renewed some policies regarding FDI in Indonesia to make it easier for foreign investors to enter Indonesia market. Here are the incentives regarding FDI in Indonesia.

1. Import Duty Facility

Foreign investment can get two years of import duty exemption or directly apply for 4 years for companies using locally-produced machines (min. 30%). For industries which produce goods and/or services, including:

  1. Tourism and culture
  2. Public transportation
  3. Public health services
  4. Mining
  5. Construction
  6. Telecommunication
  7. Port

Imported machine, goods and raw material are:
Not yet being locally produced.
If the local machines are available, yet unable to fulfill criteria of required machines.
If the local machines are available, yet unable to fulfill the total required machines.

2. Tax Allowance

30% of investment value 145 business fields Eligible for tax allowance, expanded from 143 segments in the previous regulation with additional segment: textile industry. Under certain requirements among others: investment value or export orientation, manpower absorption, local content, and project location (especially outside Java island). Deduction of net corporate income which amounts 30% from total investment, carried over 6 years period (equal to 5% deduction per year).
Tax Allowance Calculation Illustration: PT ABC
Total Investment: US$ 10,000,000
Deduction per year: 5% x US$ 10,000,000 = US$ 500,000
Deduction for 6 years: 6 x US$ 500,000 = US$ 3,000,000

3. Tax Holiday

Corporate Income Tax reduction can be given for 5 – 20 fiscal years, based on investment value and eligible for projects that considered strategic for the Indonesian economy.
The 18 eligible pioneer industries are:

  1. Upstream basic metal
  2. Oil and gas refinery
  3. Petrochemicals from oil, gas, or coal
  4. Organic basic chemicals from agriculture, plantation, or forestry products
  5. Inorganic basic chemicals
  6. Pharmaceutical raw materials
  7. irradiation, electromedical, or electrotherapy equipment
  8. Main components of electronics or telematic equipment
  9. Machinery and main components of machinery
  10. Robotics components of power plant machinery
  11. Main components of power plant machinery
  12. Motor vehicles and main components of motor vehicles
  13. Main components of vessels
  14. Main components of trains
  15. Main components of aircraft and activities supporting the aerospace industry
  16. Agricultural, plantation, of forestry-based processing that produce pulp
  17. Economic infrastructure
  18. Digital economy which includes data processing, hosting, and related activities

4. Land Incentives

Foreign investors investing in the SEZs are allowed to have the building right on land (Hak Guna Bangunan), which is extendable up to 80 years; own property in the SEZs; and those who own property have the option to apply for the permanent stay permit in Indonesia.
Source: BKPM

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