The Indonesian government is committed to fostering the advancement of the research and development (R&D) sector through the introduction of a tax incentive policy. One of its flagship initiatives is the introduction of an additional 200% tax deduction for specific expenditures related to R&D activities.

This incentive encompasses several eligible expenditure categories. Firstly, it includes assets other than land and buildings, incorporating accumulated depreciation, electricity, water, fuel, and maintenance costs. However, it's important to note that the additional deduction does not apply if the assets have already received other facilities under Tax regulations or additional deductions for labor-intensive industries.

Moreover, expenses for goods or materials, salaries, honorariums, and similar payments to employees, researchers, and engineers are covered. Additionally, handling fees for obtaining patents or Plant Variety Protection (PVP), as well as payments to R&D institutions or higher education institutions in Indonesia involved in R&D activities without holding rights to the results, are also within the scope of this incentive.

To avail of this facility, a taxpayer must submit an application through the Online Single Submission (OSS) system, attaching a proposal for R&D activities and a Tax Clearance Letter. In the absence of OSS, manual applications can be submitted to the Ministry responsible for science and technology, using a provided letter template. Following the ministry's review process, applicants will receive notifications of approval or rejection, either through OSS or the manual process.

Applicants whose applications are approved must adhere to administrative requirements. This includes the submission of an annual R&D cost report through OSS or the manual process. Additionally, they are required to submit an annual report on the calculation of the use of the additional deduction after receiving notification to commence claiming the additional deduction.

Failure to fulfill these requirements may lead to adjustments by the Directorate General of Taxation on the enjoyed additional deduction. This tax incentive aims to stimulate business participation in R&D activities, fostering innovation and enhancing competitiveness in the global market.

 

Source: PWC