Net Income Reduction Facility for New Investment or Business Expansion in Certain Business Fields in Labour-Intensive Industry

In order to increase direct investment in the labour intensive industries, the Minister of Finance (MoF) has issued a new regulation regarding the Net Income Reduction Facility for New Investment or Business Expansion in Certain Business Fields which are labour intensive industry through its Regulation No. 16/PMK.010/2020 (“PMK-16”) effective from 9 March 2020.

The Corporate Taxpayers investing in labour intensive industries can get the income tax facilities of 60% reduction in net income from total Investment in the form of tangible fixed assets, including land, used for Main Business, expensed within 6 years from fiscal year of Commercial Production Commencement Period, 10% per annum.

The facilities for labour intensive industries are given to Domestic Corporate Taxpayers, who fulfil certain criteria including doing Main Business in accordance to Indonesian Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia – ‘KBLI’) listed in its appendix (i.e. from 10216 until 32402) and employ a workforce of at least 300 (three hundred) persons in a fiscal year .

Such Income Tax Facilities are provided on tangible fixed assets, including land, following the criteria as follows:

  • tangible fixed assets are brand new;
  • stated in the principle license, investment license, investment registration issued by the relevant Government institutions, e.g. BKPM; and
  • owned and utilised for Main Business.

The net income deduction facility is no longer applicable if:

  1. Taxpayer Main Business is not in accordance with the initial business activities; or
  2. During the utilisation of the facility, Taxpayer does not fulfil requirement of the number of labor force; or
  3. Taxpayer does not fulfil the stipulated requirements.
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