In order to provide greater certainty, opportunity and participation for Business Actors in the context of accelerating development in Nusantara Capital City (”IKN”), the Indonesian Government has issued Government Regulation Number 12 of 2023 (“PP-12”) concerning Granting of Business Licensing, Ease of Doing Business, and Investment Facilities to Business Actors in IKN.

PP-12 provides Investment Facilities in the form of fiscal and non-fiscal incentives, as follows:

1. Income Tax
   1. Corporate Income Tax (“CIT”) rate reduction facility
      Indonesian Corporate Taxpayers that invest at least IDR 10 billion in IKN or in a Partner Region shall be granted a 100% or 50% CIT rate reduction. Partner Region is defined as certain areas on the island of Kalimantan that are established for the development and enhancement of an economic superhub for the IKN, in collaboration with the IKN Authority, and determined through a Decision of the Head of Authority.
      An overview of the facilities is as follows:

      Location	Field of Investment	Investment Period	Reduction Period	Reduction Rate
      IKN	Infrastructure and public services	2023 up to 2030	30 Years	100%
      		2031 up to 2035	25 Years	100%
      		2036 up to 2045	20 Years	100%
      	Economic awakening	2023 up to 2030	20 Years	100%
      		2031 up to 2035	15 Years	100%
      		2036 up to 2045	10 Years	100%
      	Other business fields	2023 up to 2030	10 Years	100%
      		2031 up to 2045	10 Years	50%
      Partner Region	Infrastructure and public services	2023 up to 2030	25 Years	100%
      		2031 up to 2035	20 Years	100%
      		2036 up to 2045	15 Years	100%

      To obtain approval for the rate reduction, Taxpayers must apply via the OSS system prior to starting commercial operations. The CIT rate reduction facility can be utilized as of the tax year when the commercial operations start.

   2. Income Tax Facility for Financial Sector ActivitiesIndonesian Domestic Corporate Taxpayers and Permanent Establishments conducting business activities in the financial sector in the IKN Financial Centre shall be granted 100% or 85% CIT rate reduction. The facility depends on the investment field and the period of the investment. The reduction periods are 25 and 20 years for the investment periods of 2023 up to 2035 and 2036 up to 2045.The 100% deduction applies for investment fields in the form of banking, insurance and sharia finance services which are used for investment or to finance the construction, development and economic activities in IKN and/or Partner Regions.The 85% deduction applies for investment fields as follows:
      • Capital markets, derivative finance and carbon exchange;
      • Pension fund;
      • Financing;
      • Venture capital;
      • Technological innovation in the financial sector;
      • Guarantee;
      • International commodity trading;
      • Bullion;
      • Trust fund manager;
      • Management of financial instruments (special purpose vehicle);
      • Financial conglomeration holding company;
      • Financial market infrastructure;
      • Money market, foreign exchange market, and their derivative transactions;
      • Operation of payment system services; and/or
      • Other financial services.In addition, PP-12 also provides exemption of withholding tax and/or income tax for incomes from investment at the Financial Centre in IKN that is received by foreign taxpayers for a period of 10 (ten) years as of from the placement of funds for the first time at the Financial Centre in IKN.
   3. CIT rate reduction facility for the Establishment and/or Relocation of the Head Office and/or Regional Office
      Business Actors with the status of foreign tax subjects that establish and/or relocate their head offices and/or regional office to the IKN shall be granted a CIT rate deduction facility, with the following provisions:
      • Having at least 2 (two) related affiliation units and/or business entities outside Indonesia;
      • Having economic substance in Nusantara Capital City; and
      • Establishing a legal entity in the form of a limited liability company in Indonesia.

      The CIT reduction is 100% for the first 10 years and 50% for the following 10 years. This facility shall be granted until 2045.

