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Who does it apply to and why?

In order to attract investment, The Government of Indonesia amended the previous Minister of Finance Regulation No. 159/PMK.010/2015 JO No. 103/PMK.010/2016 (“PMK”) regarding Corporate Income Tax Reduction Facilities (otherwise known as the Tax Holiday Facility) with the latest Minister of Finance Regulation No. 35/PMK.010/2018 (“Regulation”). The new Regulation became effectively enforced on 04 April 2018. Subsequenlty, PMK has been revoked and declared null and void by Regulation.

For clarification, there are some frequently asked questions we would like to address, which summarize a few crucial points regarding the Tax Holidays.

1.What type of industries does the Tax Holiday Facility apply to?

The Tax Holiday Facility is only intended for Pioneer Industries, which are defined as industries that have a large interconnection, provide added value and high externality, introduce new technology, or contain strategic value to the national economy. Such industries are limited to the following sectors:

  1. Integrated upstream basic metal;
  2. Integrated oil and gas refinery;
  3. Integrated petrochemical based on oil, gas or coal;
  4. Integrated inorganic basic chemicals;
  5. Integrated organic base;
  6. Integrated pharmaceutical raw materials;
  7. Manufacture of semi-conductor components and Computer main componenst;
  8. Manufacture of communication eguipment main components;
  9. Manufacture of medical eguipment main components;
  10. Manufacture of industrial machinery main components;
  11. Manufacture of engines main components;
  12. Manufacture of robotic main components;
  13. Manufacture of vessel main components;
  14. Manufacture of aircraft main components;
  15. Manufacture of Train main components;
  16. Powerplant Machinery Industry;
  17. Economic Infrastructures.

The specific details of business scopes for Pioneer Industries will be stipulated by the Indonesia Investment Coordinating Board Regulation.

2.Are there any specific descriptions regarding economic infrastructure that should be noted?

No, the Regulation does not cover any specific business scope descriptions for economic infrastructure. However according to the Indonesia Fiscal Policy Agency, a Cooperation Agreement between any government and business entity is eligible to be a subject of economic infrastructure.

3.What is the reduction of corporate income tax rates granted by the Tax Holiday Facility and for how long?

When a Pioneer Industry qualifies for the Tax Holiday Facility, the reduction of corporate income tax is 100% for certain periods, which are related to the investment value as follows :

NoInvestment Value (In IDR)Tax Holiday Period
1500 Billions up to 1 Trillion5 Years
21 Trillion up to 5 Trillion7 Years
35 Trillion up to 15 Trillion10 years
415 Trillion up to 30 Trillion15 years
5More than 30 Trillion20 years


After the period concludes, the Pioneer Industry is eligible for an additional 50% Corporate Income Tax reduction for an additional two-year period.

4.If our company has already started commerical production, are we eligible to apply for the Tax Holiday Facility?

No, Pioneer Industries are only eligible for the Tax Holiday Facility prior to the start of commercial production. Yet, Pioneer Industries are able to apply when they file their new investment registration or within a maximum of one year after obtaining the investment registration but prior to commerial prodution. Furthermore, one of the requirements to apply for the Tax Holiday Facility is that the Pioneer Industry must not have had its Tax Holiday Facility application accepted or rejected by the Ministry of Finance.

5.What is the process of applying for the Tax Holiday Facility ?

First, the Pioneer Industry must file a request of Tax Holiday Facility with the Head of Investment Coordinating Board. Then, the Board is obligated to determine the eligibility of applicant. In the event the applicant is not eligible for or hasn’t met the requirements to obtain the Tax Holiday Facility, the Board shall return the application with clear reasons why. In the event of the applicant is eligible or does meet the requirements to apply for the Tax Holiday Facility, the Board will forward the application to the Ministry of Finance along with specific suggestions to approve it. Finally, within five working days after the application is received from the Head of Investment Coordinating Board, the Ministry of Finance will issue a decree based on he suggestions from the Board.

We hope this clears up any misunderstandings about this Regulation, but please do contact SLF should you need any further assistance.

Schinder Consultant London Ltd.


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