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Indonesia incentivises industry with Super Deductible Tax

Industries that invest in vocational and research and development (R&D) activities will be given fiscal incentives in the form of tax relief by the Indonesian government.

According to a recent report, the Super Deductible Tax will reduce the income taxes of business entities so that they can pay less.

The government has created a pipeline since the end of 2018 and is in the process of harmonising with relevant ministries, particularly the Ministry of Industry.

Hopefully, the coordination with relevant ministries will run smoothly so that the Super Deductible Tax will come out faster and meet its early March 2019 target.

Benefits of the Super Deductible Tax

The Minister of Industry explained that the implementation of the Super Deductible Tax policy will support the Making Indonesia 4.0 initiative.

The benefits of this policy for industry players include fiscal incentives tax allowances as well as tax holidays.

Moreover, it will accelerate the national manufacturing industry and prepare it for the Fourth Industrial Revolution.

In the new tax relief scheme, the Ministry proposed up to 200% tax relief for industries that invest in vocational education.

As for those involved with R&D activities in order to create innovation, the Ministry proposed up to 300% tax relief.

Both of these are included in the priority strategy of the Making Indonesia 4.0 roadmap.

To better understand how the incentive works, examples were provided.

How will it work?

If for instance a company built an innovation centre for R&D in Indonesia and they invested around US$ 71,400 (IDR 1 billion), the Indonesian government will provide a reduction of taxable income worth US$ 214,200 (IDR 3 billion) in over five years to the company.

The company will be receiving a reduction that is three times the cost of their initial investment.

On the other hand, if a company cooperates and works with vocational high schools to provide vocational trainings, industrial equipment, and apprenticeship activities at a cost of US$ 71,400 (IDR 1 billion), the government will provide a US$ 142,700 (IDR 2 billion) taxable income to the company.

Requirements to avail

There are certain conditions required from the company if they wish to get tax incentives for their R&D activities.

One of which is that the results of the research carried out must have a major impact on the national economy such as increasing product competitiveness, spurring exports, and more employment.

The government will analyse and assess first if the company meets all the requirements before providing the tax relief.

Preparing for Industry 4.0

The Super Deductible Tax incentives are being provided to hasten the improvement of Indonesia’s human resource and prepare them for Industry 4.0.

Transforming to a digital industry requires that people are re-skilled and up-skilled, which will enable them to compete in the industrial sector.

This effort is carried out as one of the strategies to capture opportunities for demographic bonuses experienced by Indonesia for the next 15 years.

The growing number of productive workforce is believed to be able to boost performance and competitiveness of the national manufacturing industry.

The Making Indonesia 4.0 Roadmap aims to include Indonesia in the ranking of the 10 countries that have the strongest economy in the world by 2030.


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