Tax Allowance for Energy Sector

Minister of Energy and Mineral Resources has issued Minister of Energy and Mineral Resources (MEMR) Regulation No 16 Year 2015 dated 13 May 2015 (“MEMR-16”)  regarding Criteria or Requirement to Utilize Tax Allowance in Energy and Mineral Resources. This MEMR-18 is one of the implementing regulation of GR 18/2015 regarding taxallowance. MEMR comes into effective on 25 May 2015.

In general, MEMR-18 provides detail criteria and requirements for each business sectors in energy and mineral resources. Director General of MEMR will certify the application of tax allowance in accordance with criteria and requirement stipulated by MEMR-16.  The final decision for granting tax allowance will be based on  trilateral meeting between Minister of Finance, Investment Coordinating Board, and Minister of Energy  and Mineral Resources. 

The government provides tax allowance incentive for eco/green investment  and smelter. While for oil and gas industry, tax allowance is only available for downstream industry considering that tax allowance does not work in upstream industry because of production sharing mechanism. 

Below is the list of eligible  business sectors  in energy and mineral resources along with its criteria and requirements. 

Business	Criteria & Requirement
Coal & Lignit Gasification	·         Minimum investment IDR 100 billion ·         Only for domestic need
Geothermal	·         Minimum investment IDR 100 billion
Cooper Mining	·         Minimum investment IDR 100 billion ·         For building new or expanded smelter
Gold and Silver smelting	·         Minimum investment IDR 100 billion ·         For building new or expanded smelter
Oil Refinery	·         Minimum investment IDR 200 billion ·         Local content at least 50% ·         Priority for fulfilling domestic need
Gas Processing (to LPG or LNG)	·         Minimum investment IDR 200 billion ·         Local content at least 50% ·         Priority for fulfilling domestic need
Power Plant	·         Minimum investment IDR 30 billion ·         Manpower minimum 100 persons ·         Priority for fulfilling domestic need
LNG Regasification using FSRU	·         Minimum investment IDR 1 trillion ·         Local content at least 25%
CBM (non PSC), shale gas, tight gas sand, methane hydrate	·         Minimum investment of IDR 110 billions for CBM and IDR 610 billions for shale gas, tight gas sand, and methane hydrate OR ·         Local content at least 35% for CBM and 25% for shale gas, tight gas sand, and methane hydrate.
Coal & Lignit for energy liquefaction	·         Minimum investment IDR 100 billion ·         Only for certain regions stipulated in MEMR 16/2015
Smelting of sand iron, iron ore, uranium, thorium, tin, lead, bauxite, copper, nickel, manganese,	·         Minimum investment IDR 100 billion ·         Only for certain regions stipulated in MEMR 16/2015 ·         For building new or expanded smelter
Smelting of zinc, zircon	·         Minimum investment IDR 50 billion ·         Only for certain regions stipulated in MEMR 16/2015 ·         For building new or expanded smelter
Oleo chemical industry, bioenergy industry, bio-lube/ bioplastic/ bio-surfactant	·         Minimum investment IDR 500 billion ·         Manpower minimum 150 persons ·         Priority for fulfilling domestic need ·         Integrated industry ·         Only for certain regions stipulated in MEMR 16/2015
Electricity, steam, substitute fuel, and/or  biogas derived from organic waste treatment (sludge and Palm Oil Mill Effluent) from palm oil plant	·         Minimum investment IDR 50 billion ·         Manpower minimum 300 persons ·         Priority for fulfilling domestic need ·         Only for certain regions stipulated in MEMR 16/2015