Ship Finance in Indonesia: Tax Considerations for Vessel Owners

SSEK Legal Consultants founding partner Dyah Soewito, senior foreign legal advisor Michael D. Twomey and Stephen Igor Warokka, an associate at the firm, have contributed the Indonesia chapter of the new Getting the Deal Through global guide to Ship Finance. SSEK has one of the leading shipping practices in Indonesia. SSEK advises multinational and joint venture shipping and offshore drilling companies on all aspects of their operations in Indonesia, including advising on the establishment of joint venture companies, the opening of representative offices and the acquisition and sale of vessels. SSEK is ranked as a tier-one shipping firm by The Legal 500 and is highly recommended for its shipping practice by Asialaw.

The following is an excerpt from the Indonesia chapter of the Getting the Deal Through global guide to Ship Finance written by SSEK Legal Consultants.

Is the income earned by the owners of vessels registered in Indonesia subject to domestic taxation? At what rate?

Income earned by owners of Indonesian-flagged vessels who hold a Sea Transportation Company Business License (SIUPAL) is subject to 1.2 percent final income tax. If the vessel owner does not have a SIUPAL the vessel owner is subject to normal corporate income tax, with the current highest marginal rate being 25 percent.

Is there an optional tonnage tax exempting vessel owners from tax on income?

There is no optional tonnage tax exempting vessel owners from tax on income.

What special tax incentives are available to shipowners registering vessels in your jurisdiction?

If the vessel owner holds a SIUPAL, the vessel owner may be able to obtain an exemption from value added tax (VAT) or article 22 income tax, or both, due on the importation of a transportation or fishing vessel. Services ren­dered by certain national water transportation companies are also subject to VAT exemption.

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