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DECISION OF THE DIRECTOR GENERAL OF TAXATION NO. KEP-229/PJ/2001 DATED MARCH 22, 2001

TAX TREATMENT IN INTEGRATED ECONOMIC DEVELOPMENT ZONE (KAPET)

THE DIRECTOR GENERAL,

Considering :

That as further implementation of Decree of the Minister of Finance No. 200/KMK.04/2000 on tax and customs treatment in KAPET as already amended by Decree of the Finance Minister No. 11/KMK.04/2001, it is necessary to stipulate a decision of the Director General of Taxation on tax treatment in KAPET;

In view of :

1. Law No. 6/1983 on general provisions and procedure for taxation (Statute Book No. 49/1983, Supplement to Statute Book No. 3262) as already amended the latest by Law No. 16/2000 (Statute Book No. 126/2000, Supplement to Statute Book No. 3984);

2. Law No. 7/1983 on the income tax (Statute Book No. 50/1983, Supplement to Statute Book No. 3263) as already amended the latest by Law No. 17/2000 (Statute Book No. 127/2000, Supplement to Statute Book No. 3985);

3. Government Regulation No. 33/1996 on bonded container yards (Statute Book No. 50/1996, Supplement to Statute Book No. 3638) as already amended by Government Regulation No. 43/1997 (Statute Book No. 90/1997, Supplement to Statute Book No. 3717);

4. Government Regulation No. 20/2000 on tax treatment in a KAPET (Statute Book No. 45/2000, Supplement to Statute Book No. 3949) as already amended by Government Regulation No. 147/2000 (Statute Book No. 268/2000, Supplement to Statute Book No. 4065);

5. Decree of the Minister of Finance No. 291/KMK.05/1997 on bonded zones, as already amended the latest by Decree of the Minister of Finance No. 94/KMK.05/2000;

6. Decree of the Minister of Finance No. 200/KMK.04/2000 on tax and customs treatment in a KAPET as already amended by Decree of the Minister of Finance No. 11/KMK.04/2001.

DECIDES :

To stipulate :

THE DECISION OF THE DIRECTOR GENERAL OF TAXATION ON TAX TREATMENT IN A KAPET.

Article 1

(1) Referred to as a company in this decision shall be a company undertaking business activities in a KAPET and obtaining an operational license and an appointment as project executive from the Management Board (BP) of a KAPET.

(2) Referred to as a bonded zone (KB) in this decision shall be a KB located within the territory of a KAPET.

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(1) A company domiciled in the territory of a KAPET shall be granted an income tax facility in the form of: a. reduction in the net earnings amounting to 30% (thirty percent) of the amount of investment made,

which can be enjoyed for 6 (six) years as from the year in which commercial production begins, namely 5% (five percent) every year or the amount of the capital investment realized either in the fixed assets which can or cannot be depreciated;

b. the choice to apply depreciation and or accelerated amortization, as follows:

Period of Benefit Becomes

Tariff of Amortization on the Method

Depreciation and on the basis of

Asset Group

Straight Line Decreasing Balance Non-Building or

Intangible Assets

Group I 2 years 50% 100%

Group II 4 years 25% 50%

Group III 8 years 12,5% 25%

Group IV 10 years 10% 20%

II. Building

Permanent 10 years 10%

Non- Permanent 5 years 20%

-c. Compensation for fiscal losses, starting from the next fiscal year consecutively up to a maximum of 10 (ten) years;

d. The Income Tax Article 26 on Dividends of 10% (ten percent) or a lower tariff according to the prevailing double taxation avoidance agreement.

(2) A company not domiciled in the territory of a KAPET shall be given only the Income Tax facility as referred to in sub-article (1) letters a and b.

(3) The taxation facility in the area of the Income Tax as meant in sub-articles (1) and (2) shall be granted to activities and assets which are used only within the territory of a KAPET.

(4) A company undertaking business activities as an operator of a bonded zone (PKB) and or a company in a bonded zone (PDKB) can be granted an additional income tax facility in the form of exemption from the Income Tax Article 22 Import on :

a. the import of capital goods or equipment for the construction/expansion of a bonded zone and office equipment used only by a PKB;

b. the import of other capital goods or equipment directly related to the production activities of a PDKB solely used in a PDKB;

c. the import of goods and or materials to be processed in a PDKB.

(5) Apart from the facility of the Income Tax Article 22 Import as meant in sub-article (4), a PKB and or a PDKB shall be granted the facility of non-collection of the Value Added Tax (VAT) and the Sales Tax on Luxury Goods (PPnBM) on :

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b. the import of other capital goods or equipment related directly to the production activities of PDKB solely used in a PDKB;

c. the import of goods and or materials to be processed in a PDKB;

d. the entry of taxable goods from Another Indonesian Customs Area (DPIL) to a PDKB to be further processed;

e. the dispatch of goods resulting from the production of PDKB to another PDKB to be further processed; f. the release of goods and or materials from a PDKB to an industrial company in a DPIL or another

PDKB in the framework of subcontracting;

g. the re-delivery of taxable goods resulting from the subcontracted work by taxable companies in a DPIL or another PDKB to a taxable company in the original PDKB;

h. loan of machinery and or factory equipment in the framework of subcontracting from a PDKB to an industrial company in a DPIL, or another PDKB and its return to the original PDKB.

