Explore tax service in Belt and Road countries – Indonesia Overview of Indonesia’s economy
Rangoon THAILAND Population MYANMAR LAOS VIETNAM Manila PHILIPPINES Bangkok 261 million (Burma) CAMBODIA Mindoro Philippine Andaman Phnom Samar Panay Sea Gulf Penh Sea South Palawan Of Negros Thailand China GDP (nominal) Sea Sulu Sea Mindanao USD 933 billion Banda Aceh Borneo MALAYSIA Bandar Seri Begawan Kuala ACEH Medan BRUNEI Lumpur RIAU Pacific ISLANDS Celebes Sea SULAWESI MALYASIA KALIMANTAN Manado SINGAPORE GORONTALO UTARA Ocean GDP (annual % change) Pekanbaru Singapore TIMUR KEPULAUAN Pontianak Gorontalo Halmahera Kalimantan Samarinda SULAWESI Sofifi 5% * Padang RIAU BELITUNG KALIMANTAN Palu Sumatra KALIMANTAN TENGAH MALUKA PAPUA Jambi BANGKA BARAT TENGAH UTARA BARAT New Guinea JAMBI Pangkalpinang SULAWESI Ceram SUMATERA Palangkaraya Sulawesi Palembang BARAT Buru Jayapura BARAT SUMATERA BENGKULU Banjarmasin Kendari Ambon PAPUA Bengkulu SELATAN Jakarta KALIMANTAN Makassar LAMPUNG JAKARTA RAYA SELATAN MALUKA PAPUA GDP per Capita Tanjungkarang- Serang Bandung Semarang Java Sea SULAWESI SULAWESI Banda Sea KEPULAUAN NEW Telukbetung SELATAN TENGGARA ARU USD 3,603 BANTEN JAWA TENGAH Surabaya BALIMataram GUINEA JAWA JAWA TIMUR Sumbawa Flores Dili KEPULAUAN Indian Ocean Yogyakarta BARAT Denpasar TANIMBAR YOGYAKARTA Arafura Sea Java NUSA Timor EAST TIMOR Christmas Island TENGGARASumba NUSA Kupang (AUSTRALIA) BARAT Timor Sea TENGGARA AUSTRALIA Ashmore and Inflation TIMUR Cartier Islands INDONESIA (AUSTRALIA) 3.5%
Source: World Bank (2016 data)
PwC 2 Challenges for investors amid Indonesia’s rising Foreign Direct Investment (FDI)
1
Regulation
2 3 4 5
TAX $
Tax Land Manpower Infrastructure
Source: BKPM
PwC 3 Pro-Investment Policy: Economic Deregulation Series to Drive Economic Growth
Predictable Wage System Tax incentive for labour Dwelling time optimisation New Negative List of Relaxation of entry visa intensive industries Investment that is more open policy
3Hr
Tax incentive for transport Acceleration of infrastructure 3 Hour Licensing Service in Lower energy costs for Tax incentive on property industries & power development BKPM industries
EODB e-commerce
Acceleration on land Ease of Doing Business Affordable housing for the Incentive for investment in Efficiency on National licensing Improvement people e-commerce areas Logistic Cost
The Indonesian government has just launched a new policy to boost investment. The policy aims to speed up the issuance of business permits while providing greater certainty on the cost and time involved, and to improve coordination between ministries and provincial administrations.
Source: BKPM
PwC 4 Investment Priority Sectors
Infrastructure Maritime Energy, transportation, industrial estates, SEZs Including fisheries and cold storage
Manufacturing Industry Agriculture
Labour Intensive Industry e.g.: textiles, garments, furniture, etc. Tourism “10 New Bali” Export Orientation Industry Export e.g.: automotive, electronics, machinery, etc. Lifestyle Industry e.g.: creative industries, culinary, fashion Import Substitution Industry e.g.: pharmaceutical raw material, petrochemical
Value-Added Industry e.g.: agro-industry, smelters, etc.
