BKPM Now Handles Tax Allowance Issuance to Accelerate Investment

The Indonesia Investment Coordinating Board (BKPM) now has been directly authorized to make decisions on tax allowance issuance to accelerate investment. This ruling and authority is in accordance with the provision listed on Regulation of the Minister of Finance Number 96/2020. Here are information on the implementation.

What is tax allowance?

Tax allowance is an incentive facility granted by the government to investors. In this condition, the investors in question are investors who make new investments or business expansions in certain areas. The business criteria permitted to receive tax allowance, according to the Regulation of the Government No.78 of 2019, are businesses that have high investment values or exports; massive rate of labour absorption; or produces high local contents.

Tax allowance effectivity on investment acceleration

Previously, the authority to make decisions on tax allowance issuance lied to the Minister of Finance. However, as PMK No. 96/PMK.010/2020 has been published, the authority to grant tax incentives is now delegated to the Chairman of BKPM. In the regulation, it is listed that the income tax (PPh) facility issuance for investment in specific business sectors and areas is to be administered by BKPM on behalf of the Minister of Finance.

The PMK publication is an innovation in the investment licensing bureaucracy which hopefully will help investors with a faster process. Another goal of a single door mechanism in investment licensing and facility administration at BKPM is to increase certainty and accelerate the execution of investments in the field.

A decline in Indonesia’s economic growth results in an increased unemployment rate. Investment holds a significant role in opening new jobs. The Chairman of BKPM emphasizes that investment is the main motor driving Indonesia’s economic growth. The tax allowance effectivity is a part of innovations to accelerate investment which will help open new job vacancies and absorb more potential workers. Therefore, businesses in Indonesia need to be pushed, in terms of the investment acceleration process, with the tax allowance effectivity.

A more practical tax allowance issuance process

The tax allowance issuance will be supported by the Online Single Submission (OSS) system that has been operated by BKPM. OSS is the same system that business owners use to apply for a business license. Later on, BKPM will handle the tax allowance application via OSS, submitted documents verification, and the issuance of decree on granted facilities.

Since the process is performed with the support of an integrated digital system, the overall tax allowance issuance process will take 5 (five) days. However, this time frame will only apply if all the official requirements and documents have been met. Some of the requirements that must be fulfilled by business owners are fixed asset accounting documents, tax clearance certificate, documents on production result transactions, and field inspection documents.

If the tax allowance issuance is approved, the issuance will contain information about the investment, such as name, address, Tax code (NPWP), tax allowance facilities detail, Business Identification Number (NIB), principle permit, taxpayer obligations and prohibitions, period of granted facilities, standard industrial classification (KLBI), and investment plan.

The delegation of tax allowance authority as an innovation in the licensing process to support business growth is a smart step to promote Indonesia’s economy. As the investment licensing process gets easier with a faster tax allowance application and issuance, more investors will be interested to make investments in Indonesia.