The government issues Minister of Finance Regulation Number 28 of 2024 (PMK 28/2024) to clarify and refine the regulations regarding tax incentive facilities provided by the government to the National Capital of Nusantara (Ibu Kota Nusantara or IKN) and Partner Regions (Daerah Mitra). This regulation is a follow-up to Government Regulation Number 12 of 2023 (PP 12/2023) which previously regulated tax incentives at IKN. PMK 28/2024 will come into effect on May 16 2024.

Apart from tax holiday facilities, PMK 28/2024 also regulates other tax incentives, namely:

1. Vocational Super Tax Deduction, given to Taxpayers who undertake vocational coaching and training at IKN;
2. Research & Development (R&D) Super Tax Deduction, given to taxpayers who carry out research and development activities at IKN; And
3. Super Tax Deduction Donations for social/public facilities at IKN are given to taxpayers who contribute to the construction of social facilities and public facilities at IKN.

Provisions for Vocational Super Tax Deduction

Article 79 PMK 28/2024 regulates the provision of income tax reduction facilities for taxpayers who organize and/or involve human resources in educational and/or training activities at IKN for work practice, apprenticeship and/or learning activities in terms of coaching and development of certain competency-based human resources is provided with a gross income reduction facility.

The aim of providing this facility is to encourage the role and contribution of the industrial business world in increasing human resources competency in the IKN area. These facilities are provided at a maximum of 250% of the total costs incurred for work practice, apprenticeship and/or learning activities.

The types of costs for work practice, apprenticeship and/or learning activities that receive gross income reduction facilities are contained in Article 83 PMK 28/2024, including:

• Cost of providing physical facilities;
• Supporting costs for providing physical facilities;
• Instructor and teaching fees;
• Cost of goods and/or materials for activity purposes;
• Honorarium fees, expense reimbursements, and/or similar payments; and
• Competency certification costs

The period for granting income tax reduction facilities for fees charged is up to 2035. However, the Directorate General of Taxes (DGT) has the authority to determine the revocation of the facility if the taxpayer:

1. Fails to submit notifications;
   
2. Engages in activities that do not align with the competency plan as stipulated in the Cooperation Agreement; or
3. Fails to meet reporting requirements.

For taxpayers whose facilities are revoked then:

• Must pay the income tax liability starting from the time the taxpayer commits the violation; and
• Subject to administrative sanctions in accordance with the provisions of tax laws.

Super Tax Deduction Research & Development (R&D) Provisions

In accordance with Article 92 PMK 28/2024, additional facilities for reducing gross income are provided to domestic corporate taxpayers who have domiciles and/or places of business activities that carry out certain research and development activities at IKN.

This facility is provided to encourage the realization of the IKN area as a national research center which can encourage an increase in future Indonesian research and development.

"Gross income reduction facilities.. are given at a maximum of 350% of the total costs incurred for certain research and development activities which are charged within a certain period," reads Article 93 paragraph (1) PMK 28/2024.

The reduction in gross income is given at 100% of accrued costs and an additional reduction of a maximum of 250% (50% domestic patents, 25% foreign patents, 125% commercialization stage, and 50% collaboration with university or government).

The types of costs that can result in additional deductions from gross income, among them are:

• Regarding assets include buildings, in the form of:
• Depreciation costs for tangible fixed assets and/or amortization costs for intangible assets; And
• Supporting costs for tangible fixed assets which include electricity, water, fuel and maintenance costs;
• Regarding goods and/or materials;
• Regarding salaries, honorarium, or similar payments paid to employed employees, researchers, and/or engineers;
• Management to obtain intellectual property rights in the form of patents or PVP rights; And
• Fees paid to research and development institutions and/or higher education institutions located in Indonesia and contracted by taxpayers to carry out research and development activities without having rights to the results.

The period for granting income tax reduction facilities is provided for costs incurred for certain R&D activities at IKN until 2035. However, the DJP has the authority to make additional corrections to income reduction if the taxpayer:

1. Do not obtain a notification of conformity;
2. Do not obtain notification “able to utilize”;
3. Fail to submit activity and cost reports;
4. Fail to submit utilization calculation reports; or
5. Do not report the amount and type of costs correctly.

For taxpayers who receive corrections from the DJP, then:

• Must pay the income tax owed starting from the time the taxpayer commits the violation; and
• Subject to administrative sanctions in accordance with the provisions of tax legislation.

Provisions for Super Tax Deduction Contributions for Social/Public Facilities

In accordance with Article 110 PMK 28/2024, this facility is provided to domestic taxpayers who provide donations and/or costs for the construction of public facilities, social facilities, and/or other non-profit facilities at IKN area.

Referring to Article 112 PMK 28/2024, this facility provides a maximum gross reduction of 200% of the donations cost provided as long as the taxpayers meet certain criteria, including:

• Taxpayers have fiscal net income based on the previous tax year's income tax return;
• Donations do not cause losses in Tax Year the donations and/or fees are given;
• Supported by valid evidence in the form of:
• Proof of banking transfer;
• Proof of receipt of goods issued by the Head of the Authority;
• Minutes of handover (Berita Acara Serah Terima or BAST) of project completion issued by the Head of the Authority; or
• Other documents related to the provision of donations and/or fees issued by the Head of the Authority.
• Obtain technical approval and specifications from IKN Authority

Apart from that, taxpayers must also have a Fiscal Certificate (Surat Keterangan Fiskal or SKF) issued by the authority.

Taxpayers can provide money, goods and/or costs for the construction of social, public and other non-profit facilities. Further regulated in Article 113 paragraph (2) - (4), the value of donations and/or costs in the form of money is determined based on the nominal amount of money given.

Then, the value of donations and/or costs in the form of goods is determined based on:

• The acquisition value for donated items has not been depreciated;
• Fiscal book value, for donated goods has been depreciated; or
• Cost of goods sold, for goods donated are goods of own production.

Meanwhile, the value of donations and/or costs in the form of development costs is determined based on the actual amount spent.

Exceptions for donated facilities and/or development costs at IKN cannot be deducted from the gross income of the donor in the event that donation is an obligation from the donor's business activities and/or costs at IKN area.

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