Eligible for Coronavirus Effect Incentives, What Are SMI KITE Taxpayer

JAKARTA, DDTCNews - The government has announced the details of the stimulus package volume II granted in anticipation of the effects of the Coronavirus on the economy. The stimuli are given to maintain the sustainability of real sectors and people'’ purchasing power which leads to the national economy.

In the stimulus package volume II, the government provides four fiscal stimuli, including the relaxation of article 21 income tax, the relaxation of article 22 import income tax, the relaxation of article 25 income tax and the relaxation of value added tax (VAT) refunds.

One of the recipients of the volume II stimuli is Import Facilities for Exports (Kemudahan Impor Tujuan Ekspor, hereinafter referred to as KITE) taxpayers and Import Facilities for Exports for Small and Medium Industries (Kemudahan Impor Tujuan Ekspor Industri Kecil dan Menengah, hereinafter referred to as SMI KITE). A KITE taxpayer has been defined in the Dictionary ‘Recipients of Coronavirus Effect Tax Stimuli, What are KITE Taxpayers?’.

As such, what or who are SMI KITE taxpayers?

Referring to Article 1 number 2 of the Minister of Finance Regulation (MoF Reg.) 177/PMK.04/2016 in conjunction with MoF Reg. 110/PMK.04/2019, SMI KITE refers to facilities in the form of an exemption from import duty as well as VAT or VAT and sales tax on luxury goods (STLGs) payable non-collected.

The facilities are granted for the import and/or admission of goods and/or materials to be processed, assembled or installed on other goods for export purposes and/or for supplies of SMI products.

SMI refers to a business entity that fulfils the criteria of small industries or medium industries and has been designated as a recipient of the SMI KITE facilities. Article 3 of MoF Reg. 110/PMK.04/2019 describes the criteria for industries that may be designated as SMIs. In summary, the criteria can be seen in the following table:

Investment value refers to the value of land, buildings, machinery equipment, facilities and infrastructure, except for working capital. On the other hand, net worth refers to the subtraction of the total value of liabilities from the total value of business assets – excluding land and buildings for places of business.

Further, pursuant to Article 2 paragraph (1) of MoF Reg. 110/PMK.04/2019, the SMI KITE facilities are not only granted to SMIs, but also business entities established by a group of SMIs, SMIs appointed by several SMIs in one centre or cooperatives. However, the four groups are eligible for the SMI KITE facilities after being designated as SMIs or also called the KITE consortium.

Thus, the SMI KITE facility taxpayers are taxpayers classified as SMIs and eligible for facilities in the form of import facilities for raw materials for the production of finished goods to be exported. The facilities are provided in the form of an exemption and/or refund of export duty and/or excise as well as VAT and STLGs non-collected.

Requirements of SMIs

To be designated as an SMI, pursuant to Article 4 of MoF Reg. 110/PMK.4/2019, a business entity must apply to the Head of the Customs Office who supervises the factory or business location. However, to be to apply, eight requirements must be fulfiled, as follows:

1. of the small- or medium-sized industry scale;

2. performs the processing, assembly and/or installation of raw materials for export purposes;

3. if all or part of the raw materials originates from outside the customs area:

1. having performed the processing, assembly and/or installation of raw materials for export purposes for a minimum of two years, or

2. having export sales contracts if the business entity performs the processing, assembly and/or installation of raw materials for export purposes for less than two years

1. if all raw materials originate from other places within the customs area, the business entity has fulfiled the export realisation of a minimum of 25% of the proceeds of the annual sales for the past two-year period;

2. constituting a stand-alone business entity, not a subsidiary or not a branch of a company that is held, controlled or is a part, either directly or indirectly, of another small-scale business, another medium-scale business or a large-scale business;

3. having proof of ownership or control of the location that is valid for at minimum of two years for the place of production and the storage of goods and/or materials, machinery and products;

4. willing and able to utilise the customs application system (module) for the management of goods purchased with the SMI KITE facilities;

5. willing to be responsible in the event of misuse of the granted facilities.

SMI KITE Facilities

SMI KITE facilities are provided by the government in the form of the exemption from import duty and/or VAT or STLGs payable non-collected on the import or admission of raw materials – including packaging and auxiliary materials – or machinery to process, assemble or install goods to be exported or for supplies of SMI products.

Further, two provisions must be fulfiled for imports of machinery to obtain SMI facilities. First, the machinery should be used for industrial development to improve the quantity, types and/or quality of the products. Second, the machinery must be used for the production process within two years from the import and/or admission of the machinery.

In addition to raw materials and machinery, SMI KITE facilities may also be granted to sample goods. Sample goods refer to goods used to support the production process, where the products are intended for exports and/or supplies of SMI products.

However, the sample goods eligible for the SMI KITE facilities are only sample goods used to support the production process and the products to be exported. In addition, the sample goods must fulfil other criteria and provisions in respect of the sample goods exemption facilities pursuant to the regulation stipulating the exemption from import duty for imports of sample goods.

As facilities provided by the government, SMI KITE renders benefits for its recipients. The benefits that may be enjoyed by business entities eligible for SMI KITE facilities include more convenient export and import procedures, reduced production costs, increased equity, cash flow and competitiveness. (kaw)