The MoF has issued Regulation No. 153/PMK.010/2020 regarding Granting of Deduction in Gross Income for Certain Research and Development (“R&D”) Activities in Indonesia (“PMK-153”). This PMK-153 is the implementation of Government Regulation No. 45 of 2019 regarding Calculation and Repayment of Taxable Income in the Current Year (“GR-45”).  Below are summarized highlights:

1. Subject
   The Indonesian Government has provided incentives to reduce gross income for 11 (eleven) specific   industries. The list is as follows:

   No.	Industry
   1	Food
   2	Pharmaceutical, cosmetics and medical devices
   3	Textile, leather, and shoes
   4	Means of transportation
   5	Electronics, telematics, information and communication technology
   6	Energy
   7	Capital goods, components, and auxiliary materials
   8	Agroindustry
   9	Base metal and non-metal minerals
   10	Base chemicals from oil and gas and coal
   11	Defense and security

2. Facilities/Incentives
   The Indonesian Government has provided incentives to reduce gross income for 11 (eleven) specific   industries. The list is as follows:
   Taxpayers that conduct certain R&D activities in Indonesia, can be granted a deduction in gross income   up to 300% (three hundred percent) from the total cost expended for certain R&D activities in Indonesia   that are charged within a certain period.  The 300% reduction consists of:
   1. 100% reduction of actual cost for R&D activities
   2. A maximum of 200% additional deduction, which consists of:
      • 50% additional deduction if the R&D activities obtain intellectual property rights in the forms of patent or Plant Variety Protection (PVP) rights that are registered in the Indonesian intellectual property rights office.
      • 25% additional deduction when the intellectual property rights are also registered in an overseas intellectual property rights office.
      • 100% additional deduction when the R&D activities have reached commercialization stage.
      • 25% additional deduction when the R&D activities that produce patent or Plant Variety Protection (PVP) rights as referred to in point (a), (b), and/or reach commercialization stage as referred to in point (c), are carried out in cooperation with the Government’s R&D institution or a higher education institution in Indonesia.

      The Commercialization as referred to in points (c) and (d) can be carried out by Taxpayers that carry out R&D activities or other taxpayers.

      The amount of the additional gross income deduction that can be utilized is the percentage of the additional gross income reduction as referred to in point (2) multiplied by the accumulated research and development costs for the last 5 (five) Fiscal Years since:

      • registration of Intellectual Property rights in the form of Patents or PVP Rights; or
      • reached the stage of Commercialization,

      whichever occurs first.

   The additional deductions can be claimed starting in the year when the registration or commercialization occurred, with a maximum of 40% of the taxable income of that respective year. If the amount of additional deduction exceeds 40%, it can be carried forward to the subsequent fiscal years.

3. Types of R&D Activities
   The types of R&D activities that can enjoy this facility must be:
   1. carried out by a taxpayer, other than a taxpayer under a Production Sharing Contract, Contract of Work, or mining contract whose income tax treatment is based on the contract and not the prevailing Income Tax Law;
   2. started from the date GR-45 is applied (26 June 2019) onwards;
   3. fulfilling the following criteria:
      • Aims to achieve new discoveries;
      • Based on an original concept and hypothesis;
      • Involves uncertainty on the end result;
      • Planned and budgeted; and
      • Aims to create an invention that can be freely transferred or traded.

   Types of activities which are not given the additional gross income deduction are as follows:

   1. full application of engineering in production activities in the early stages of commercial production;
   2. quality control during commercial production, including routine testing of production results;
   3. repairs of damage that occurred during commercial production;
   4. repair, addition, enrichment or other quality improvements that are routine from existing products;
   5. adjustment of existing capabilities for special requests or customer requirements as part of its continuous commercial activities;
   6. periodic changes to the design of existing products;
   7. routine design of equipment and molds;
   8. construction engineering and engineering with respect to construction, relocation, rearrangement, or start-up of facilities and equipment; and/or
   9. marketing research.

4. Administrative requirements
   To enjoy this facility, Taxpayers must file an application through OSS, attaching the:
   • R&D activity proposals; and
   • Fiscal Certificate.

   This PMK-153 is applied since 09 October 2020.