Indonesia offers several tax incentives for Chinese investors

PT QMB New Energy Material, a subsidiary of Chinese renewable energy sector player GEM Co. Ltd. invested in Morowali, Indonesia and was granted a 10-year corporate income tax (PPh) exemption and a 2-year 50% PPh reduction.The company is owned by a number of well-known companies and also cooperates with the Indonesian Institute of Technology in nickel research and development. The company has not utilized super tax breaks due to the tax exemption period. In addition GEM plans to build an international green industrial park in Morowali with an estimated investment of US$8 billion. The vice chairman of the Investment Coordination Committee said that the government attracts foreign investment by providing various incentives such as tax holidays and tax breaks to enhance the country's competitiveness and to promote training and research and development by companies. Tax holidays mean 5-20 years of 100% corporate income tax exemptions for new investments with an investment of at least 50 billion dong (about US$3.35 million), with some companies enjoying an additional 50% exemption; and 5 years of 50% corporate income tax exemptions and 2 years of additional 25% exemptions for companies with an investment of 10-50 billion dong. The tax breaks include a gross income deduction of 30% on the original value of fixed assets in specific industries or areas, accelerated depreciation and amortization, a reduction in income tax on dividends to 10% or less, and an extension of the loss carry-forward period. In addition companies using a certain percentage of local machinery are entitled to tax exemptions on imported machinery, etc., companies engaged in education are entitled to a super tax break of up to 200% on the cost of educational activities, and there are corresponding tax incentives for labor-intensive industries and R&D activities. Indonesia also has 25 Special Economic Zones (SEZs), which provide investors with additional benefits such as tax exemptions on imports and exports. According to the Ministry of Finance's tax report for 2023, the government has provided Rp21 billion in tax breaks for investments in specific areas or regions, and Rp3.84 trillion in tax holidays for pioneering industries.