Understanding Super Tax Deduction in Indonesia

The Indonesian government has introduced a Super Tax Deduction policy to encourage businesses to invest in specific sectors that contribute to national economic growth. This initiative provides significant tax incentives for companies involved in vocational training, research and development (R&D), and innovative activities.

By leveraging this tax benefit, businesses can reduce their taxable income, ultimately lowering their overall tax burden.

What is Super Tax Deduction in Indonesia?

Super Tax Deduction is a tax incentive introduced by the Indonesian government to encourage businesses to invest in research and development (R&D) and vocational education. Under this policy, companies that engage in these activities can receive a tax deduction of up to 200% of their eligible expenses, effectively reducing their taxable income.

This initiative aims to enhance Indonesia’s economic competitiveness by fostering industry collaboration, improving workforce skills, and increasing innovation output.

Also read: Tax Incentives in Indonesia: Key Benefits and Opportunities

Legal Basis for Super Tax Deduction

The legal framework for Super Tax Deduction is set by:

• Government Regulation (PP) No. 45 of 2019
• Minister of Finance Regulation (PMK) No. 128/PMK.010/2019

These regulations provide clear guidelines on how businesses can qualify for the incentive and the necessary procedures to apply.

Who Can Benefit from Super Tax Deduction?

Super Tax Deduction is available for companies that actively participate in:

• Vocational education: Providing internships, apprenticeships, and other workforce training programs in collaboration with educational institutions.
• Research and development: Conducting R&D activities that contribute to technological advancements and economic growth.

Companies must be registered taxpayers in Indonesia and submit a detailed proposal outlining their vocational or R&D activities to qualify for the incentive.

Also read; Carbon Tax in Indonesia: A Key Step Towards a Greener Economy

Key Benefits of Super Tax Deduction

Here are some of the benefits of the supertax deduction:

1. Tax Savings: Businesses can deduct up to 200% of eligible expenses, leading to significant tax savings.
2. Encourages Innovation: Companies are incentivized to invest in new technologies, boosting patent registrations and commercialized innovations.
3. Workforce Development: Strengthens collaboration between industries and educational institutions, ensuring graduates possess skills that meet market needs.
4. Economic Competitiveness: Enhances Indonesia’s appeal as an investment destination by fostering a business-friendly environment.

How to Apply for Super Tax Deduction

For Research & Development (R&D)

1. Submit a Proposal: Companies must submit a research plan, including objectives, expected outcomes, and required resources.
2. Approval Process: The proposal is reviewed by relevant authorities to ensure alignment with national innovation goals.
3. Implementation & Reporting: Once approved, companies must document expenses and progress for compliance and future audits.

For Vocational Education

1. Industry Collaboration: Companies must establish formal partnerships with vocational institutions.
2. Training Implementation: Conduct training programs, apprenticeships, or curriculum enhancements.
3. Documentation & Submission: Provide proof of expenses and outcomes to claim the tax deduction.

Also read: Withholding Tax in Indonesia: Complete Guide for Foreigners

Challenges and Implementation Issues

Despite its advantages, the Super Tax Deduction program has faced challenges, including:

• Limited Awareness: Many businesses are unaware of how to leverage this incentive.
• Administrative Complexity: The application process requires thorough documentation and compliance with strict regulations.
• Industry Participation: Some companies hesitate to invest in R&D and vocational training due to upfront costs.

Also read: Tax Evasion in Indonesia: Causes, Consequences, and Prevention

Super Tax Deduction is a strategic initiative that supports Indonesia’s long-term economic goals by promoting R&D and vocational education. Businesses that take advantage of this incentive can enhance their innovation capacity, reduce tax burdens, and contribute to workforce development.

For more details and application procedures, you can consult to InvestinAsia’s Indonesia tax consultant and compliance services.

Our experienced team of professionals is ready to assist you in every tax matter, such as:

• Accounting and tax reporting services in Indonesia
• Indonesia Payroll Service
• Indonesia LKPM Reporting Service
• Indonesia VAT Taxpayers Registration

Contact us now for FREE consultation and special package!

sources:

• Press Release of the Coordinating Ministry for the Economy of the Republic of Indonesia HM.4.6/53/SET.M.EKON.3/03/2021
• Indonesia National Research and Innovation Agency
• SIPPN – Ministry of Administrative Reform and Bureaucratic Reform – Republic of Indonesia
• Directorate General of Vocational Education, Ministry of Education and Research, Republic of Indonesia