PMK-153 serves as the foundation motivating collaboration between the private sector and government R&D institutions or universities in Indonesia. This initiative provides tax incentives for corporate entities engaged in Research and Development (R&D) activities. To qualify for these facilities, R&D activities must meet several crucial criteria. Firstly, these activities must be undertaken by corporate taxpayers, except those under specific contracts such as Production Sharing Contracts, Contracts of Work, or mining contracts where the tax arrangements are based on the contract rather than the prevailing Income Tax Law. Secondly, these activities must have commenced since June 26, 2019. Thirdly, they must satisfy various criteria, including the aim to achieve new discoveries, being based on original concepts and hypotheses, involving uncertainty in the final outcomes, being planned and budgeted, and aiming to create discoveries that can be freely transferred or traded.

Moreover, eligible R&D activities must fall within specified priorities outlined in PMK-153, such as the food, pharmaceutical, textile sectors, among others. PMK-153 further provides a detailed definition of qualifying R&D activities, distinguishing between research and development.

The regulation explicitly identifies types of activities not included in the R&D definition, such as marketing research, quality control during commercial production, and periodic or seasonal design changes to existing products. Thus, PMK-153 establishes a robust foundation to encourage innovation among companies by setting clear criteria and offering tax incentives as a form of government support for R&D activities in Indonesia.

 

Source: PWC