JAKARTA (Reuters) – Indonesia yesterday announced tax incentives aimed at getting companies to revalue their fixed assets and to create real estate investment trusts (REITs).
The moves are the latest in a series of policy changes the government has been rolling out since last month in a bid to spur economic growth, which has sagged to the lowest level in six years.
Earlier measures announced by President Joko Widodo’s administration included lowering energy prices, cutting red tape for investors and setting a new way to calculate annual minimum wage increases.
One Thursday move is intended for companies to revalue their fixed assets, which many firms have reported as unchanged for years to avoid paying a 10 percent tax on the amount by which such assets are increased.
The Finance Ministry said companies that submit proposals for fixed asset revaluation before December 31 will only pay 3 percent tax on the increased amount.
The tax rate would go up to 4 percent for firms submitting proposals in the first half of 2016 and 6 percent for the second half. The scale is meant to get companies to revaluate assets soon.
“Asset revaluation will increase firms’ capacity,” said Coordinating Minister for Economics Darmin Nasution, adding that bigger assets would lift their leverage.
Yustinus Prastowo, an analyst at Center for Indonesia Taxation Analysis, said the incentive would make it cheaper for firms to revaluate assets if they want to go public or issue debts.
“But to get corporates to do that, it needs more than just incentives. There need to be conducive conditions in the stock market,” Mr. Prastowo said.
The tax office said having more companies revalue assets can boost tax collection. Indonesia expects tax revenue to be nearly $11 billion below its 2015 target. The government is also encouraging the setting up of REITs by removing double taxation that may apply to such businesses.
Mr. Nasution said many Indonesians invest in REITs in Singapore, which in turn invest in Indonesian property assets. Indonesia currently has one small REIT, but the business area has not been developed.
Finance Minister Bambang Brodjonegoro said the government will impose a single tax for REIT business, removing both dividend taxes and one on property sales. “We hope to attract back to Indonesia the offshore money invested in REITs,” Mr. Brodjonegoro said. The Financial Services Authority also said it would relax rules to open sharia bank branches to boost that sector.
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