Tax Holiday in New Capital City, Indonesia

Based on Statute 3 on 2022 concerning the new capital city, central government has established Ibu Kota Negara (IKN) in East Kalimantan as a sustainable city in the world, driving the Indonesian economy in the future, and as a symbol national identity. In order to accelerate the construction and development of Ibu Kota Negara (IKN) which is a high priority scale and has strategic value for the national economy, required policies that can encourage Entrepreneur in the preparation, construction, transfer, and development of the Ibu Kota Negara.

Involvement of Entrepreneur is expected to make the IKN besides being the center of government and also the center Indonesia-centric economic activities especially in supply for infrastructure and generating activities for advanced locomotive. In order to accelerate development in the IKN, the government needs to provide certainty, opportunities, and greater participation for Entrepreneur, thus central government published Presidential Regulations 12 on 2023 about Granting of Business Licensing, Ease of Business, and Investment Facilities for Business Players in IKN.

Aimed to ease Entrepreneur for Operating Business, Otorita IKN (IKN government) providing some exemption for Land Rights (HAT/Hak Atas Tanah). Implementation of land management is carried out by Otorita IKN that authorized to allocate, utilize, divert, use and release lands as state asset over the Land Share of Land Management Rights (Hak Pengelolaan Lahan/HPL). Granted Land Rights (HAT) for Entrepreneur consists of cultivation rights (Hak Guna Usaha/HGU), building rights (Hak Guna Bangunan/HGB) and right of land use (hak pakai). Though lands in IKN are set as state property, Granted Land Rights (HAT) will be registered in the name of Entrepreneur.

There is time limit to utilize Land Rights exemption from government. For Cultivation right (HGU) exemption is issued for a maximum 35 years. Both of Building Right (HGB) and Right of Land Use (hak pakai) exemption are issued for maximum period of 30 years. These excused land rights are subjected to BPHTB rate of 0% of the acquisition value for issued period of time.

In economics, Minister of Finance also provide investment facility includes all forms of fiscal and non-fiscal incentives for investor. Central government authority comprise regulation on income tax, value-added tax, luxury good tax, and customs.

Income Tax Facility will be provided for Macro Corporate Business, Micro Business and Employee. Income Tax Facility for Macro Corporate Entrepreneur bounded to infrastructure and public services, economic building business, and other field according to regulations. Facilitated investment in these macro business fields considered to elevate construction and development in IKN, need to achieve minimum investment value of at least Rp 10.000.000.000. For infrastructure and public services comprises:

a. power generation including new and renewable energy
b. construction and operation of toll roads
c. construction and operation of seaports
d. airport construction and operation
e. construction and provision of clean water
f. construction and operation of health facility
g. construction and operation of education facility
h. construction and operation of telecommunications and informatics
I. development and management of urban park forests
j. construction of housing, residential areas, and offices
k. waste water development and management
l. construction and management of underground utility network systems
m. operation of industrial estate and research-and-innovation centers
n. development and operation of public market
o. provision of public transportation
p. construction and operation of passenger or goods transport vehicle terminals
q. construction and operation of sports stadium/facility

For economic building business comprises:

a. construction and operation of shopping centers (malls)
b. provision of tourism facilities and accommodation/star-hotel services
c. provision of Meeting, Incentive, Conference, and Exhibition (MICE) facilities
d. refueling and/or charging stations for electric vehicles (battery charging)

Other specified businesses also provided with income tax facility that are located and earn income from business activities in IKN. These other businesses including:

a. urban farming and/or fishery cultivation
b. value-added industry and/or industrial engineering
c. hardware and software industry
d. trading services
e. construction service
f. real estate brokerage services
g. tourism services and creative economy

Corporate Tax