The Jakarta Post
The government is offering a number of tax facilities, including tax relief for companies looking to revalue their assets, as part of the fifth economic policy package announced on Thursday.
Finance Minister Bambang Brodjonegoro said both state and privately owned businesses, and individuals, would receive a significant cut in the tax imposed on gains resulting from the revaluation of their assets.
'Those that apply for the asset revaluation before year-end will be eligible for a 3 percent tax rate, down from the current 10 percent,' he said during a press conference held at the Presidential Office on Thursday.
The tax rate will be set at 4 percent for those that apply for the revaluation between January and June 2016, and at 6 percent for the period of July to December 2016.
By revaluing their assets, companies and individuals will see the value of their assets increase, thus creating greater room or leverage for them to access external financing. Many companies, especially state-owned companies would like to reassess their assets so that their valuations reflect actual worth but the 10 percent tax imposed on the gains from such a revaluation has dissuaded them from doing do so.
Tax Office head Sigit Priadi Pramudito previously said that state-owned electricity company PLN and state-owned railway operator PT Kereta Api Indonesia (KAI) were among those looking to reevaluate their assets.
Coordinating Economic Minister Darmin Nasution, Coordinating Maritime Affairs Minister Rizal Ramli, Bank Indonesia (BI) Governor Agus Martowardojo, Financial Services Authority (OJK) Chairman Muliaman D. Hadad and Cabinet Secretary Pramono Anung also attended the press conference.
Rizal described the incentives offered under the revaluation scheme as a 'breakthrough', claiming they would accelerate economic progress.
'Back in 2000, PLN was on the brink of bankruptcy. Its assets were worth only Rp 50 trillion [US$3.66 billion] and it had negative equity. It asked for a state capital injection, but we didn't grant it,' said the former finance minister under president Abdurrahman 'Gus Dur' Wahid.
He said that when PLN conducted a revaluation, the value of its assets swelled to around Rp 200 trillion, while its equity returned to the black, amounting to Rp 104 trillion.
In addition to the tax relief in asset revaluations, the latest economic policy package also removes double taxation on portfolio investors who invest in a Real Estate Investment Trust (REIT) by using the collective investment contract (CIC) system.
This system will enable investors to pool CIC funds in a collective investment vehicle (CIV), rather than investing them directly, without being liable for double taxation.
At present, the investment method is subject to double taxation; on its dividends and on the activities because the CIV itself is considered a corporate body.
Bambang said the government would consider the CIC and CIV as one entity, thus making them subject to a single tax scheme. 'There will be no taxes levied on the dividend paid by the special purpose company [CIV] to CIC investors,' he said. 'And if an underlying asset sale occurs through the special purpose company, no tax will be charged either,' he said, adding that the government hoped the incentive would allow the REIT market to flourish and attract new investors into the country.
Contacted separately, University of Indonesia tax expert Darussalam welcomed the latest package, saying it would be attractive enough for companies to revalue their assets.
'It will also help them to meet the DER [debt-to-equity ratio] requirement that the government introduced earlier,' he said.
Meanwhile, Yustinus Prastowo, the executive director of the Center of Indonesian Taxation Analysis (CITA), predicted that state-owned firms would be the first ones to conduct revaluations.
'Private firms usually have many more things to consider before deciding to revalue their assets, as opposed to their state-owned counterparts,' he said.
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