Article 3

(1) The facility as meant in Article 2 sub-article (1) letter a shall reduce the net income in the event that a company obtains a business profit or increase fiscal losses in the event that the company sustain losses.

(2) If in the years in which the facilities are granted as meant in Article 2 sub-article (1) letter a, the company shall transfer the assets originating from capital investment already enjoying the said facilities, the facilities already enjoyed and become inherent in the said assets shall be revoked and added to the taxable income in the fiscal year when the transfer of the assets is made, and the profit obtained from the said asset transfer shall continue to entail outstanding income tax.

Article 4

A company undertaking business activities outside the territory of KAPET, shall be required to undertake separate book-keeping for transactions, income and expenses regarding business activities undertaken within the territory of a KAPET and those undertaken outside the territory of a KAPET.

Article 5

(1) To obtain the income tax facilities as meant in Article 2 sub-article (1) letter a, a company must file a written application to the head of the tax service where the company is registered by using the form as meant in Attachment I.a. to this Decision of the Director General along with :

a. a letter of appointment as project executive from the BP of a KAPET; b. a capital investment certificate from an authorized government agency; c. the amo unt and the year of the realization of capital investment;

d. a financial report for the year when commercial production begins.

(2) An application as meant in sub-article (1) can also be filed by a company augmenting/expanding the capital.

(3) To be able to obtain the income tax facilities as meant in Article 2 sub-article (1) letter c, the company must file a written application to the head of the tax service where the company is registered by using the form as meant in Attachment II.a to this Decision of the Director General of Taxation by enclosing a letter of appointment as project executive from the BP of a KAPET.

(4) To obtain the income tax facilities as meant in Article 2 sub-article (1) letter d, the company must file an application to the head of the tax service where the company is registered by using the form as meant in Attachment III.a to this Decision of the Director General of Taxation along with :

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b. the list of names, addresses, amounts of dividends distributed, amounts of the outstanding Income Tax Article 26;

c. an explanation that the dividends paid out come from the profit balance remaining from the fiscal year concerned.

(5) To be able to obtain the taxation facilities as meant in Article 2 sub-articles (4) and (5) letters a, b and c, the company must comply with the provisions prevailing for a bonded zone.

Article 6

(1) The head of a tax service where the company is registered shall issue a letter of decision on approval of the granting of taxation facilities in the KAPET using the form as meant in Attachment III.b to this Decision of the Director General of Taxation at the latest 5 (five) working days after the application as meant in Article 5 is received in complete order.

(2) In the event that the tax service where the company is registered differs from the tax service where the company undertakes its business activities, the head of the tax service where the company is registered shall send the copy of the letter of decision on approval as meant in sub-article (1) to the head of the tax service whose territory shall encompass the place where the company undertakes its business activities.

Article 7

(1) Regarding a company already obtaining an operational license and an appointment as project executive by the BP of a KAPET concerned prior to April 7, 2000, the facilities of the income tax, the VAT and the PPnBM as meant in Presidential Decree No. 89/1996 as already amended by Presidential Decree No. 9/1998 shall remain applicable up to the expiration of the operational license and the appointment as project executive.

(2) Taxation facilities pursuant to this decision may be granted in the case of an application of a company to obtain the taxation facilities in a KAPET having been received prior to the enforcement of Government Regulation No. 147/2000 and not yet decided up to the enforcement of Government Regulation No. 147/2000.

(3) A company already stipulated as being entitled to receive the taxation facilities in a KAPET prior to the enforcement of Government Regulation No. 147/2000 may file an application to obtain additional facilities pursuant to this decision.

Article 8

This decision of the Director General of Taxation shall take effect as from the date of stipulation.

For public cognizance, this decision of the Director General of Taxation shall be announced by publishing it in the State Gazette of the Republic of Indonesia.

Stipulated in Jakarta On March 22, 2001

DIRECTOR GENERAL OF TAXATION sgd.

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Attachment I.a.

Sheet 1 : For Tax Service Sheet 2 : For Applicant

Number : Attachment :

Subject : Application for Reduction in Net Income by 30% of Amount of Investment

To

Head of the Tax Service of ……… In

……….

We here with :

Name of taxpayer : ………

Address : ………

Taxpayer Code Number : ………

License from BP of KAPET

Number : ……… Date : ………

Pursuant to Government Regulation No. 147/2000 as already regulated further by virtue of Decree of the Minister of Finance No. 11/KMK.04/2001 dated January 12, 2001 are filing an application for a reduction in the net income by 30% (thirty percent) of the amount of capital investment, namely 5 (five) percent annually for 6 (six) years for :

Fiscal year : Starting from fiscal year of …… Up to fiscal year of ……

Year when commercial production begins : ………. Year when investment is realized : ……… … Amount of investment realized : Rp. ………. Amount of reduction in net income/year : Rp. ……….

