The government is steadfast in its commitment to provide a conducive environment for citizens and those interested in living or investing in the Capital City of the Archipelago (IKN). A key aspect of this commitment is the provision of tax incentives, a measure that has been significantly intensified by the government.
As a testament to our commitment, the Ministry of Finance (Kemenkeu) has recently issued a comprehensive regulation that meticulously outlines the provision of tax and customs facilities in IKN, demonstrating our dedication to the citizens and potential investors of IKN.
The regulation was issued through the Minister of Finance Regulation (PMK) 28/2024, which states that income tax (PPh) is one of the tax facilities provided.
The government offers 9 income tax incentives for investors or business actors who invest or establish businesses in IKN. The various incentives include:
- 100% Corporate Income Tax Incentive for Investors in IKN (Tax Holiday)
The criteria for receiving this facility include: (1) conduct business activities and must be through a head office and/or business unit located in IKN and/or partner regions. (2) Make investments with a value of at least IDR 10 billion. (3) Are domestic corporate taxpayers.
This facility can be utilized since the tax year when commercial operations begin. This corporate income tax reduction facility is given at 100% of the amount of corporate income tax payable.
Entrepreneurs who make investments in business fields that have strategic value can also enjoy this facility. The strategic value projects referred to are power plants, including new and renewable energy, the construction and operation of toll roads, and the construction and operation of seaports.
The maximum period for this tax holiday incentive is 30 years for infrastructure clusters, 20 years for economic revival business sectors, and 10 years for other sectors.
- Income Tax Facility at IKN Financial Center
The exemption facility from withholding and/or collection of income tax is provided on income derived from investment in the Financial Center at IKN received or obtained by foreign tax subjects.
The corporate income tax reduction facility provided covers up to 100% and 85% of the corporate income tax payable on certain parts of the income.
This facility is given for 25 tax years for investments made from 2023 to 2035 and 20 tax years for investments made from 2036 to 2045.
The commencement of this investment is calculated from the issuance of business licenses through the Online Single Submission (OSS) system for financial sector investment activities located at the IKN Financial Center.
- Reduction of Corporate Income Tax on the Establishment and/or Transfer of Head Office and/or Regional Office
This facility is divided into two schemes. First, it is provided for foreign tax subjects who move to their head office or regional office. Second, it is provided to domestic corporate taxpayers who are newly established and have head office status.
This corporate income tax incentive facility is provided at 100% of the amount of corporate income tax calculated for 10 tax years.
After the period of corporate income tax reduction, the corporate income tax reduction facility is given at 50% of the amount of corporate income tax payable for the next 10 tax years.
- Vocational Superdeduction
The vocational super deduction is an incentive in the form of a gross income reduction facility for organizing work practice, apprenticeship, and/or learning activities for the guidance and development of certain competency-based human resources.
The gross income facility is provided at a maximum of 250% of the total costs incurred for work practice, apprenticeship, and/or learning activities.
- Research and Development Superdeduction
For domestic corporate taxpayers who have a domicile and/or place of business activities that carry out certain Research and Development activities in IKN, an additional gross income reduction of a maximum of 350% is given.
This incentive also provides an incentive of 100% of the total costs incurred for Research and Development activities, as well as an additional gross income reduction of a maximum of 250% of the accumulated costs incurred for certain research and development activities within a certain period.
- Super deduction for Donation of Public/Social Facilities in IKN
This incentive is given to people who want to support the development of IKN by giving money, goods, or physical development. The facilities provided are a reduction in gross income of a maximum of 200% of the value of the donation.
- Income Tax Article 21 Final Borne by the Government
One of the facilities offered by the government is the final Income Tax Article 21 borne by the government. There are several provisions discussed regarding the final ITA 21 borne by the government, including
- the income of certain employees in connection with employment is given a facility in the form of Income Tax Article 21 borne by the government and is final;
- the provisions of certain employees consist of working for certain employers, residing in IKN, and having an NPWP registered at the Tax Office whose working area covers IKN;
- certain new employer provisions, among others, are located in IKN, have an NPWP registered at the Tax Office whose working area covers IKN, must submit a notification of facility utilization and obtain approval, and must submit the realization of facility utilization;
- income sourced from outside IKN remains subject to Income Tax in accordance with applicable provisions;
- certain employees are still required to submit annual income tax returns;
- the facility is granted until 2035.
- 0% Final Income Tax for MSMEs
This incentive is intended for MSMEs that have income from part of the business circulation of up to IDR 50 billion received or obtained at business locations located in IKN. This regulation is valid until 2035.
This incentive is also given to domestic taxpayers (individuals and entities), excluding Permanent Establishments (BUT) that invest in IKN below IDR 10 billion and meet certain conditions will not be subject to the Final Income Tax rate or 0% of the gross business turnover and is final.
- Income Tax Reduction on Transfer of Land/Building Rights
This facility is provided for taxpayers who transfer land and/or buildings in IKN to buyers who are the first to acquire rights to land and or buildings in IKN.
The Income Tax reduction facility on the transfer of land and/or building rights is 100% of the amount of Income Tax on the transfer of land and/or building rights payable and is valid until 2035.
