Indonesia offers incentives to spur setting up of REITs

Indonesia on Thursday announced tax incentives aimed at getting companies to revalue their fixed assets and to create real estate investment trusts (REITs).

The moves are the latest in a series of policy changes the government has been rolling out since last month in a bid to spur economic growth, which has sagged to the lowest level in six years.

Earlier measures announced by President Joko Widodo’s administration included lowering energy prices, cutting red tape for investors and setting a new way to calculate annual minimum wage increases.

One Thursday move is intended for companies to revalue their fixed assets, which many firms have reported as unchanged for years to avoid paying a 10 per cent tax on the amount by which such assets are increased.

The Finance Ministry said companies that submit proposals for fixed asset revaluation before December 31 will only pay 3 per cent tax on the increased amount.

The tax rate would go up to 4 per cent for firms submitting proposals in the first half of 2016 and 6 per cent for the second half. The scale is meant to get companies to re-evaluate assets soon.

“Asset revaluation will increase firms’ capacity,” said Coordinating Minister for Economics Darmin Nasution, adding that bigger assets would lift their leverage.

Yustinus Prastowo, an analyst at Center for Indonesia Taxation Analysis, said the incentive would make it cheaper for firms to revaluate assets if they want to go public or issue debts.

“But to get corporates to do that, it needs more than just incentives. There need to be conducive conditions in the stock market,” Prastowo said.

The tax office said having more companies revalue assets can boost tax collection. Indonesia expects tax revenue to be nearly $11 billion below its 2015 target.

The government is also encouraging the setting up of REITs by removing double taxation that may apply to such businesses.

Nasution said, many Indonesians invest in REITs in Singapore, which in turn invest in Indonesian property assets.

Indonesia currently has one small REIT, but the business area has not been developed.

Finance Minister Bambang Brodjonegoro said the government will impose a single tax for REIT business, removing both dividend taxes and one on property sales.

“We hope to attract back to Indonesia the offshore money invested in REITs,” Brodjonegoro.

The Financial Services Authority also said it would relax rules to open sharia bank branches to boost that sector.

(Additional reporting by Cindy Silviana, Fransiska Nangoy and the Jakarta bureau; Editing by Richard Borsuk; Editing by Richard Borsuk)

Reuters

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.