October 16, 2019
Indonesia issues implementing regulations for 200% super deduction
The Indonesian Minister of Finance issued Regulation No. 128/PMK.010/2019 on 9 September 2019 containing implementing regulations (the Regulations) for the 200% super deduction (Super Deduction) for apprenticeship, internship and teaching activities conducted by the taxpayer’s employees.1 The Regulations are effective for deductions incurred on or after 9 September 2019.
The Government of Indonesia encourages the Indonesian subsidiaries of multinational companies to participate in the Super Deduction program with the aim of transferring international experience and knowledge to local educational institutions.
This Alert summarizes the key aspects of the Regulations.
To qualify for the Super Deduction, the taxpayer must satisfy all of the following:
The Qualified Super Deduction includes any costs related to:
The Director General of Tax may deny the Super Deduction for any of the following reasons:
1. See EY Global Tax Alert, Indonesia announces 300% super deduction for R&D and other incentives, dated 29 July 2019.
2. The apprenticeship and internship programs include:
3. The teaching activities are performed by personnel assigned by the taxpayer to teach in the vocational high schools, vocational diploma programs and vocational training centers.
4. The list of “certain competency” sectors is provided in the Regulations and includes manufacturing, medical, agri-business, tourism, creative industry, digital economy and migrant labor.
5. The Regulations require certain information to be outlined in the Cooperation Agreement such as taxpayer identity, competency sectors, vocational institution identity, effective date of the program, estimation of number participants, estimated number of assigned employees, and estimated cost.
6. It outlines the taxpayer’s tax compliance status for certain periods and can be obtained from the tax office where the taxpayer is registered.
7. The Regulations also provide general rules regarding the calculation of qualified expenses.
8. Submitted on the OSS channel developed by the Foreign Investment Coordination Board. If the OSS channel is not available, the documents can be submitted to the taxpayer’s regional tax office.
For additional information with respect to this Alert, please contact the following:
EY Indonesia, Jakarta
Ernst & Young LLP (United States), Indonesia Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York