Exploring Infrastructure Projects Tax Cases: Feasibility Support, Incentives, and Collaboration

Infrastructure development is the government’s capital sector to achieve more equitable economic growth. Infrastructure is used as one of the benchmarks of a country’s development. From time to time, the infrastructure built by the government is increasing. Taxes have an essential role because taxes are a source of state revenue to finance state spending, including financing of infrastructure developments such as roads, bridges, public schools, and public hospitals, which are all interconnected with the intricate landscape of infrastructure projects tax cases.

Enhancing Financial Feasibility and Public Services: Government Facilities for Infrastructure Development

Infrastructure Projects Tax Cases

The government seeks further to increase the financial feasibility of infrastructure development projects and realize available public services through infrastructures at affordable rates, so the government provides the following facilities:

Feasibility Support for Infrastructure Provision under PPP Scheme

a. The feasibility support for infrastructure provision activities under the Public-Private Partnership (PPP) scheme. This effort is supported by the issuance of Director General of Taxes Regulation Number PER-29/PJ/2018 concerning the Treatment of Income Tax on Feasibility Support in Government Cooperation Projects with Business Entities in Infrastructure Provision.

The feasibility support can be provided during the construction period or after the commercial operation date is reached as agreed in the Cooperation Agreement. Eligibility support received applies the following conditions:

1. The business entity records the feasibility support as deferred income during the construction period and is capitalized as Intangible Assets – Feasibility Support when the commercial operation date is reached.

2. If feasibility support is received during the construction period, deferred income is recognized as income when the commercial operation date is reached. If feasibility support is received after the commercial operation date has been reached, income is recognized when the feasibility support is received.

3. Each time income is recognized, at the same time, the business entity also records the amortization expense of intangible assets following the provisions of the tax laws and regulations in the same amount.

Thus, the business entity does not pay income tax on feasibility support when feasibility support is received, instead, the tax payment occurs gradually over the concession period which can reach a maximum of 20 years so as to ease the flow of business entities’ money. Through the provision of this special treatment, the Director General of Taxes hopes that the interest of the private sector will increase in infrastructure development projects through the PPP scheme.

Incentives for New Investments in Pioneer Industries

b. Incentives in the form of a reduction in corporate income tax (CIT) are given to corporate taxpayers who make new investments in Pioneer Industries (one of which is economic infrastructure) with a new investment value of at least IDR 100,000,000,000 (one hundred billion rupiahs).

Income tax deduction for entities that make new investments in Pioneer Industries is given as follows:

  • 100% of the amount of corporate income tax payable for new investment with a minimum value of IDR 500,000,000,000 (five hundred billion rupiahs)
  • 50% of the amount of corporate income tax payable for new investment with a minimum value of IDR 100,000,000,000 (one hundred billion rupiahs) and a maximum of less than IDR 500,000,000,000 (five hundred billion rupiahs)

To be able to obtain the deduction, corporate taxpayers must meet the following criteria:

  • corporate taxpayer is a Pioneer Industry;
  • status as an Indonesian legal business entity;
  • make new investments that have never been issued;
  • has a planned new investment value of at least IDR 100,000,000,000 (one hundred billion rupiahs);
  • comply with the provisions on the ratio between debt and equity;
  • commit to starting the realization of the investment plan no later than 1 (one) year after the issuance of the CIT reduction decision

Collaboration with Construction Service Business Entities

To carry out development, the government cooperates with construction service business entities. The construction service business entities are divided into Small (K1 and K2), Medium (M1 and M2), Large (B1 and B2), and Do not Have Qualifications. Construction service entities are required to have a Construction Service Business Entity Certificate or commonly abbreviated as SBUJK, which is issued based on the qualifications above. SBUJK can be used as evidence that the business entity has qualifications in its business field.

On October 29, 2021, the government of the Republic of Indonesia enacted the Law on the Harmonization of Tax Regulations (UU HPP). This Law was formed to increase sustainable economic growth and support the acceleration of economic recovery, create a more just and legal certainty taxation system and increase voluntary taxpayer compliance in Indonesia by alleviating the burden on taxpayers, one of which is through lowering the income tax rate on construction service.

Tax Rate Reduction on Construction Services Income

There is a reduction in the tax rate on construction services income under the HPP Law. Types of construction services are divided into three, namely Construction Consulting, Construction Work, and Integrated Construction Work. Following are the changes in tax rates on construction services income based on the HPP Law:

NoType of WorkCarried Out byPrevious RatesNew Rates
1.Construction workService providers who have a small qualification business entity certificate or a certificate of business competence of an individual business2%1.75%
2.Construction workService providers who do not have a business entity certificate or a certificate of business competence of an individual4%4%
3.Construction workOther service providers as referred to in letter a and letter b (medium and large Certificate Construction Works)3%2.65%
4.Integrated construction workService providers who have a business entity certificate2.65%
5.Integrated construction workService providers who do not have a business entity certificate4%
6.Construction consultancy servicesService providers who have a business entity certificate or work competency certificate for an individual business4%3.5%
7.Construction consultancy servicesService providers who do not have a business entity or work competency certificate for an individual’s business6%6%

The rate adjustments above were carried out in order to make the business climate in the construction services sector more conducive and also continue to grow because the construction services industry is seen as an important sector in creating economic growth and supporting domestic development.

If you need assistance or further information regarding infrastructure projects tax cases in Indonesia, consider reaching out to SW Indonesia. With our expertise in tax regulations and extensive knowledge of the infrastructure sector, we can provide valuable insights and guidance tailored to your specific needs. Contact us today at +62 2993 2132 to discuss how we can support your infrastructure projects and ensure compliance with tax requirements. Together, let’s navigate the complexities of infrastructure projects tax cases and drive sustainable economic growth.


  • SW Indonesia

    As the webmaster and author for SW Indonesia, I am dedicated to providing informative and insightful content related to accounting, taxation, and business practices in Indonesia. With a strong background in web management and a deep understanding of the accounting industry, my aim is to deliver valuable knowledge and resources to our audience. From articles on VAT regulations to tips for e-commerce taxation, I strive to help businesses navigate the complexities of the Indonesian tax system. Trust SW Indonesia as your go-to source for reliable and up-to-date information, empowering you to make informed decisions and drive success in your business ventures.

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