Indonesia Implementing A Variety of Tax Breaks to Boost GDP Growth

Jul 2019

Indonesia is implementing a comprehensive set of tax measures aimed at boosting investment, and stimulating economic growth, amid signs that the government’s 5.3% growth target for 2019 may be difficult to achieve.

The government raised the threshold at which houses become subject to luxury tax in order to boost the property sector and supporting home buyers. The 20% tax is now only levied on a property or apartment worth at least IDR 30 billion (USD 2,14 million), compared to the previous threshold of IDR 20 billion (USD 1.42 million) for a property and IDR 10 billion (USD 714,389)  for an apartment.

Further measures include a planned cut from 15% to 5% in income tax rate for Infrastructure related securities, but no timeline has been given for its implementation.

Moreover, new regulations issued in July allowed for “super deductible tax” incentives. Under the new rules, a company can deduct 60% of a new investment or expansion into a labor intensive business from its taxable income. Furthermore, it lets a company deduct its taxes at double the amount it invests in working programs, internships and/or educational activities to develop human capital and triple the investment in research and development (R&D) under article 29C of the regulation. The R&D activities must be conducted in Indonesia and produce new inventions, innovations, new technology and/or a technology transfer to help develop industries. These measures are meant to boost industry, encourage innovation and create more jobs.

(Sources: The Straits Times; Channel News Asia; The Jakarta Post)


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