Steps to Application of Tax holiday : 

1. Submission of Tax Holiday

              Tax Holiday application must be submitted via the Online Single Submission (OSS) system, which will verify the eligibility of the application and pass it on to the Ministry Of Investment. This submission is intended to verify the compliance of data with tax holiday regulations, suh as capital investment plant, KBLI that can be submitted for a tax holiday, application compliance, and company commitment. Failing to submit the application within this 1-year window could result in losing the opportunity to obtain the tax holiday.

The document needed when this step application is :

• Explanation Letter for DER (Debt to Equity Ratio)

The debt-to-equity (D/E) ratio measures how much a company uses debt compared to its own funds to run its business. This ratio is calculated by dividing the company’s total debt by the shareholders’ equity. The D/E ratio is important because it shows how much the company relies on borrowing to finance its operations instead of using its own capital.

• • Calculation of Internal Rate of Return (IRR)

Internal Rate of Return (IRR) is a measure used to assess how profitable an investment is. IRR is the discount rate at which the present value of all future cash flows equals the initial investment cost.

• Calculation of Payback Period (PP)

The Payback Period is a financial metric used to determine how long it will take for an investment to recover its initial cost from the cash inflows it generates. In other words, it calculates the time required for an investor to “break even” on an investment.

After the required documents above are complete, the next steps are as follows:

1. Document review by the Ministry of Investment
2. Company Business Plan presentation
3. Evaluation process by the Minister
4. The application result is issued (Approved / Rejected)

This whole step will take about 3 to 5 months, depending on the busyness of the employees at the Ministry of Investment and the speed of repairing the requested documents.

2. Tax Holiday Utilization

the obligation of companies receiving a tax holiday is to implement their investment plans before commencing commercial operations. Failure to realize the investment plan may result in the company losing its tax holiday facility. Verification of the company’s investment realization occurs when it submits a request for tax holiday utilization

The utilization of the Tax Holiday can only be apply after the company have all the following requcruitment  :

• Completed the construction process
• Has realized an investment of at least IDR 100 billion or more
• Has fulfilled licensing compliance, such as environmental permits and factory operational permits
• Has received a Purchase Order or issued the first Commercial Invoice

Reucruitment  documents for tax holiday utilization applications are as follow :

•  Fiscal Certificate (SKF) of the Company (Taxpayer)
• Details of Assets in the Investment Value Plan
• Realization of Fixed Assets along with Pictures and Layout
• Layout Pictures (Factory Layout, including Machines and Other Assets)
• Sales Invoice or Invoice
• Verified Business Identification Number (NIB)

Step for The utilization of the Tax Holiday are as follow

1. The company has obtained verified permits and applies for Tax Holiday utilization through the OSS System.
2. BKPM evaluates the completeness of the Tax Holiday application documents.
3. BKPM provides feedback on the completeness of the Tax Holiday application documents.
4. The company makes corrections to the Tax Holiday utilization documents (if any).
5. Complete documents are forwarded to the Directorate General of Taxes (DJP).
6. DJP evaluates the documents by assigning the local Tax Office (KPP)
7. The local KPP issues a field audit notice to the company to verify asset data.
8. The audit with KPP and independent surveyor process is carried out:
9. The audit lasts for 2 months and can be extended up to a maximum of 4 months from the date of the Audit Order (SP2) to the date of the Audit Report (LHP).
10. Activities during the tax audit include:
    1. Determining the date when production begins.
    2. Testing compliance with Tax Holiday criteria and requirements.
    3. Matching investment commitments with investment realizations.

11. Calculations:

12. The investment value, including the value of land and buildings acquired.

13. The total value of tangible and intangible fixed assets, as well as their depreciation value.

14. the local KPP and the independent surveyor prepares the audit report to be submitted to DJP and BKPM.

15.Based on the recommendations from DJP, BKPM will issue a decision approving the utilization of the Tax Holiday.

The application for the utilization of the tax holiday can take a long time, depending on the audit process and the number of the company’s assets, and it may take more than 6 months.