English translation. The implementation of Special Economic Zones (SEZ) started since the enactment of Law No. 39 of 2009 on Special Economic Zones. Currently, there are 15 KEKs in Indonesia, consisting of nine industrial SEZs and six tourism SEZs.
Up to the last quarter of 2020, the realization of investment in these Special Economic Zones amounted to Rp23.1 trillion. The realization of this investment has had an effect on the development of economy in Indonesia which generated investment commitments of almost Rp70.4 trillion. In 2020, companies in the Special Economic Zones (KEK) in Indonesia, have produced exports to more than 30 countries and contributed to foreign exchange earnings worth Rp5.2 trillion.
Based on the evaluation of SEZs, and observing the changes in current business models, and in an effort to shift the center of the global economy to Indonesia, it is important to anticipate measures to set the right policies and strategies to attract investors. Government Regulation No. 40 of 2021 on the Implementation of Special Economic Zones (“PP 40/2021”) was recently passed as an effort to implement Law No. 11 of 2020 on Job Creation.
With the issuance of PP 40/2021, it also revokes the provisions on the implementation of kek stipulated in government regulations and revokes Government Regulation No. 1 of 2020 concerning the Implementation of Special Economic Zones and Government Regulation No. 12 of 2020 concerning Facilities and Facilities in Special Economic Zones.
PP 40/2021 also regulates facilities and other easement that can be enjoyed by KEK investors in carrying out the implementation of their investments in the KEK.
FACILITIES AND EASE OF INVESTMENTS
Facilities and ease of investment measures provided for investors in the management of Special Economic Zones include and cover:
Investments in a KEK are still exempt from import duties, the provision of facilities are not subject to Income Tax, Value Added Tax (VAT) and Sales Tax of Luxury Goods for Taxable Services and Intangible Taxable Goods (“PDRI”) on the import of Consumer Goods for businesses and / or suspension of import duties for the import of goods sold in stores or shopping centers in the ministry of tourism with the provisions as detailed in Regulation of the Minister of Finance No. 33/PMK.010/2021 concerning Amendments to Regulation of the Minister of Finance No. 237/PMK.010/2020 concerning Taxation, Customs, and Excise Treatment in Special Economic Zones.
In addition, there is zero income tax of Business Entities in land procurement transactions in SEZs; the sale of land and/or buildings; and/or lease of land and/or buildings in an SEZ, are now not subject to Income Tax.
In terms of customs, imported goods used in SEZs are no longer subject to the obligations to conform to the Indonesian national standard.
The restrictions on employing foreign Nationals has also been eased. Foreign nationals who work in SEZs were subject to domestic tax on all income. The new regulations provide that Foreign Nationals having certain expertise will only pay tax on Income received or obtained from Indonesia for 4 (four) years.
With respect to licensing services, PP 40/2021 requires SEZ Administrators and local governments to provide support including regional incentives such as exemption or waiver of local taxes, and regional levies;
Non-industrial SEZs can also import consumer goods, and be entitled to the convenience and accelerated special procedures in obtaining land rights. The National Council may also establish additional facilities and other facilities.
PP 40/2021 is expected to be the right strategic step in attracting and developing businesses in Indonesian SEZs. It is hoped that these regulations will improve the competitiveness of SEZs through improving the quality of services and the application of best practices that are equivalent to other SEZs abroad. (TWK)