Darmin Nasution (tempo.co)

The government has announced its fifth economic policy package, which mainly aims to boost property and infrastructure investment by cutting a multiple tax previously imposed on a financial instrument known as a collective investment contract of Real Estate Investment Trusts (REITs).

An asset revaluation for state-owned enterprises (SOE) is also included in the new package, along with an incentive for sharia banking, according to the Cabinet Secretary Pramono Anung as quoted by tempo.co.

Economic Coordinating Minister Darmin Nasution said that property companies used to create a subsidiary to turn their real assets into underlying assets, for REIT securities. They raised funds by selling and listing the REITs in capital markets abroad, such as in Singapore.

'€œPreviously, the government imposed tax on the property companies and the subsidiaries. Now, we have rolled it into one and the multiple tax is gone. It is part of our efforts to deepen Indonesian capital markets," he said as quoted by kompas.com on Thursday night in Jakarta.

Finance Minister Bambang Brodjonegoro added that the government would publish the necessary finance minister'€™s regulation (PMK) next week, to officially scrap the double taxation practice.

"In terms of income tax, REITs are considered a single entity, unseparated from the holding company. Thus, the dividend paid by the special purpose company [SPV] to the REITs [investor] is not a tax-object anymore,'€ he said.

If the underlying assets, such as land and buildings, were sold to the REIT'€™s companies or through a subsidiary such as the SPV, then they would not be subject to any final income tax, Bambang asserted. (ags/bbn)