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The Government Proposes Tax Incentive for Venture Capital

Venture Capitals investing in startups will be getting tax-exempt (PPh) incentive

Prayogo Ryza - 22 February 2018

Indonesia's government will share tax-exempt incentive for venture capitals investing in startups. Quoted from CNN Indonesia, Minister of Finance Sri Mulyani said, this is the first incentive package to be given to venture capitals. The step is taken to raise investment in digital economy and e-commerce, particularly for SMEs.

"The received income by venture capitals, that also the company's profit, will not be treated as an object of taxable income in order to increase investment interest for SME sectors," she explained.

The tax-exempt incentive will apply to the investor that already registered on Financial Service Authority (OJK). According to OJK, per December 2017, there are 67 Indonesia-based venture capitals with total asset reaching Rp11 trillion. Investors with Rp500 million to Rp1 trillion investment will be getting taxable income deduction of 10-100% for 5-10 years.

The government is said to be open for the possibility to extend the incentive period reflecting on similar step implemented by Thailand.

Quoted from Katadata, for venture capitals and startup SMEs in particular, the incentive will be provided by making the investment as part of the profit that excluded in taxable income. The government should revise the 1995's Minister of Finance Decree (KMK) #250.

"We'll revise 1995's KMK to meet startup's expectation that mobilizing investment from venture capital for rapid growth," Sri Mulyani explained.

The government plan is well received by the Startup and Venture Capital Associate (AMVESINDO). It is a step forward, they said on this.

Himawan Yasin, AMVESINDO's Vice Secretary General, reminded that the new rules should be in line with 2015's POJK #35 on venture capital operation to support VC industry in Indonesia.

Original article is in Indonesian, translated by Kristin Siagian

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