Ibu Kota Nusantara (IKN) is being built to realize Indonesia’s target of becoming a developed country following the Vision of Indonesia 2045. To achieve this, the Indonesian government provides 9 (nine) income tax incentives for IKN investors. This is stipulated in Government Regulation No. 12 of 2023 concerning Business Licensing, Business Facilitation, and Investment Facilities for Business Actors in Ibu Kota Nusantara.
Tax Reduction Incentives for Domestic Corporate Taxpayers
In Articles 28 and 29, domestic corporate taxpayers with a minimum capital investment of IDR 10,000,000,000.00 (ten billion Indonesian rupiahs) are granted a 100% income tax incentive. The incentives are provided in the field of infrastructure and public services, economic recovery, and other business sectors, subject to the provisions in Article 28 paragraphs (4), (5), and (6).
The reduction of corporate income tax for each business sector is granted for the following periods:
- For the infrastructure and public services sector:
- Capital investment from 2023 to 2030: 30 years of tax reduction
- Capital investment from 2031 to 2035: 25 years of tax reduction
- Capital investment from 2036 to 2045: 20 years of tax reduction.
- For the economic recovery sector:
- Capital investment from 2023 to 2030: 20 years of tax reduction
- Capital investment from 2031 to 2035: 15 years of tax reduction
- Capital investment from 2036 to 2045: 10 years of tax reduction.
- For other business sectors:
- Capital investment from 2023 to 2030: 10 years of tax reduction
- Capital investment from 2031 to 2045: 10 years of tax reduction (for this particular investment, the corporate income tax incentive is granted at 50%).
Domestic corporate taxpayers with a minimum capital investment of IDR 10,000,000,000.00 (ten billion Indonesian rupiahs) in partner regions are also granted a 100% income tax incentive. Partner regions refer to specific areas in Kalimantan Island designated by the head of the authority in the development of the IKN economic superhub. The incentives are provided in the field of infrastructure and public services, subject to the provisions in Article 30 paragraph (3).
The reduction of corporate income tax for the infrastructure and public services sector in partner regions is granted for the following periods:
- Capital investment from 2023 to 2030: 25 years of tax reduction
- Capital investment from 2031 to 2035: 20 years of tax reduction
- Capital investment from 2036 to 2045: 15 years of tax reduction.
Income Tax Incentives for Financial Sector Activities in the Financial Center
Domestic corporate taxpayers and permanent establishments in the financial sector in the IKN Financial Center are granted income tax incentives for 18 types of business activities, as detailed in Article 32 paragraph (2). For financial businesses in banking, insurance, and sharia finance, a 100% income tax incentive is provided. The income tax referred to is the corporate income tax on investments in IKN. For other financial businesses, an 85% incentive is granted.
The income tax value is calculated based on foreign investment in the country and net income. For foreign investors, income from investments in IKN is exempted from income tax for 10 years from the initial capital investment in the Financial Center. The Financial Center is an area designated as a financial services zone and a center for technological development and other services in the financial sector.
The reduction of corporate income tax for the financial sector is granted for the following periods:
- Capital investment from 2023 to 2035: 25 years of tax reduction
- Capital investment from 2036 to 2045: 20 years of tax reduction.
Baca juga: OJK Siapkan Financial Center di Ibu Kota Nusantara
Income Tax Reduction Incentives for Establishment and/or Relocation of Offices
In Articles 35 – 41, the government provides a 100% income tax reduction incentive for the establishment and/or relocation of head offices or regional offices in IKN. The tax reduction period is granted for 10 years starting from the tax year when the office operates commercially. After the expiration of this period, Taxpayers are granted a 50% reduction in corporate income tax from the total amount of corporate income tax payable for the next 10 tax years. The government grants the application deadline for this incentive until the year 2045.
The requirements for receiving this incentive are as follows:
- For foreign taxpayers (SPLN):
- Have a minimum of 2 business entities outside of Indonesia
- Have economic substance in IKN
- Establish a limited liability company (PT) in Indonesia.
- For domestic taxpayers (WPDN):
- Have economic substance in IKN
- Establish a limited liability company (PT) in Indonesia.
Income Gross Reduction Incentives for Internship Activities
In Articles 42 and 43, domestic corporate taxpayers are granted a maximum 250% income gross reduction incentive for human resources participating in competency-based internship activities. This income gross reduction incentive is granted until the year 2035.
