The Indonesian government is set to give income tax incentive for venture capital firms investing in tech startups. According to CNN Indonesia, Minister of Finance Sri Mulyani said that the incentive package is the first ever to be given to venture capital. The step is taken in order to boost investment into digital economy and e-commerce, especially among small- and medium-sized enterprises (SMEs).

“The income received by venture capital firms, which is a revenue for the business entity, will not be treated as an object of tax income in order to increase interest in startup and SME investment,” she explained.

The incentive is valid for investors listed in the Financial Services Authority (OJK). According to data by OJK, per December 2017, there are 67 venture capital firms in Indonesia with a total asset of IDR11 trillion (US$804 million). Investors that are investing between IDR500 billion (US$36 million) and IDR1 trillion (US$73 million) will receive a 10 to 100 per cent tax cut for five to 10 years.

The government is also open for the possibility to extend the duration of the incentive, following a similar step implemented in Thailand.

Also Read: Thailand may soon tax e-commerce to help local businesses compete

According to KataData, from the point of view of SMEs, particularly for venture capital and startups, the incentive will be given by turning venture capital income as part of profit that is not treated as tax income object. To support its implementation, the government will revise the Ministry of Finance Decree (KMK) No. 250 Year 1995.

“We will revise the Decree No. 250 Year 1995 in order to fulfill the needs of many startups, which required the mobilisation of capital from venture capital firms in order to grow faster,” the minister explained.

The plan received warm welcome from the Indonesian Venture Capital and Startups Association (AMVESINDO). For the organisation, this decision is a step forward.

AMVESINDO Deputy Secretary General Himawan Yasin also reminded that the new regulation has to be in line with the Financial Services Authority Regulation No. 35 Year 2015 on the setting up of venture capital firms in order to push for the industry growth in Indonesia.

The article Pemerintah Beri Insentif Pajak untuk Modal Ventura was written by Prayogo Ryza for DailySocial. English translation and editing by e27.

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