Exemption from maximum foreign ownership
As you may be aware, several lines of businesses in Indonesia are subject to a limitation of foreign ownership. GR12/2023 has exempted this requirement for all affected businesses located in Nusantara and its partnered area.
Longer period for rights over land
Lands in Nusantara are managed by the government’s capital authority under management rights. Companies who wish to carry out business in Nusantara are required to enter into an agreement with the capital authority, to be granted with the rights over land for business purposes.
Rights over land for business purposes in Nusantara shall be in the form of: (i) the right to build (hak guna bangunan or “HGU”); (ii) the right to cultivate (hak guna usaha or “HGU”); or (iii) the right to use (“Hak Pakai”). These rights over land are granted for the following periods:
- HGU will be granted for a total period of 95 years (an initial period of 35 years, with a first extension of 25 years and a second extension of 35 years);
- HGB will be granted for a total period of 80 years (an initial period of 30 years, with a first extension of 20 years and a second extension of 30 years); and
- Hak Pakai will be granted for a total period of 80 years (an initial period of 30 years, with a first extension of 20 years and a second extension of 30 years).
GR 12/2023 enables companies to extend their rights over land with another cycle (with the same period for each right over land), provided that this extension has been agreed with the capital authority. Such extensions for another cycle of land usage rights are not granted for lands located in other regions.
Tax holiday for certain business activities and products
Business activities which have strategic value to accelerate growth and development of Nusantara (including, among others, general construction business, airport, seaport or toll road operator, malls, hotel and tourism operators, and hardware and/or software manufacturing) shall enjoy a 100% corporate income tax exemption. The period for such tax exemption may vary, depending on each business activity.
For example, tax exemption for airport, sea port or toll road operators shall be granted for: (i) 30 fiscal years, for investment made between 2023 – 2030; (ii) 25 fiscal years, for investment made between 2031 – 2035; and (iii) 20 fiscal years, for investment made between 2036 – 2045.
Meanwhile, tax exemption for hotel or mall operators shall be granted for: (i) 20 fiscal years, for investment made between the period of 2023 – 2030; (ii) 15 fiscal years, for investment made between the period of 2031 – 2035; and (iii) 10 fiscal years, for investment made between the period of 2036 – 2045.
In addition to a tax holiday for corporate income tax, value added tax (“VAT”) will be exempted for transfer or provision of certain products or services in Nusantara. The VAT exemption shall apply for, among others: (i) leased office buildings and/or malls and department stores in Nusantara; (ii) construction services for roads, dams, telecommunication networks, hospitals, offices and other infrastructures; and (iii) transfer of electric vehicles produced in Indonesia and have police numbers registered in Nusantara capital. VAT exemption will be granted until 2035.
Authored by Mochamad Kasmali and Fakharsyah Hanif Sugiyartomo.