The Indonesian government has recently issued Government Regulation No.12 of 2023 concerning the Granting of Business Licenses, Business Ease, and Investment Facilities for Business Actors in the New Capital City of Nusantara ("GR 12/2023"), which provides various fiscal and non-fiscal incentives to businesses seeking to invest in Indonesia's new capital city, Nusantara. The regulation aims to provide greater certainty, opportunities, and participation for business actors to accelerate the development of Nusantara, thus leveling up development and driving Indonesia's economy forward. GR 12/2023 is eagerly anticipated by business actors, both domestically and internationally. Furthermore, the Investment Ministry/Investment Coordinating Board (BKPM) has prepared business licensing services for the Digital Nusantara Detailed Spatial Plan (Rencana Detail Tata Ruang or RDTR).
The incentives afforded to investors include corporate income tax exemptions, tax holidays, and personal income tax exemptions for investments in priority projects in the new capital, such as ports, airports, renewable energy systems, and healthcare services, among many others.
The government will provide income tax holidays and reductions for investments in Indonesia's new capital city. Furthermore, the government will issue future implementing regulations on how the tax facilities will be regulated. The government will provide up to 100% corporate income tax exemption for between 10 and 30 years for domestic taxpayers that invest at least IDR 10 billion in the new capital. The duration of the incentive depends on the sectors in which the investment is directed. For instance, investing in public services will receive the longest tax holiday, up until 2035. Banks and insurers that invest before 2035 can enjoy up to 25 years of income tax exemption, whereas those that invest before 2045 can receive up to 20 years of income tax exemption.
According to GR 12/2023, the health sector is eligible for incentives in the form of a reduction in corporate income tax up to 100% for a period of 30 years, which is aimed at investors who invest between 2023 and 2030. The government also provides various facilities for business licenses, land use, and building facilities development. Functional permits and building certificates are charged a fee of Rp 0.
Developers of other critical infrastructure, such as public works, airports, seaports, and housing, can also benefit from the incentives, as well as businesses that engage in economic development through the construction of hotels, malls, energy infrastructure, and software, among many others.
Corporate income tax reductions will be available for investors that develop financial centers in the new capital, as well as for companies that relocate their head offices to the new capital. Moreover, investors that implement certain research and development activities will be afforded a reduction in their gross income. Further, micro, small, and medium-sized enterprises in certain business activities will also pay a zero percent corporate income tax rate.
The government also offers exemptions on import duties for the import of goods used for the construction and development of Indonesia's new capital. Further, there are import duty exemptions for the import of goods and materials used in the construction and development of industries within the new capital.
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Author: Dewi Susanti