Details of the Financial Sectors in IKN Eligible for a Tax Cut

JAKARTA, DDTCNews - The government stipulates the granting of income tax (PPh) incentives that apply to the financial centres of Nusantara Capital (IKN) in line with the issuance of Government Regulation (Gov. Reg.) Number 12/2023.

Under Article 32 paragraph (1) of Gov. Reg. 12/2023, the government offers the reduction in corporate income tax incentives (tax holiday) with a certain percentage and period for resident taxpayers and permanent establishments (PEs) conducting financial sector businesses in IKN financial centres.

The Financial Centre area … is determined by the head of the [Nusantara Capital] authority which is listed in the detailed spatial planning,” reads Article 34 paragraph (2) of Gov. Reg. 12/2023, quoted on Wednesday (8/3/2023).

Resident taxpayers or PES conducting banking, insurance and sharia finance businesses at Nusantara Capital financial centres will be granted a tax holiday incentive of 100% of the amount of corporate income tax payable on the share of income used for investments or fund construction, development and economic activities in IKN or partner regions.

Other financial sectors, including capital markets, pension funds, financing, venture capital, fintech, guarantees, commodity exchange, bullion, trusts, special purpose vehicles, financial holding companies, financial market infrastructure, money and foreign exchange markets, the operation of payment system services as well as other financial services may be given a tax holiday of 85%.

For the capital market and commodity exchange sector, a tax holiday incentive of 85% is granted for corporate income tax payable on the share of income sourced from foreign investors.

The tax holiday incentive is given for 25 years if the investment is performed in IKN from 2023 to 2035. If new investment is performed in 2036 to 2045, the tax holiday is only given for 20 years.

Further provisions on the subjects, forms of the incentives and criteria for eligibility; procedures for the application for and the utilisation of incentives; obligations and prohibitions for taxpayers eligible for the incentives; and the criteria for the revocation of the incentives are further stipulated in a minister of finance regulation (MoF Reg.).

In addition to the tax holiday, income from investments in the IKN financial centres received by non-resident tax subjects (SPLN) is also exempt from income tax withholding/collection for a period of 10 years since the funds are invested for the first time in the financial centres.

Further provisions on the granting of the exemption from income tax withholding/collection incentives will be regulated in the form of an MoF Reg. (rigs)