The Finance Ministry has said that the government is preparing a regulation on the gross-split scheme, which will encourage oil and gas companies involved in exploration and exploitation to invest in the sector through the provision of tax incentives, according to a kontan.com report on Tuesday.
“We are trying to provide investors with fiscal incentives, incentives in income tax (PPh) and added-value tax (PPN),” Finance Deputy Minister Mardiasmo said on Tuesday in Jakarta.
He added that the incentives were based on existing regulations on cost recovery.
Under the scheme, taxes would be waived for the company during its exploration stage, he said, adding that accumulated operational costs of the exploration would be deducted from the company’s income tax.
During the exploitation stage, the company would not be required to pay taxes until it could achieve optimal oil and gas production. “They will be required to pay taxes when their income surpasses their accumulated operational costs,” he added.
Earlier, Energy and Mineral Resources Minister Ignasius Jonan had called on the Finance Ministry to immediately issue a regulation related to taxation under the gross-split scheme. “A gross-split is effective only for new investment, while the old agreement will use the old, cost recovery scheme,Jonan said.
Among those who demanded the new regulation are businessmen that have joined the Indonesian Petroleum Association (APA).