Criteria for Non-Pioneer Industries to Remain Eligible for Tax Holiday

JAKARTA, DDTCNews - Taxpayers investing in business sectors that are not included in pioneer industries may continue to apply for the tax holiday. The provision is listed in the Minister of Finance Regulation (MoF Reg.) 130/2020.

The application for tax holiday may be submitted insofar as it fulfils the requirements. Referring to Article 5 paragraph (2) subparagraph b of MoF Reg. 130/2020, the requirements include the pioneer industry quantitative criteria score industry reaching a minimum of 80.

“An application for a corporate income tax reduction ... may be submitted if it fulfils ... the score of the pioneer industry quantitative criteria reaches a minimum of 80,” reads Article 5 paragraph (2) subparagraph b of MoF Reg. 130/2020, quoted on Friday (1/11/2024).

The quantitative criteria score is calculated based on the results of the pioneer industry review conducted by the taxpayer. Details of the pioneer industry quantitative criteria can be seen in Appendix A of MoF Reg. 130/2020.

Pursuant to Appendix A of MoF Reg. 130/2020, there are four groups of pioneer industry quantitative criteria. The four criteria groups are subsequently re-segmented into several derivative criteria as follows.

First, having broad linkages. For this criterion, there are 4 derivative criteria that need to be fulfilled by taxpayers, including completing the industrial tree; using primary raw materials that are produced domestically; products are used domestically (import substitution); and the number of similar companies in a region.

Second, having high added value/externality. There are 2 derivative criteria, namely employing a substantial number of workers and investment locations.

Third, introducing new technologies. In this case, corporate taxpayers need to fulfil 2 derivative criteria, namely using eco-friendly technology and new technologies in production equipment.

Fourth, priority in the national industrial scale. There are 3 derivative criteria in this group, namely supporting national strategic projects, production bases and constructing infrastructure facilities independently.

Each of these derivative criteria has a score and percentage weight of the score. For example, the criterion of completing the industrial tree has a value range of 20 to 100 depending on the number of competitors in Indonesia and has a score weight of 10%.

On the other hand, the criteria for employing a substantial number of workers has a value range of 60 to 100 depending on the number of workers and has a score weight of 10%. Further, the results of the score are multiplied by the weight for each criterion and subsequently added up.

If corporate taxpayers have fulfilled the specified requirements and obtain a score of ≥ 80, they are entitled to apply for the tax holiday facility. The calculation format and sample completion of the quantitative criteria score are listed in Appendix B of MoF Reg. 130/2020.

In addition to fulfilling the quantitative criteria score, taxpayers must also fulfil six other criteria. First, having the status of an Indonesian legal entity. Second, performing new investments that have never been issued.

Third, having a new investment plan of a minimum of IDR100 billion. Fourth, fulfilling the provisions on the debt-to-equity ratio to calculate income tax.

Fifth, committed to starting realising the investment plan no later than one year after the issuance of the decision letter on the corporate Income Tax reduction. Sixth, the taxpayers must attach the tax clearance certificate (Surat Keterangan Fiskal/SKF in Indonesian) of all shareholders recorded in the deed of 

If the taxpayers have fulfilled the required provisions, they may continue the application for the tax holiday online through the Online Single Submission (OSS). The application is submitted by uploading four documents.

First, a softcopy of the fixed asset details in the investment value plan. Second, a soft copy or electronic documents of the shareholders’ tax clearance certificates. Third, a soft copy of the review of the fulfillment of the pioneer industry criteria.

Fourth, a soft copy of the self-assessment of the pioneer industry quantitative criteria according to the format of Appendix letter B of MoF Reg. 130/2020. The soft copy of the self-assessment of the quantitative criteria is treated as a statement of commitment to the taxpayer’s ability to fulfil the pioneer industry criteria.

Based on the application, the Head of the Investment Coordinating Board (Badan Koordinasi Penanaman Modal/BKPM in Indonesian) conducts an assessment of the calculation of the score of the fulfilment of the pioneer industry quantitative criteria within a maximum period of five business days from the time the application is completely received.

In the event that in the assessment result, a score of a minimum of 80 is obtained, the taxpayer’s investment is declared to fulfil the pioneer industry criteria. An application declared to fulfil these criteria is processed by the Head of the Indonesian Investment Coordinating Board as a proposal for the granting of the tax holiday.

As is known, the government provides a 50% or 100% corporate income tax reduction facility with a period of 5 years to 20 years, depending on the investment value. This facility, commonly referred to as the tax holiday, is granted to new investments in eighteen pioneer industry groups. Check out 18 Types of Pioneer Industries Eligible for the Tax Holiday. (sap)