Indonesia seeks to soften impact of global mininum corporate tax
A teller prepares Indonesian rupiah bank notes at a money changer in Jakarta, Indonesia, on Oct 14, 2022. (Photo: REUTERS/Willy Kurniawan)
JAKARTA: Indonesia to extend its tax holiday policy for certain investments and will add new incentives as a way to mitigate the impact of global minimum corporate tax rate at 15 per cent, its finance ministry's official said on Friday.
The largest economy in Southeast Asia is among 140 countries which agreed on a landmark 2021 deal that allows governments to apply a top-up tax to the 15 per cent level on any profits booked in a country with a lower rate. It is aimed at limiting tax competition between countries.
"We will extend the tax holiday ... so there would not be any disruption (on investment)," Febrio Kacaribu, the head of finance ministry's fiscal policy agency told reporters.
Under the existing tax holiday rule, certain companies with investment of at least 500 billion rupiah (US$32.30 million) in Indonesia could get a 0 per cent corporate income tax (CIT), for up to 20 years, from the normal rate of 22 per cent.
However, with the implementation of 15 per cent global minimum tax, which is expected to kick off next year in Indonesia, the companies will then have to pay CIT at 15 per cent, while the government could only give 7 per cent tax discount.
As a compensation for the remaining 15 per cent tax tariffs that the companies have to pay when the global minimum tax rate took effect, Febrio said the government is looking for a different kind of policy, including other tax incentives, though he could give any details yet.
"Because we don't want our taxing rights will be taken by the investor's origin country," he added.
Indonesia's tax holiday policy has been offered to investors who are willing to invest in pioneer industries, such as upstream basic metals, oil and gas refining and chemicals.