The internship activities referred to are activities attended by:
- Students, educators, or educational personnel in vocational high schools or vocational Islamic schools
- University students, educators, or educational personnel in diploma programs in vocational education
- Trainees, instructors, or training personnel in vocational training centers
- Unemployed individuals coordinated by the Ministry of Manpower, the IKN Authority, provincial governments, or district/city governments as vocational or competency-based education curriculum to acquire specific skills.
Income Gross Reduction Incentives for Specific Research and Development Activities
In Article 44, domestic corporate taxpayers with a place of business or domicile engaged in specific research and development activities are granted a maximum 350% income gross reduction incentive. This income gross reduction incentive is granted until the year 2035. Specific research and development activities refer to activities carried out in IKN to develop and produce inventions, innovations, new technology mastery, and technology transfer for the development of the national industry.
Income Gross Reduction Incentives for Non-Profit Contributions and/or Development Costs of Non-Profit Facilities
In Articles 45 – 49, domestic taxpayers who provide contributions and/or development costs for public facilities, social facilities, and/or other non-profit facilities are granted a maximum 200% income gross reduction incentive. The contributions and/or costs mentioned can be in the form of money, goods, or development expenses. This income gross reduction incentive is granted until the year 2035.
The requirements for this income gross reduction incentive are as follows:
- Taxpayers have a fiscal net income based on the previous year’s annual income tax return
- The provision of contributions and/or costs does not result in a loss in the tax year when they are given
- Supported by valid evidence
- Obtains technical approval and specifications from the IKN Authority.
Baca juga: Pembangunan IKN Berlanjut, Pemerintah Siap Pindahkan Belasan Ribu ASN ke IKN
Article 21 Income Tax (PPh 21) Incentives Covered by the Government and Considered Final
In Articles 50 – 55, the government provides incentives in the form of Article 21 income tax or PPh 21, which are covered by the government and considered final for certain employees. The specific employees referred to in this regulation are employees who receive income from specific employers, reside in IKN, and have a registered Tax Identification Number (NPWP) at the IKN tax office.
These specific employees may still be subject to the normal PPh 21 rate if they have additional income from outside the IKN area. Employers are required to pay the Article 21 income tax in cash to the employees upon income payment. This policy is valid until the year 2035.
The provisions for specific employers to utilize the Article 21 income tax incentive are as follows:
- Business activities are domiciled in IKN
- NPWP or tax identification of the business activities registered at the IKN tax office
- Have submitted a letter of utilization of the Article 21 income tax incentive to the Director General of Taxes and obtained approval from the Director General of Taxes
- Have submitted a realization report of the utilization of this Article 21 income tax incentive to the Director General of Taxes.
Final 0% Income Tax Incentives for Micro, Small, and Medium Enterprises (MSMEs)
In Article 56, the government provides an incentive in the form of a final 0% income tax on the gross income from certain business activities for MSMEs in IKN. This income tax incentive is given to taxpayers on their gross income from business activities up to IDR 50,000,000,000.00 (fifty billion Indonesian rupiah) in one tax year derived from businesses located in IKN.
If the taxpayer has more than one business location or branch in IKN, the determination of the investment value limit in IKN is based on the aggregation or total of all such businesses or branches. The 0% final income tax incentive is granted until the year 2035.
The conditions for taxpayers to be eligible for this income tax incentive are as follows:
- Domestic taxpayers, excluding permanent establishments, that invest capital in IKN with a value of less than IDR 10,000,000,000.00 (ten billion Indonesian rupiah)
- Have a residence or domicile, and/or have branches in IKN
- Conduct business activities in IKN
- Registered as taxpayers at the IKN tax service office or have tax identification at the place of business located in IKN
- Have invested capital in IKN
- Qualify as MSMEs as issued by the relevant authorities
- Have applied to utilize the 0% final income tax incentive no later than 3 months from the date of capital investment and obtained approval for the granting of the tax incentive.
Income Tax Reduction Incentives for the Transfer of Rights to Land and/or Buildings
In Article 57, the government provides a 100% income tax reduction incentive for taxpayers who transfer rights to land and/or buildings in IKN. The first seller who sells the land or building to the buyer will receive the income tax reduction incentive for the transfer. This incentive is provided until the year 2035. The application for this incentive is submitted through the available electronic channels at the Ministry of Finance and is granted through the issuance of a tax clearance certificate (SKB).