   4. Deduction of gross income for the organization of work practices, apprenticeships, and/or learning activities in the context of fostering and developing certain competency-based human resources
      Indonesian corporate Taxpayers that organize and/or involve human resources in education and/or training activities in IKN for work practice, apprenticeship, and/or learning activities in the framework of fostering and developing specific competency-based human resources shall be granted a gross income deduction facility. The gross income deduction facility shall be granted in a maximum amount of 250% (two hundred fifty percent) of the total costs incurred for work practice, apprenticeship and/or learning activities.
   5. Deduction of gross income for certain research and development activities
      Indonesian corporate taxpayers that have established domiciles and/or places of business activities and carry out specific research and development (R&D) activities in IKN shall be granted a gross income deduction facility with a maximum amount of 350% (three hundred fifty percent) of the total R&D costs.
      The specific (R&D) activities shall be research and development activities that are carried out in IKN to produce inventions, develop innovations, mastery of new technologies, and/or transfer of technology for industrial development to increase national industrial competitiveness.
   6. Deduction of gross income from donations and/or costs for construction of public facilities, social facilities, and/or other non-profit facilities
      Indonesian Taxpayers that provide donations and/or costs for construction of public facilities, social facilities, and/or other non-profit facilities in IKN shall be granted a gross income deduction facility with a maximum amount of 200% (two hundred percent) of the total donations and/or costs incurred for construction of public facilities, social facilities, and/or other non-profit facilities.
      Contributions and/or costs shall be deducted from gross income provided that:
      • The Taxpayer reported fiscal net income in the Corporate Tax Return in the year preceding the provision of the donation;
      • The grant of donations and/or costs does not result in a loss in the tax year when the donations and/or costs are granted;
      • Supported by valid evidence; and
      • Obtains technical approval and specifications from IKN Authority, in the event that the donations are granted in the form of goods and/or costs for construction of public facilities, social facilities, and/or other non-profit facilities

      This facility is available up until 2035.

   7. Facility of Article 21 Final Income Tax borne by the government
      Certain employees are entitled to enjoy the facility of Article 21 Final Income Tax borne by the government. These are employees who:
      • Receive income from certain employers;
      • Reside in the IKN; and
      • Are registered with the tax office in IKN

      The employers shall meet the following conditions:

      • Residing, or having business activities in the IKN;
      • Registered with the tax office in IKN;
      • Have received validation from the Director General of Taxes (DGT); and
      • Have submitted a report on realization of the utilization of the facility to the DGT.This facility is available up until 2035.
   8. Zero-rated final tax for Micro, Small and Medium Enterprises (“MSME”)
      Qualified MSMEs that invest less than 10 billion rupiah in IKN may be subject to 0% Income Tax for a certain period. The 0% rate shall be imposed on income from annual revenue up to Rp50 billion generated from IKN.
      This facility is granted from the approval of the facility up until 2035.
   9. Income Tax reduction on transfer of Land and/or Building rights
      Taxpayers that transfer the rights to land and/or buildings in IKN shall be granted an Income Tax deduction facility amounting to 100% (one hundred percent) of the Income Tax payable.
      This facility shall be granted only to a buyer in the first acquisition of rights to land and/or buildings in IKN.
      This facility is available up until 2035.

• VAT and/or Luxury Goods Sales Tax facilities
  1. Facilities in IKN
     • Non-collected VAT
       Non-collected VAT shall be granted for the:
       Delivery of certain strategic taxable goods and/or taxable services in relation to the development of landed house, apartment, office, shops, warehouse, infrastructures and provision of motorized vehicles with license plate numbers registered in IKN, which use domestically produced battery electric vehicle technology; and
       Import of certain strategic taxable goods
     • Exemption from Sales Tax on Luxury Goods on the delivery of taxable goods
       Exemption from Sales Tax on Luxury Goods shall be granted for the delivery of luxury residential groups to individuals, entities, and/or ministries/agencies carrying out business activities, serving, or domiciled in IKN.
  2. Facilities in Partner Regions
     Non-collected VAT shall be granted for the delivery of certain strategic taxable services in the form of construction services in connection with the development in Partner Regions to Taxpayers that obtain the CIT rate reduction, for the following business sectors:
     • Power generation, including new and renewable energy;
     • Construction and operation of toll roads/seaport/ airport; and
     • Construction and supply of clean water.
• Customs facilities
  
  • Facility of exemption from import duty and import taxes (“PDRI”) for the import of goods by the central government or regional governments that is intended for the public interest in IKN and Partner Regions;
  • Facility of exemption from import duty and PDRI for the import of capital goods for the construction and development of industries in IKN and Partner Regions; and
  • Facility of exemption from import duty on the import of goods and materials for the construction and development of industries in IKN and/or Partner Regions.

Exemption from import duty can be granted to capital goods as well as goods and materials originating from Free Port and Free Trade Zones, Special Economic Zones, and/or Bonded Warehouses.

This facility is available up until 2045.