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Indonesia slashes taxes for revaluation of asset to boost investment

Xinhua, October 22, 2015 Adjust font size:

Indonesia on Thursday unveiled the 5th economic stimulus package that cut taxes for revaluation of assets of firms in a bid to lure investment and raise earning for the government.

The package came after the country's investment board announced that the foreign direct investment grew steady at about 18 percent in the third quarter compared with the previous three months.

The government decided to reduce the tax to revalue assets and apply single tax for collective contracts for real estate investment trust (REITs) compared with double taxes under the current rule, Economic Chief Minister Darmin Nasution announced.

With the cheaper tax, it is expected to encourage state firms or private companies to revalue their assets, whose value certainly significantly rises at present, as it could boost their performance, he said.

Many firms had been reluctant to revalue their assets as it would be charged with high income tax of 10 percent, said Nasution.

"Should companies revalue their assets, it will significantly step up their capacity and financial performance. And eventually it will avail them to make more profits in coming years," Mr. Nasution said at the State Palace.

"If state firms do not do it (the revaluation), it is stupid. Their assets will multiply. Their capital will be bigger so that the capacity to take credit or issue bond for the reviving of Indonesia's economy becomes big," Coordinating Minister for Maritime Rizal Ramli said.

Under the tax incentive package, firms conducting revaluation of asset no later than Dec. 31, 2015 will be charged with 3 percent income tax, and for those conducting it from Jan. 1 to June 30, 2016 will be charged by 4 percent income tax and the revaluation carried out from July 1 to Dec. 31, 2016 will be charged by 6 percent, Finance Minister Bambang Brodjonegoro said at the palace.

For the collective contract of REITs, it is only charged with single income tax, compared with the recent double taxes, which had resulted in Indonesia's firms issuing the REIT in Singapore, Mr. Brodjonegoro said.

"The double tax is decided to be dropped, it is enough with a single tax," he said.

President Joko Widodo has launched a series of stimulus packages since September, including acceleration and simplification on investment licensing.

On Wednesday, President Joko Widodo asked governors across the country to simplify regulations linked with investment to lure more foreign capitals.

Indonesia has attempted to cut rate tape, simplifying process of investment licensing, combating graft and conducting other reforms to lure foreign investment. Enditem