Jakarta. The Indonesian government has extended its tax holiday program until December 31, 2025, to attract more foreign investment. This decision, announced by Investment Minister Rosan Roeslani, comes amid the global implementation of a minimum tax rate of 15 percent by numerous countries.

“Tax holidays play a crucial role, accounting for over 25 percent of incoming investments. Additionally, the Global Minimum Tax (GMT) at a rate of 15 percent being applied in many countries is also a consideration for this extension,” Rosan said following a meeting with the Coordinating Ministry for Economic Affairs in Jakarta on Sunday.

The GMT is an internationally agreed-upon minimum tax rate that large corporations must pay on their profits. The new GMT sets a proposed rate of 15 percent. The Organization for Economic Cooperation and Development (OECD) proposal has received the support of 137 countries, including Indonesia, and was approved at the October 2021 summit in Rome, with an effective date set for 2024.

He added that if Indonesia does not impose this tax on foreign companies, their home countries will. "Indonesia needs to adjust its tax incentive policies to remain competitive in the eyes of foreign investors," Rosan said.

Rosan further clarified that the global minimum tax policy only applies to foreign companies, while domestic firms can still apply for the extended tax holiday until the end of 2025. This policy is expected to encourage growth in both domestic and foreign investments across various economic sectors.

According to the Finance Minister Regulation (PMK) No. 130/2020, there are two levels of corporate income tax reductions under the tax holiday scheme in Indonesia: 100 percent and 50 percent. A 100 percent reduction is granted to corporate taxpayers with a planned new investment value of at least Rp 500 billion, while a 50 percent reduction is available for those with investment plans ranging from Rp 100 billion to Rp 500 billion. The duration of the tax holiday varies between 5 to 20 years, depending on the amount of investment and the industry type.

Industries eligible for the tax holiday include the pharmaceutical raw materials industry, the creative digital economy, waste processing, electric vehicle manufacturing, solar cell production, battery manufacturing, and more.

Additionally, the tax holiday will be granted to investors who invest in Special Economic Zones (KEK) and the new capital city project, Nusantara (IKN), currently under construction in East Kalimantan. IKN is a national strategic project expected to become a center for government, business, and innovation in Indonesia. The tax holiday scheme in IKN offers a longer duration compared to other regions in Indonesia, with a maximum tax holiday period of 30 years for investments in infrastructure and public services with a minimum of Rp 10 billion.

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