Great news for businesses conducting internship and workers training.
Under the newly introduced Government Regulation (PP) 45/2019 and further stipulated under the MoF Regulation (PMK) 128/010/2019, businesses are now eligible for deduction on their taxable gross income by up to 200% of costs they incur for skill and competence development programs. The skill development programs included under the MoF regulation are on-the-job training (praktik kerja), internship, and other educational activities aimed at increasing workers’ skills and competencies by industry. This incentive for competence & skill development is targeted explicitly for technology and engineering-related skills to help Indonesia’s workforce better prepared in facing the increasing automation and digital disruption in the industry.
The first component of the deduction is the deduction on the taxable gross income by 100% of costs incurred for skill development programs. The second component of the deduction is an additional up to 100% of all human development costs incurred for skill development in skills specified under the annex of the MoF regulation. Those skills include engineering (construction, aviation, IT, etc.), healthcare, agribusiness, tourism & creative business, and IT & Telecommunication (digital economy). Competence development programs that are eligible for this second component of the deduction must also be under cooperation with vocational schools (Sekolah Menengah Kejuruan), polytechnic universities/diploma, and training centers (Balai Latihan Kerja). Business entities must also not in fiscal loss state and has tax compliance certificate to be eligible for this second component of the deduction.
The human development cost that are eligible to be submitted for the tax deduction covers: 1) Training facility cost (place, water, electricity), 2) Trainer fees, 3) Goods and related items that support training activities, 4) Honorarium for trainees, 5) Trainee certification cost. More accounting details on the calculation of costs are stipulated under Chapter 5 of the MoF Regulation, while administrative details are stipulated under Chapter 7, 8, and 9. Assessment on the eligibility of tax deduction are assigned to ministries/regional agencies in fields of education, higher education, manpower/human resources, and other sectoral agencies (depending on the sector of the applying business entity).
IT-related skills are included to reduce our digital economy’s reliance on foreign professionals due to lack of talent – which has been an issue for startup development in Indonesia. With this regulation, both the manufacturing and services sectors are expected to increase productivity and product sophistication – therefore enabling them to upgrade themselves in the global value chain. ISD highly supports this regulation and encourage businesses to take part in developing Indonesia’s human resources.
For further details on the law and the list of skills eligible for the tax deduction, you can refer to the document below (in Bahasa Indonesia, list of skills available in English).