VAT Non-Collected and Exclusion from STLGs Scheme

JAKARTA, DDTCNews - Gov. Reg. 12/2023 stipulates the granting of fiscal incentives for investors in Nusantara Capital (IKN). These fiscal incentives include value added tax (VAT) and sales tax on luxury goods (STLGs).

The incentives are granted in the form of VAT non-collected and STLGs exclusion for supplies of taxable goods (BKP). These incentives are granted to entrepreneurs performing investments and economic activities and/or financing the construction and development of IKN and/or partner regions.

“VAT relief … granted in partner regions in the form of VAT non-collected,” reads Article 58 paragraph (2) of Gov. Reg. 12/2023, quoted on Wednesday (8/3/2023).

Partner regions are certain zones on the Island of Kalimantan established for the construction and development of the IKN economic superhub, in collaboration with the IKN Authority and determined through the head of the authority decree.

The tax relief in the form of VAT non-collected in IKN is provided for supplies of certain strategic taxable goods (BKP) and/or taxable services (JKP). The incentives are also provided for imports of certain strategic taxable goods.

Certain strategic taxable goods include new buildings in the form of landed houses, flat units, offices, shops/shopping centres and/or warehouses for certain individuals, certain agencies and/or ministries/institutions (K/L).

Motor vehicles with plate numbers registered in IKN, that use domestically produced battery electric vehicles for individuals, agencies and/or K/L. Next, other certain strategic taxable goods required in the context of the preparation, construction, relocation and development in IKN.

Certain strategic taxable services include lease services for landed houses, flat units, offices, shops/shopping centres and/or warehouses supplied to individuals, agencies and/or K/L, conducting business, assigned or domiciled in IKN.

Next, construction services for the construction of roads, bridges, dams, clean water treatment plants, new and renewable energy power plants, drinking water supply systems, telecommunications networks, energy networks, water/irrigation networks, waste and/or sewage treatment plants. 

Further, construction services for the development of hospitals/clinics, health laboratories, schools or colleges, government buildings, landed houses, flat units, offices, shops and/or warehouses, airports, seaports, terminals, railway networks or other similar infrastructure constructed in IKN;

Other certain strategic taxable services also include garbage and/or waste processing services for the garbage and/or waste produced in IKN. There are also other certain strategic taxable services required in the context of the preparation, construction, relocation and development in IKN.

VAT non-collected is also granted for imports by and/or supplies to taxable persons for VAT purposes producing electricity from new and renewable energy in IKN in the form of machinery and factory equipment, both main machines/equipment and supporting machinery/equipment to produce electricity from new and renewable energy in IKN.

VAT non-collected in partner regions are granted in respect of supplies of certain strategic services. The taxable services are in the form of construction services in respect of the development in partner regions. Supplies to taxpayers are eligible for Income Tax incentives (the tax holiday). 

The incentives apply to power plants, including new and renewable energy; the construction and operation of toll roads; the construction and operation of seaports; the construction and operation of airports; and the construction and supply of clean water.

“VAT non-collected … may be granted until 2035,” reads Article 59 paragraph (6) of Gov. Reg. 12/2023.

VAT payable on imports and/or acquisitions of taxable goods must be paid. This provision applies if the taxable goods that have received VAT non-collected within a period of 4 years are used not according to the original purpose; are transferred to another party, either in part or in whole; and/or are registered with a plate number outside IKN if the taxable goods are in the form of vehicles.

VAT payable must also be paid for taxable services that have received VAT non-received if they are used not according to the original purpose within a period of 4 years and/or leased back to another party during the lease period if the taxable services are in the form of a lease.

Later, the Ministry of Finance will issue a Minister of Finance Regulation (MoF Reg.) which contains more detailed provisions on these incentives. These provisions include the threshold, subjects and criteria of taxable goods and/or taxable services eligible for VAT non-collected as well as procedures for granting the incentives.

The exclusion from the imposition of STLGs is granted to supplies of luxury residential groups to individuals, agencies and/or K/L conducting business, assigned or domiciled in IKN. Exclusion from the imposition of STLGs may also be granted until 2035.

Provisions on procedures for the exclusion from the imposition of STLGs will also be stipulated under the MoF Reg. (kaw)