The latest economic policy package also involves an expansion of Indonesia's tax holiday program and the provision of tax incentives for the newly mandated conversion of export earnings to rupiah.

Foreign Direct Investment

The red carpet is rolled out for foreign investors as a revision to Indonesia's Negative Investment List will open up foreign ownership for the full 100 percent in 28 categories within the Standard of Industrial Classification (in Indonesian: Klasifikasi Baku Lapangan Usaha Indonesia, or KBLI). Main aim of this revision is to attract more direct investment into Indonesia, hence boosting economic activity and - preferably - leading to less need for imports in the future.

Tax Holiday

The new tax holiday aims at boosting industrialization in Indonesia in order to become more complete from upstream to downstream sectors. The tax holiday, which is available through the Online Single Submission (OSS), involves the expansion of categories (KLBI), duration and the amount. A big change is that Indonesia will not only offer the tax holiday to so-called pioneering industries in the special economic zones (SEZs) but also to smaller investments in these zones. The new sectors that are eligible for the latest tax incentive are the processing industry based on agriculture, plantations or forestry and the digital economy.

Repatriation of Export Earnings

Lastly, the latest package also offers final income tax cuts to those exporters who deposit their earnings in designated (domestic) bank accounts in order to provide liquidity to Indonesia's financial system. For example, a zero percent final income tax cut is offered to exporters who deposit at least 90 percent of their earnings - for at least six months - in either US dollars or rupiah at the designated banks.

The text above is a sneak preview of the article that is included in the November 2018 edition of our research report. This article discusses:

(1) the exact Negative Investment List revisions, tax holidays, and tax incentives for the conversion of export earnings to rupiah that are offered by the government;
(2) reactions from Indonesia's business community and from government officials.

Read the full article in the November 2018 edition of our monthly research report (scheduled to be released in early December 2018). You can purchase this report by sending an email to or a WhatsApp (WA) message to the following number: +6287884106944

Economic Stimulus Packages of the Indonesian Government:

Package Unveiled Main Points
1st 9 September
• Boost industrial competitiveness through deregulation
• Curtail red tape
• Enhance law enforcement & business certainty
2nd 30 September
• Interest rate tax cuts for exporters
• Speed up investment licensing for investment in industrial estates
• Relaxation import taxes on capital goods in industrial estates & aviation
3rd 7 October
• Cut energy tariffs for labor-intensive industries
4th 15 October
• Fixed formula to determine increases in labor wages
• Soft micro loans for >30 small & medium, export-oriented, labor-intensive businesses
5th 22 October
• Tax incentive for asset revaluation
• Scrap double taxation on real estate investment trusts
• Deregulation in Islamic banking
6th 5 November
• Tax incentives for investment in special economic zones
7th 4 December
• Waive income tax for workers in the nation's labor-intensive industries
• Free leasehold certificates for street vendors operating in 34 state-owned designated areas
8th 21 December
• Scrap income tax for 21 categories of airplane spare parts
• Incentives for the development of oil refineries by the private sector
• One-map policy to harmonize the utilization of land
9th 27 January
• Single billing system for port services conducted by SOEs
• Integrate National Single Window system with 'inaportnet' system
• Mandatory use of Indonesian rupiah for payments related to transportation activities
• Remove price difference between private commercial and state postal services
10th 11 February
• Removing foreign ownership cap on 35 businesses
• Protecting small & medium enterprises as well as cooperatives
11th 29 March
• Lower tax rate on property acquired by local real estate investment trusts
• Harmonization of customs checks at ports (to curtail dwell time)
• Government subsidizes loans for export-oriented small & medium enterprises
• Roadmap for the pharmaceutical industry
12th 28 April
• Enhancing the ease of doing business in Indonesia by cutting procedures, permits and costs
13th 24 August
• Deregulation for residential property projects for low-income families
14th 10 November
• Creating a roadmap for the nation's e-commerce industry:
- easing and widening access to funding
- offer tax incentives
- harmonize regulations and gradually develop a national payment gateway
- promote e-commerce awareness campaigns and improve e-commerce education
- accelerate the development of high-speed broadband network
- improve the e-commerce logistics system
15th 15 June 2017 • Improving Indonesia's logistics:
- enhance the role of transportation insurance
- reduce costs for logistic service providers
- strengthen the Indonesia National Single Window (INSW) authority
- reduce the number of prohibited and restricted goods
16th 16 November 2018 • Improving Indonesia's investment climate:
- a revision of the country's Negative Investment List
- an expansion of Indonesia's tax holiday program
- the provision of tax incentives for the newly mandated conversion of export earnings to rupiah