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INDONESIA: 200% Tax Deductions on Offer to Manufacturers Investing in Vocational Schools

A 200% tax deduction is to be offered to any manufacturer that establishes a vocational school or training centre in the country. Billed as a Superdeduction Tax, the incentive scheme will allow eligible companies to claim a five-year tax exemption on income amounting to 200% of the initial expenses incurred in setting-up such facilities. In practice, should a manufacturer make an investment of IDR 1 billion while setting up a vocational school, for example, it will be then entitled to a deduction of IDR 2 billion from its annual total taxable income for a period of five years.

To be eligible, manufacturers must set up vocational training facilities with a focus on one or more of 36 relevant skills, of which 16 are specified as general skills, while the remaining 20 are related to specific industries. The general skills include training in industrial electronics, welding, casting, installation of electrical power systems, industrial mechanical maintenance, metal instrumentation and metal fabrication, process control, mechanical control, industrial automation, industrial chemistry, chemical analysis, audio/video repair and maintenance, and heavy equipment repair and maintenance. The 20 industry-specific skills relate to the automotive, furniture, shipbuilding, garment/textile and industrial logistics sectors.

The proposed tax incentive scheme is part of a Ministry of Industry initiative intended to reskill and upskill the country’s manufacturing workers and prepare them for the government’s Making Indonesia 4.0 initiative, which is designed to boost the competitiveness of the country’s manufacturing industry and, by 2030, ready it for the widespread implementation of the so-called Fourth Industrial Revolution. While a date for the implementation of the proposed scheme has yet to be announced, it is not expected to be formally adopted until after the results of the country’s recent general elections are announced in May.

Content provided by Picture: HKTDC Research
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