We are attaching herewith :

a. letter of appointment as project executive from BP of KAPET;

b. investment certificate from the Board of Investment and Fostering of State-Owned Enterprises; c. amount of investment realized and year of investment realization;

d. financial report for the year when commercial production begins.

Thank you for the approval you will grant us.

………, ………… …….

Taxpayer

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Attachment I.b.

MINISTRY OF FINANCE OF THE REPUBLIC OF INDONESIA DIRECTORATE GENERAL OF TAXATION

TAX SERVICE OF

………..

DECISION ON APPROVAL OF REDUCTION IN NET INCOME BY 30%

Number :

KEP-Head of Tax Service of ………… herewith grants an approval to :

Name of Taxpayer : ………

Address : ………

Taxpayer code number : ………

With reference to the letter of application

Number : ………

Date : ………

To be allowed the facility of reduction in the net income by 30% (thirty percent) of the amount of the investment made, pursuant to Government Regulation No. 147/2000 as already regulated further by virtue of Decree of the Finance Minister No. 11/KMK.04/2001 dated January 12, 2001, as follows :

Fiscal year : …… .. up to ……

Year of investment realization : ……… Amount of realization of investment : Rp. ………. Amount of reduction in net income granted (30%) : Rp. ………. Amount of reduction in net income per year (5%) : Rp. ……….

Please be informed accordingly.

…………, …….. ……..

Head

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Attachment II.a

First sheet : For tax service Second sheet : For applicant

Subject : Application for license for compensation for losses

To

Head of Tax Service of ……… In

……….

Herewith we :

Address : ………

Number : ………

Dated : ………

Pursuant to Government Regulation No. 147/2000 as already regulated further in Decree of the Minister of Finance No. 11/KMK.04/2001 dated January 12, 2001 are filing an application for a license for compensation for losses :

Fiscal year : ……… Amount of fiscal losses : ……….. Period of time : ………… year (s)

Starting from fiscal year of …… up to fiscal year of …….

Letter of appointment as project executive from BP of KAPET is herewith attached.

Thank you for the approval you will grant us.

…………, …….. ……..

Taxpayer

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Article II.b

MINISTRY OF FINANCE OF THE REPUBLIC OF INDONESIA DIRECTORATE GENERAL OF TAXATION

TAX SERVICE OF

………..

LETTER OF DECISION ON APPROVAL OF COMPENSATION FOR LOSSES Number :

KEP-Head of the tax service of ………… herewith grants an approval to :

Address : ………

With reference to letter of application

Number : ………

Dated : ………

To compensate for fiscal losses of the fiscal year of …… in the amount of Rp. ….. (…………..). As from the fiscal year of …….. up to the fiscal year of ……. pursuant to Government Regulation No. 147/2000 as already regulated further by virtue of Decree of the Minister of Finance No. 11/KMK.04/2001 dated January 12, 2001. The amount of the losses may change in accordance with the outcome of tax auditing on the basis of the prevailing provisions.

…………, …….. ……..

Head

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Article III.a

First sheet : For tax service Second sheet : For applicant

Subject : Application for Income Tax Article 26 on Dividends at a tariff of 10%

To

Head of Tax Service of ……… In

……….

Herewith we :

Address : ………

Number : ………

Dated : ………

Pursuant to Government Regulation No. 147/2000 as already regulated further by virtue of Decree of the Minister of Finance No. 11/KMK.04/2001 dated January 12, 2001 are filing an application for the Income Tax Article 26 on dividends at a tariff of 10% to be paid/outstanding in the amount of Rp. …….. (………..).

Attached please find :

a. Letter of appointment of project executive from BP of KAPET.

b. List of names, addresses, amount of dividends distributed, amount of Income Tax Article 26 outstanding; c. Explanation that the dividends paid out comes from the profit balance remaining from the fiscal year

concerned.

We thank you for the approval that you will give us.

…………, …….. ……..

Taxpayer

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Attachment III.b

MINISTRY OF FINANCE OF THE REPUBLIC OF INDONESIA DIRECTORATE GENERAL OF TAXATION

TAX SERVICE OF

………..

DECISION ON APPROVAL OF INCOME TAX ARTICLE 26 ON DIVIDENDS AT A TARIFF OF 10%

Number :

KEP-Head of the tax service of ………… herewith grants an approval to :

Address : ………

With reference to letter of application

Number : ………

Dated : ………

To be granted the facility of the Income Tax Article 26 on dividends at a tariff amounting to 10% to be paid out/outstanding to the said foreign taxpayer in the amount of Rp. ….. (…………..).pursuant to Government Regulation No. 147/2000 as already regulated further by virtue of Decree of the Minister of Finance No. 11/KMK.04/2001 dated January 12, 2001.

…………, …….. ……..

Head