The government notified the WTO of its compliance with Trade-Related Investment Measures (TRIMS) on 26 August 1998. The Parliament revoked tax holiday incentives in 2000.
However, a BKPM sponsored draft investment bill, under cabinet review, aims to reestablish such incentives. Various fiscal incentives are available to both foreign and domestic investors.
A company producing for the domestic market may apply for import duty exemptions on all required machinery and equipment as well as on raw and supporting materials needed during the first two years of commercial production.
A company producing for export markets may apply for restitution of import duties paid on inputs subsequently re-exported in finished form.
Indonesia expects foreign investors to contribute to the training and development of Indonesian nationals, allowing the transfer of skills and technology required for their effective participation in the management of foreign companies.
Under Ministry of Manpower regulations, any expatriate who holds a work and residence permit must contribute USD 1,200 per year to a fund for local manpower training at regional manpower offices.
As a general rule, a company can hire foreigners only for positions that the government has deemed open to non-Indonesians. Employers must have manpower-training programs aimed at replacing foreign workers with Indonesians.
At present, Indonesia does not have formal regulations granting national treatment to U.S. and other foreign firms' participating in government-financed and/or subsidized research and development programs.
The State Ministry for Research and Technology handles applications on a case-by-case basis. However, the Ministry is currently drafting regulations to enable interested parties to participate in research and development programs in certain circumstances.Indonesia does not require investors to purchase from local sources or export a certain percentage of output. The government eased rules in June 1998 that encouraged investors to locate in industrial estates.
Foreign firms are not required to disclose proprietary information to the government before investing. Investment Incentive The final tariffs maximum is 5%. Equipments and raw materials imported in the framework of development of investment projects.
Import duty tariffs which are mentioned in the Indonesian Custom Tariff Book 5% or lower, the effective tariffs shall be those in BTBMI. The import duty is given for an import of 2 years period starting from the date of stipulation of the decision on relief of import duty.
Investment Incentive (Government Regulation No. 1/2007 jo. No. 62/2008 and other investment incentive regulations). 30% net income reduced from capital investment amount for 6 (six) years period (equal to 5% per annum)
Accelerated amortization & depreciation up to 10 years. 10% Income tax charged for overseas tax-payer on dividend bill or lower tariff according to the Double Taxation Agreement.
Loss compensation with the period between 5 to 10 years with some specific stipulations. Investment Allowance (IA) : Corporate income tax base is deducted by 30% of investment realization. Total 30% deduction is given in 6 years (5% deduction p.a).
Illustration: Company X Investment Realization : US$ 1billion IA p.a. : 5% X US$ 1 billion = US$ 50 million IA is constantly given for 6 years: 6 X US$ 50 million = US$ 300 million 10 years Losses carry forward Expedite depreciation Land Rights Right to Cultivate (HGU) of 35 years and it can be extended for another 25 years Right to Build (HGB) of 30 years and it can be extended for another 20 years Right to Use (KP) up to 25 years and it can be extended for another 20 years