Kawasan Ekonomi Khusus (Special Economic Zones or ‘SEZ’) is an area with certain boundaries within the jurisdiction of the Republic of Indonesia, determined to carry out functions with certain economic benefits. The main objectives of SEZ development are to create economic growth, equitable development, and increase the nation’s competitiveness.
Special Economic Zoness are developed through the preparation of areas that have geoeconomic and geostrategic advantages and function to accommodate industrial activities, exports, imports, and other economic activities that have high economic value and international competitiveness. The presence of SEZs is expected to build economic capability and competitiveness at the national level through value-added industries and tourism and value chains.
Special Economic Zones Application Requirements
Business Activity Requirement
- production and processing;
- logistics and distribution;
- research, digital economy, and technology development;
- tourism;
- energy development;
- education;
- health & sports;
- financial services;
- creative industry;
- SEZ development and management;
- SEZ infrastructure provision
Location Requirement
Locations that can be proposed to become Special Economic Zones include:
- new areas;
- expansion of existing SEZs; or
- all or part of Free Trade Area and Free Port (KPBPB) locations
The proposed location to become a Special Economic Zones must meet the following criteria:
- in accordance with the regional spatial plan and does not have the potential to disturb the protected area;
- have clear boundaries;
- the land proposed to become Special Economic Zones has been controlled at least 50% (fifty per cent) of the planned area.
Incentives for Special Economic Zones developers and tenants
Corporate Income Tax (CIT)
| Categories | Incentives | Remarks |
| Tax Holidays | – 10 years zero CIT for a minimum investment of IDR 100 billion – 10 years zero CIT for a minimum investment of IDR 100 billion – 15 years zero CIT for a minimum investment of IDR 500 billion – 20 years zero CIT for a minimum investment of IDR 1 trillion | For developers and tenants |
| Tax Allowance | – Net income reduction of 30% of the amount invested, prorated at 5% for six years – Losses carried forward for 5 years and could be extended to 10 years – Accelerated depreciation and amortisation – Dividends tax 10% or lower for treaty countries | Applied to other designated industries |
Value-Added Tax and Luxury Tax
| Categories | Incentives | Remarks |
| Goods from outside of SEZs | – Delivery from the domestic territory – VAT and Luxury Tax not collected for – Delivery of taxable goods – Delivery of taxable services: constructions, contract manufacturing, and repairs (during development stage) | Applied to all industries |
| Imported Goods | Capital goods: – Exemption of import duty – VAT import not collected – Luxury tax not collected – Import income tax not collected Raw materials: – Deferred import duty – VAT import not collected – Luxury tax not collected – Import income tax not collected | Applied to all industries |
Non-Fiscal Incentives
| Categories | Incentives | Remarks |
| Export Obligation | none | Applied to all industries |
| Foreign Ownership | Full foreign ownership is allowed (negative list not applied in SEZs) | Applied to all industries |
| Domestic Market Sales | Zero per cent duty for products with at least 40% local content | Applied to all industries |
| Limitations of Goods | Limitation of goods not required to enter SEZs | Applied to all industries |
| Immigration | Incentives for foreign employees: – VOA holders can extend their visa up to 5 times – Temporary resident status for foreign workers and their families – Permanent resident status for Property holders and senior foreigner | Applied to all industries |
| Land Titles | – Right to Use Title up to 80 years – Right to Build Title up to 80 years | Applied to all industries |
Investment opportunities for investors
INVESTMENT OPPORTUNITIES AS TENANTS
- Invest in Special Economic Zones business sectors, for example:
industries: such as palm oil, rubber, petrochemical, agro, fishery,
manufacturing, logistics, and tourism - Joint venture with the SEZ developer as investors
INVESTMENT OPPORTUNITIES AS DEVELOPERS
- Joint venture with SEZ developer in operating and managing SEZ
INVESTMENT OPPORTUNITIES AS INFRASTRUCTURE PROVIDERS
- On-site infrastructure, such as power plant, water treatment plant, wastewater treatment plant, etc
- Regional Infrastructure or supporting infrastructure surrounding SEZ such as road, port, airport, railway, electricity, water supply, gas, etc
Conclusion
This is everything you need to know regarding the Indonesian Special Economic Zones. If you are interested in investing and starting a business in Indonesia, do not hesitate to contact us at anita@permitindo.com or by filling out this form. Permitindo is trusted by hundreds of businesses and our principles have more than 25 years of business experience in Indonesia. We look forward to hearing from you.
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