Indonesia offers incentives for investors in new capital

President Joko “Jokowi” Widodo inspects the progress on a toll road that will lead to the new capital city of Nusantara in East Kalimantan on February 22.(Photo source: Presidential Secretariat's Press Bureau)

Jakarta – Indonesia’s President Joko Widodo has approved a new regulation that offers incentives to businesses investing in its new capital Nusantara, including tax holidays of up to 30 years and 95-year land use permits.

The new capital, named Nusantara, is located in an area covering 256,142 hectares of land on Kalimantan, Indonesia's second-largest island.

According to the regulation, local and foreign companies are entitled to a 100% exemption from corporate income tax if they are registered as taxpayers in Indonesia and invest in several priority areas in Nusantara.

Companies can enjoy tax holidays of 10-30 years, depending on which sectors they invest in and when they start.

Incentives will also be given to developing a financial centre in the new capital. Specifically, eligible banks, insurers and Islamic finance companies will enjoy a 100% tax exemption for up to 25 years if they invest between 2023 and 2035, and 20 years for 2036-2045 period. Other financial services companies, including the capital market, pension funds, venture capital firms and fintech companies, can apply for an 85% tax deduction.

Global companies that move their regional offices to Nusantara are eligible for a full tax exemption for 10 years, followed by a 50% cut for the next 10 years, under some conditions.

Indonesia is seeking 80% of the estimated 466 trillion Rp (30 billion USD) needed for the Nusantara development from public-private partnerships and the private sector, with the state budget covering the remaining 20%.

Agung Wicaksono, deputy for financing and investment at the Nusantara Authority, said it has so far received about 100 letters of intent for investments in the new capital, half from local investors and the rest from foreign entities, led by Malaysia.

Of these, 20 entities have entered non-disclosure agreements with the authority, he added.

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