Indonesia Enticing Investors With Tax Holidays

August 17, 2011 Taxation in Indonesia

Agus Martowardojo Announces tax HolidayIndonesia is looking to offer significant tax holidays to large international investors in order boost foreign direct investment and to support the economic development of the country.

At a press conference held on August 15th in Jakarta the Minister of Finance of Indonesia Agus Martowardojo revealed the government’s new tax holiday system aimed at significantly increasing large scale foreign direct investment into the country.

The new program will grant companies a tax holiday if they meet a set of pre-determined criteria regarding their investment into Indonesia. Under the proposal, a tax holiday of up to 10 years will be offered to projects established through foreign direct investment into one of 128 selected economic sectors. Priority will be given to infrastructure projects in telecommunications equipment production, resource extraction and refinement, renewable energy technology, and industrial machinery production.

The tax holiday will only be granted if the project will create at least 300 new jobs and is backed by an investment of at least IDR 50 billion. Alternatively, an investment of IDR 100 billion will lower the employment requirement to 100 new jobs. Applications for the tax holiday will be considered on a case by case basis, with particularly positive consideration being given to not just high priority industry investment and projects, but also to developments located in remote regions or less developed areas of the country.

The Minister said that the tax holiday program will be an effective tool in the government’s Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development, which outlines the government’s intentions for Indonesia to reach the status of an “advanced economy” before the year 2025.

Photo by World Economic Forum