Applications for corporate income tax (PPh) deductions for certain business fields and regions or Tax Allowance have been through the Online Single Submission (OSS) system. This provision is contained in the Minister of Finance Regulation (PMK) Number 96 / PMK / 0.10 / 2020 concerning Amendments to the Amendment to PMK Number 11 / PMK.011 / 2020 concerning Implementation of Government Regulation Number 78 of 2019 concerning Income Tax Facilities for Investment in Certain Fields and/or Certain Areas.
The application for Tax Allowance investment incentives through the Online Single Submission (OSS) system is effective starting 11 August 2020. The Investment Coordinating Board (BKPM) noted that there have been 13 submissions from companies. In accumulation, the total number of companies that applied for Tax Allowance from 1 January to 1 November 2020 has reached 26 applications. When compared to 2019, this value has doubled from last year. By submitting through the OSS system, the evaluation process becomes faster, so that decisions on giving incentives are more certain and faster.
This new regulation does not change the requirements and criteria for granting Tax Allowance facilities. The focus of this PMK change lies in the delegation of authority for the Tax Allowance facility, from previously being carried out by the Director-General of Taxes (Dirjen Pajak) of the Ministry of Finance, to being implemented by the Head of BKPM for and on behalf of the Minister of Finance.
In this PMK, the Tax Allowance incentive process, starting from submitting applications through OSS, verifying application documents to issuing Facility Granting Decrees, are all carried out by BKPM. BKPM tries to provide a comfortable investment climate for investors without changing the terms and criteria for providing the previous Tax Allowance facility.
What is Tax Allowance
Tax Allowance is a tax relief facility provided to qualified investment, among which it absorbs a large workforce, has a high investment value for exports, and has a high level of local content. Tax relief provided is in the form of a reduction in net income by 30 percent of the total investment value for 6 years of 5% each; accelerated depreciation of tangible fixed assets and accelerated amortization of intangible assets; the imposition of Income Tax on dividends of 10 percent; and compensation for losses that are longer than 5 years but not more than 10 years. Several business sectors that have received Tax Allowance in 2020 include the food and beverage industry, basic chemical industry, and the non-ferrous base metal manufacturing industry.
“What investors need to remember is that the submission is made before commercial production is carried out. Don’t miss it. This new procedure is an innovation in the investment licensing bureaucracy. It should be fast and easy. In accordance with the message of the President, a country that is fast will defeat the slow.”The licensing process and provision of investment facilities, which are carried out in one doorway at BKPM, are expected to increase certainty and accelerate investment execution in the field.
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