Ministry of Finance has officially issued regulations regarding the provision of tax facilities at the National Capital of Nusantara (Ibu Kota Nusantara or IKN) and Partner Regions. These regulations are contained in Minister of Finance Regulation Number 28 of 2024 (PMK 28/2024). The PMK was promulgated and became effective on May 16, 2024.

PMK 28/2024 was issued to implement and regulate further the provisions in Government Regulation Number 12 of 2023 (PP 12/2023) concerning Providing Business Licensing, Ease of Business, and Investment Facilities for entrepreneurs at IKN.

This is in accordance with the considerations in PMK 28/2024 which states, "In order to implement the provisions of...PP 12/2023...it is necessary to stipulate Regulation of the Minister of Finance concerning Taxation and Customs Facilities at IKN."

Tax Holiday for Taxpayers Who Make Capital Investments

One of the tax facilities regulated in this provision is tax holiday given to taxpayers who invest at IKN and Partner Regions. Based on Article 1 PMK 28/2024, Partner Region is a certain area on the island of Kalimantan which was formed for the construction and development of the IKN economic super hub, in collaboration with IKN authority, and is determined through Decree of the Head of the Authority.

Quoting from the Directorate General of Taxes socialization material regarding PMK Tax Facilities at IKN, the tax holiday facility is provided by the government to Resident Corporate Taxpayers who invest a minimum capital of IDR 10 billion. Based on Article 6 PMK 28/2024, capital investment must be made in business fields that have strategic value, in order to obtain Corporate Income Tax reduction facilities. Business fields that have strategic value consist of:

• Public infrastructure and services;
• Economic revival; And
• Other business fields.

The provision of facilities to Taxpayers who have invested at IKN and Partner Regions can be provided at 100% for a period of 10-30 years. In accordance with Article 8 and Article 9 PMK 28/2024, the period for granting tax holidays is different based on capital investment in certain business fields, such as:

• Capital investment for the infrastructure and public services business sector is provided with facilities for a period of time as long as:
• 30 tax years for investments made at IKN from 2023 - 2030, while 25 tax years for investments made in Partner Regions from 2023 - 2030;
• 25 tax years for investment made at IKN from 2031 - 2035, while 20 tax years for investment made in Partner Region from 2031 - 2035; And
• 20 tax years for investments made at IKN from 2036 - 2040, while 15 tax years for investments made in Partner Region from 2036 - 2040.
• Capital investment for the economic generation business sector is provided with facilities for a period of time as long as:
• 20 tax years for investments made from 2023 - 2030;
• 15 tax years for investments made from 2031 - 2035; And
• 10 tax years for capital investments made from 2036 - 2040.
• Capital investment for other business fields is provided with facilities for a period of time as long as:
• 10 tax year for investments made from 2023 - 2030; And
• 10 tax year for investments made from 2031 - 2045.

However, there is an exception for providing 100% facilities for capital investment in other business fields. "Exempted from the provisions... the reduction in Corporate Income Tax for other business fields provided for 10 (ten) Fiscal Years... is given at 50% (fifty percent) of the percentage of Income Tax reduction...," reads Article 8 paragraph (5) PMK 28/2024.

Tax Holidays on Financial Sector Activities at the Financial Center

Furthermore, there is a tax holiday facility for financial sector activities at  Financial Center. By definition, Financial Center is an area that has been designated as a concentration of financial services as well as a center for technology development and supporting services in the financial services sector. Based on Article 2 paragraph (7) PMK 28/2024, Income Tax facilities for financial sector activities at Financial Center include:

• Reduction of Corporate Income Tax for Corporate Taxpayers who carry out business activities at IKN Financial Center; And
• Exemption facility from withholding and/or collecting Income Tax on income originating from investments at IKN Financial Center received or obtained by Foreign Tax Subjects.

Quoting from Article 52 paragraph 1, the Income Tax facility provided to Foreign Tax Subjects financial sector investors is exempt from withholding tax for 10 years starting from the placement of funds at IKN Financial Center.

The SPLN criteria that can receive this facility are:

• SPLN or individual who is not a Permanent Establishment (PE); and
• The party who actually receives the benefits from the income (beneficial owner).

Furthermore, in accordance with Article 52 paragraph 3, Foreign Tax Subjects meets the requirements as the party who actually receives the benefits from the income (beneficial owner), namely:

• Individual Foreign Tax Subjects, not acting as an agent or nominee; or
• Corporate Foreign Tax Subjects, includes:
• Not acting as an agent, nominee or conduit;
• Have control over the use of funds, assets or rights that generate income from Indonesia;
• No more than 50% of Corporate Income Tax is used to fulfill obligations to other parties;
• Bear the risk of assets, capital or liabilities owned; and
• Has no written or unwritten obligation to forward part or all of the income received from Indonesia.

The forms of tax holiday facilities provided to the financial sector at Financial Center include:

• Income tax reduction facility of 100% of the amount of tax payable; And
  This facility is provided to entrepreneurs in the fund-raising sector such as banking, sharia banking and insurance.
• Income tax reduction facility of 85% of the amount of tax payable
  This facility is provided to entrepreneurs in other financial sectors such as capital markets, financial derivatives and stock exchanges, pension funds, financing, venture capital, and so on as stated in PMK 28/2024 Article 33 paragraph (1) points d - r and Article 4 .

In accordance with PMK 28/2024 Article 31 paragraph (1), this facility is provided for 25 years for capital investments made from 2023 - 2035, while capital investments made from 2036 - 2045 are given for 20 years.

Tax Holidays for the Establishment and/or Transfer of Head Office and/or Regional Offices

"Entrepreneurs who establish and/or move their head offices and/or regional offices to IKN are provided with Income Tax reduction facilities," reads Article 57 paragraph 1 PMK 28/2024.

This facility can be provided to entrepreneurs who establish and/or move their head office and/or regional office to IKN until 31 December 2045.

Entrepreneurs who can obtain this facility include:

• Foreign Tax Subjects which establishes and/or moves its head office and/or regional office to IKN; or
• Resident Taxpayers established its head office and/or regional office at IKN.

This facility can be provided at 100% for 10 years, if the 10 year period has passed, you will then receive a income tax reduction facility for the following 10 years.

corporate-tax-income , income-tax , tax-facilities , tax-holiday