Source: BKPM
PwC 5 Investment Regulation
Basic Regulatory Framework • A foreign company can have a presence in Indonesia in the form of : (1) a subsidiary company/PT (2) a representative office and (3) a branch • The government sets conditions for foreign investment in various business sectors through a regulation called the Negative List of Investment. It defines various sectors as: - Totally closed for investment - Open only for domestic investors - Open for foreign investors either: (a) 100% ownership or (b) requires a joint venture with a domestic investor • The latest Negative List of Investment was issued 18 May 2016 and is due for revision in 2019. • It is expected that there will be more sectors open for foreign investors.
PwC 6 2018 Tax Outlook
• The government’s Tax Revenue Target of IDR 1,618 trio (≈ RMB 735.5 bio), has increased by 23.7% from the 2017 Actual Tax Revenue • Tax Revenue represents 85.5% of the State Budget
Tax Reform Pillars
Optimize Tax Revenue A Strong, Credible and Accountable Directorate General of Taxation (DGT)
Organisation Human Resources IT and Database Business Processes Laws & regulations Best fit organisation structure HR staff members who are Reliable IT to process tax data Simple business processes to Laws and regulations which which considers geographical professional, competent, accurately and technology-cased make the work effective, efficient, provide legal certainty, coverage, organisation credible, with integrity and can in line with the DGT’s core accountable, IT-based, and accommodate dynamics from characteristics, economy and carry out the DGT’s business business. covering all of the DGT’s work. developing economic activities, local wisdom, potential revenue process to collect State revenue reduce compliance costs, and sufficient span of control. in line with the current potential. expand tax basis, and increase the tax revenue.
Facilities and Infrastructure Budget Synergy from Other Parties
PwC 7 Indonesian Tax Office’s Strategy in 2018
4th Focus: 1st Focus: Increase Organisation Providing Services and Counselling Capacity & Human Resources
TAX REFORM
3rd Focus: 2nd Focus: Extensification, Monitoring, Data Management and Processing Audit, Collection & Law Enforcement
PwC 8 Indonesian Tax Office’s Strategy in 2018
Certainty and options more Increase in Tax Base explored (APA & MAP)
Indonesia Robust compliance and Collection Focussed disclosure Taxation Approach
Active tax and transfer pricing Active tax and transfer pricing focussed audit focussed audit
PwC 9 Overview of Current Indonesian Taxation
Indonesia ranks 104th (out of 190 countries) based on the 2017 Paying Taxes ranking and is expected to get better
Countries 2017 Paying Taxes Rank A member of G20 Korea, Rep 23 Malaysia 61 Indonesia 104 China 131 India 172 Tax Treaties with 67 Countries
Indonesia 2015 Number of tax payments 43 Time to comply with the tax system (hour per year) 221 Total tax rate (costs of all taxes borne by the company as a % of commercial profits) 30.6% Self Assessment System
Post-filing index 2015 (A) Time to comply with VAT refund 18 hours (B) Time to obtain VAT a refund 30.9 weeks (C) Compliance time to correct Corporate Income Tax (“CIT”) errors (including audit time) 4 hours 5 Years Statute of Limitation (D) Time to complete CIT audit, where applicable Audit is unlikely
PwC 10 Available Investment Incentives
Tax Allowance Tax Holiday Import Duty Facility (GR No. 9/2016) (MoF Reg No. 103/PMK.010/2016) (MoF Reg No. 176/PMK.011/2009 juncto No. 188/PMK.010/2015)
30% from investment value 5-15 Years Machines, goods, Materials for Reduction of corporate net Tax Exemption, with potential 20 years production income tax for 6 years, exemption for projects that are considered 5% each year strategic for Indonesia’s economy 2 years import duty exemption or 4 years for companies using locally-produced 145 business fields Eligible for tax 8 eligible pioneer industries machines (min. 30%) allowance, expanded from 143 segments 1. Basic metal industries in the previous regulation with an 2. Oil refinery industries Industries additional segment: clothing industry 3. Basic organic chemicals from natural oil Which produces goods and/or services, and gas including: * Under certain requirements among others: 4. Machinery industries 1. Tourism and culture investment value or export orientation, 5. Communication devices industries 2. Public transportation manpower absorption, local content, and 6. Agricultural processing project location 7. Marine transportation 3. Public health services (especially outside Java island). 8. Economic infrastructures other than PPP 4. Mining 5. Construction IDR 1 trillion 6. Telecommunication Minimum investment plan (USD 74 million) 7. Port
PwC 11 Thank You
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