The Indonesian government has been contemplating a relocation of the country's capital from Jakarta to Nusantara. The development of the new capital requires substantial private investment, and the government is incentivizing such investment with the recently enacted Government Regulation Number 12 of 2023 on the Provision of Business Licenses, Ease of Doing Business, and Investment Facilities for Businesses in the Nusantara Capital City ("GR 12/2023"). This regulation offers several incentives, including a tax holiday, which entails a 100% reduction in corporate income tax. The tax holiday is granted in the following circumstances:

1. Domestic corporate taxpayers receive a reduction in corporate income tax, provided they have made a minimum investment of Rp10.000.000.000 (ten billion rupiah) in business fields that have strategic value in the development of the new capital city. Such fields include infrastructure and public services, economic awakening (such as the construction and operation of shopping centers), and other business fields (such as construction services).
2. Domestic corporate taxpayers and permanent establishments involved in financial sector activities in the financial center of the new capital city may receive a reduction in corporate income tax of up to 100%. However, this only applies to banking, insurance, and sharia finance activities.
3. Business actors with foreign tax subject status, who establish and/or relocate their head office and/or regional office to the Nusantara capital city, may be granted a 100% reduction in corporate income tax. To be eligible for this facility, they must have at least two affiliated units and/or related business entities outside Indonesia, possess economic substance in the new capital city, and form a legal entity in the form of a limited liability company in Indonesia.

Should you have any queries regarding the above topic, Schinder Law Firm Jakarta Indonesia is among several corporate law firms in Indonesia with extensive experience and proficient corporate and civil lawyers. We invite you to contact us at info@schinderlawfirm.com for further consultation on this matter.

Author: Budhi Satya Makmur