Terms & Conditions for Fixed Assets Other Than Land That Get Tax Allowance

By the provisions, the tax allowance facility in Indonesia in the form of a 30% reduction in net income can be given to 2 things, namely tangible fixed assets including land, and tangible fixed assets other than land.

In the previous article, it has been explained about the provisions for tangible fixed assets including land which can be given a 30% reduction in net income facility. Furthermore, this article describes the terms and conditions of fixed assets other than land that can obtain tax allowance facilities.

In general, the rules regarding fixed assets other than land that can be given a net income reduction facility of 30% are contained in Government Regulation no. 78 of 2019 concerning Income Tax Facilities for Investment in Certain Business Fields and/or in certain Regions ( PP 78/2019 ) and its derivatives rules.

The derivative rules in question, namely 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 ).

Referring to Article 4 paragraph (1) PP 78 junction Article 4 paragraph (1) PMK 96/2020, fixed assets other than the land can obtain a reduction in net income of 30% if it meets the following 3 conditions and conditions.

First, tangible fixed assets other than land are acquired in a new condition, unless the tangible fixed assets other than land are relocated as a whole as an investment package from another country.

Second, tangible fixed assets other than land are listed in principle permits, investment permits, investment registrations, or business permits. For information, principle permits, investment permits, and investment registrations are issued by the Investment Coordinating Board (BKPM) or the Regency/Municipal One-Stop Integrated Services and Investment Service (DPMPTSP). Meanwhile, business licenses can be issued by an online single submission (OSS) institution which is the basis for providing tax facilities.

Third, owned and used for main business activities. Referring to Article 1 point 6 of PP 78/2019, the main business activities can be understood as the line of business and the type of production/service at the time of applying to PPh facilities by the taxpayer as stated in the principle permit, investment permit, investment registration, or business license.

In addition to the 3 terms and conditions above, 2 additional requirements must be met so that fixed assets other than the land can obtain a 30% reduction in net income facility. The 2 additional requirements are listed in Article 4 paragraph (2) of PP 78 in conjunction with Article 4 paragraph (2) of PMK 96/2020 as follows.

First, tangible fixed assets other than land are obtained after the business license is issued by the OSS institution. Second, tangible fixed assets other than land are obtained after a principle permit, investment permit, investment registration, or business license is issued by the OSS institution for changes to the principle permit, investment permit, or investment registration.

The principle license, investment permit, investment registration, and business license must be issued after the enactment of PP No. 18 of 2015 stated PP 9 of 2016 concerning Income Tax Facilities for Investment in Certain Business Fields and/or in Certain Regions ( PP 9/2016 ). The 30% net income reduction facility can be utilized from the tax year when commercial production begins.

This is a description of the provisions on fixed assets other than land that can be given a tax allowance facility in the form of a 30% reduction in net income. The next tax class article will explain the procedure for applying for a tax allowance facility.

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