Company owners from all over the world choose to relocate their companies for any of a variety of reasons. Some may do so because of tax advantages offered by the country to which the business is being relocated. Others may relocate their company because they believe that the products or services provided by their company are more marketable in the new country than in the original country. Still others might relocate their company out of a desire to expand the reach of the company and make it more well-known in other countries.

The business activities of relocated foreign companies serve as a boost to the economy of the country to which they have relocated. This is because these companies are to pay taxes on the income which they have received in the new country. These taxes are then paid to the government which will then use the tax money in ways which will be of benefit to the country’s economy. Foreign companies which have established business operations in another country also help to reduce the unemployment rate of that country by providing opportunities for employment. In this matter, larger companies can make more of a contribution than smaller ones because they are able to provide more open positions for job seekers.

Due to the benefits provided by relocated foreign companies, the Indonesian government has taken steps which are expected to draw more foreign companies to the country’s shores.

How the Indonesian Government Has Encouraged the Relocation of Foreign Companies

One way in which the Indonesian government has encouraged foreign companies to relocate there is by providing a tax incentive for research and development investment. Ever since June 2019, the Indonesian government has offered a deductible tax of up to 200% for any eligible company, be it local or foreign. Every US$100 million invested by a company in research and development will be subsequently rewarded with a tax benefit of US$200 million. This tax incentive has already had the desired effect; ever since it came into force, foreign companies have been relocating to Indonesia at an increased rate.

Foreign company owners who start training or apprenticeship programs are also eligible for tax incentives. To be eligible for tax incentives, the foreign company in question must be actively developing the human resource capabilities which will be able to supply labor for industries and businesses across in Indonesia. Any eligible foreign company in this regard may claim a tax incentive of up to 200% of the total costs incurred by the training or apprenticeship programs initiated. Foreign companies seeking to increase the skill level of their employees or raise standards of operational efficiency will benefit greatly from this tax incentive. This is especially true of companies which have already been conducting regular training programs.

The tax incentives which have been mentioned are not the only tax incentives available in Indonesia. The various tax incentives in Indonesia may be used by anyone who is eligible. If you are interested in finding out more about your own eligibility for these incentives, we at Paul Hype Page & Co are willing to be of assistance. We will work with you so that you will understand which of Indonesia’s tax incentives you may claim. We will also take you through the process of claiming those incentives for which you are eligible.

The Indonesian government has also planned an increase in spending on infrastructure. This is because foreign companies which are planning to relocate will take note of the improved quality of infrastructure in the country, realize that this new level of infrastructure is conducive to the carrying out of business activities, and subsequently relocate to Indonesia. Today, Indonesia spends around 11% of its economic revenue on upgrades related to infrastructure. The government is attempting to increase this figure to 20%. Although this increased spending is yet to have come into force, it is nevertheless expected to draw more foreign companies to Indonesia and thus increase the country’s economic competitiveness.