Indonesia: New tax incentives for renewable energy resource utilization

The Indonesian Ministry of Finance issued a regulation on 28 January 2010 that grants various tax and customs benefits for activities relating to renewable energy resource utilization.

The regulation provides for a reduction of net income amounting to 30% of capital investment for six years (5% per year); accelerated depreciation and amortization; a reduced 10% rate of withholding tax on dividends paid to nonresidents (or a tax treaty rate if that is lower); and the ability to carryforward tax losses for up to 10 years (subject to certain conditions). Additionally, for activities relating to renewable energy resource utilization, no customs duties will be levied on the import of machinery, goods and materials used for the development or expansion of industries that produce goods and/or services providers in certain industries. Exemption from VAT will be also available on the import of strategic goods (capital goods).

The regulation is effective from the date of issuance.