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Indonesia govt preparing special tax ruling for new PSCs adopting gross split scheme

JAKARTA (  – The Indonesian government is preparing special tax ruling that will be applied to new Production Sharing Contract (PSCs) that are adopting gross split scheme. The Government Regulation (PP) is expected to be issued by the end of July 2017.

“The tax ruling on gross split scheme is still in progress, hopefully it will be ready by the end of this month,” Director General for Oil and Gas at the Energy and Mineral Resources Ministry I.G.N. Wiratmaja Puja said at a gas conference in Jakarta Wednesday (Jul 12).

The ruling will be similar to the Government Regulation (PP) No. 27, 2017, issued by the government recently. The PP 27, 2017 is issued for cost recovery scheme, while the new ruling is applied to PSCs adopting gross split scheme.

Under the PP 27, 2017, oil and gas exploration is exempted from tax. The move is aimed to boost oil and gas explorations in the country. Previously, oil and gas companies that were conducting explorations are burdened with tax, although there is no guarantee that they will discover oil and gas reserves.

The taxes that will be exempted are including import duty, value added tax (VAT), VAT on import duty and so on.

Indonesia’s oil and production has continued to decline. If there is no new oil discovery, the current reserves will deplete in the next 12 years. This condition has forced the government to issue such incentives in order to encourage companies to carry out explorations. (*)


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