BDO Corporate Tax News

The Indonesian government issued a regulation on 12 August 2024 that amends a 2023 regulation regarding investment facilities for entrepreneurs in Nusantara Capital City (Indonesia’s new capital city). The updated regulation, which grants tax and non-tax incentives to qualifying investors and streamlines the investment process, aims to attract more long-term investment to the capital.

The regulation provides corporate income tax reductions as part of the special incentives for qualifying businesses (to be fully determined in a future implementing regulation) operating in Nusantara Capital City, which vary depending on the size, duration and type of investment. Key features include:

• A corporate income tax holiday for up to 30 years, depending on the value and duration of the investment.
• A partial extended tax holiday (i.e., up to 50%) following the initial tax holiday period, subject to the approval of the authorities.
• A longer exemption period (i.e., up to 30 years) for larger investments that contribute to strategic infrastructure and sustainable projects. Smaller investments can still benefit from a corporate income tax exemption, but with shorter exemption periods which start at 10 years.

Land rights incentives are also available under the regulation. The recent amendments eliminate the staging of such rights (i.e., 35 years for granting the rights, a 25-year extension and a 35-year renewal). To provide certainty to investors, the updated regulation provides that qualifying businesses can benefit immediately from 80 to 95 years of land rights.

The updated regulation also provides for new additional incentives, such as a tax exemption for modest housing, an exemption from the duty on the acquisition of land and buildings, as well as land and building tax relief.

Irwan Kusumanto
Suwenny Leonardi
BDO in Indonesia