INVESTMENT is one of the keys to accelerating and increasing development. In addition, investment also plays a role in accelerating the national economy.
In the previous description, the terms and criteria for corporate taxpayers to obtain tax allowance facilities have been explained. This article describes the forms of tax allowance facilities that apply in Indonesia.
In general, provisions regarding tax allowances are regulated in Article 31A of Law no. 7 of 1983 concerning Income Tax stated in Law no. 7 of 2021 concerning the Harmonization of Tax Regulations ( PPh Law ) and their derivatives rules.
There are 2 derivative rules regarding tax allowances. First, Government Regulation No. 78 of 2019 concerning Income Tax Facilities for Investment in Certain Business Fields and/or in Certain Regions ( PP 78/2019 ).
Second, the Minister of Finance Regulation No. 96/PMK.010/2020 concerning Amendments to the Regulation of the Minister of Finance No. 11/PMK.010/2020 concerning the Implementation of Government Regulation No. 78 of 2019 concerning Income Tax Facilities for Investment in Certain Business Fields and/or in Certain Regions (PMK 96/2020 ).
Based on Article 3 paragraph (1) letters a to d of PP 78/2019, there are 4 forms of tax allowance facilities given to corporate taxpayers.
First, is the reduction of net income by 30% of the investment value in the form of tangible fixed assets, including land used for main business activities. The net income reduction facility is provided in stages over 6 years. Annual corporate taxpayers will receive a 5% reduction in net income.
Second, accelerated depreciation of tangible fixed assets and accelerated amortization of intangible assets acquired in the context of investment. The details of the useful lives and depreciation rates for tangible fixed assets and amortization rates for intangible assets are as follows.
Third, the imposition of PPh on dividends paid to foreign taxpayers other than permanent establishments in Indonesia at 10% or a lower rate based on the double taxation avoidance agreement (P3B) with the Government of Indonesia.
Fourth, compensation for losses that are more than 5 years but not more than 10 years. For information, based on Article 6 paragraph (2) of the Income Tax Law, if the taxpayer suffers a fiscal loss in a tax year, the loss can be compensated with income starting from the next tax year in a row for up to 5 years.
Referring to Article 3 paragraph 2 of PP 78/2019, additional compensation for losses for points 1 and 2 above is given for losses in the first, second, and/or third tax year since the start of commercial production.
Meanwhile, additional compensation for losses for points 3 to 9 above is given for losses that occur until the period of utilization of the 30% net income reduction incentive ends. This is as regulated in Article 3 paragraph (3) of PP 78/2019.