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In brief

The Minister of Finance has issued Minister of Finance Regulation Number 67/PMK.03/2020 (‘MoF 67/2020‘) on the Provisions of Value Added Tax Or Value Added Tax And Sales Tax on Luxury Goods, as well as Land And Building Tax Facilities In Upstream Oil And Gas Business Activities Under Gross Split Production Sharing Contract.

MoF67/2020 provides tax facilities during the exploration and exploitation phases until the commencement of Commercial Production, in the form of:

  • Value Added Tax  (‘VAT‘) or VAT and Sales Tax on Luxury Goods payable are not levied.
  • Land and Building Tax is reduced up to 100%.

MoF 67/2020, which was published on 15 June 2020 and effectively came into force by 15 July 2020, also regulates the procedures to obtain the facilities.


Key takeaways

There are several key takeaways to be considered from MoF 67/2020:

  1. This regulation is applicable for any contractors whose:
    1. non-gross split contracts were signed prior to the enactment of GR 53/2017 and chose to amend the contracts to a gross split profit sharing model in accordance with the provisions stipulated in GR 53/2017
    2. gross split contracts were signed before the enactment of GR 53/2017
    3. gross split contracts were signed after the enactment of GR 53/2017
  2. VAT or VAT and Sales Tax on Luxury Goods are not levied on any of the following transactions that are used in the context of petroleum operations:
    1. acquisition of Taxable Goods and/or Taxable Services
    2. utilization of Intangible Taxable Goods from outside the Customs Area in the Customs Area
    3. utilization of Taxable Services from outside the Customs Area in the Customs Area
  3. The tax facilities that are granted to the contractors apply to a Work Area, adopting a similar ring fencing principle to that implemented in the Cost Recovery Production Sharing Contract.

In more detail

  1. MoF 67/2020 is the implementing regulation of Article 25 paragraph (3) of Government Regulation Number 53 of 2017 (GR 53/2017‘) which has been awaited by the Gross Split Profit Sharing Contract contractors. Under this regulation, the contractors with Gross Split Production Sharing Contracts are officially able to enjoy similar benefits to those that have been provided to the contractors with Cost Recovery Production Sharing Contracts through Minister of Finance Regulation Number 122/PMK.03/2019.
  2. To enjoy the tax facilities stipulated in this regulation, a contractor that was appointed as a block operator needs to submit a written request to the the Head of Regional Tax Office (through the Tax Office where the operator is registered) and attach several other documents. After the request and attachments are submitted, the Head of the Regional Office on behalf of the Minister of Finance will issue a Certificate of Tax Allowance (Surat Keterangan Fasilitas Perpajakan/’SKFP’) no later than seven working days after a complete application is received.
  3. To obtain the reduction of Land and Building Tax, the operator must first complete and submit the Tax Object Notification (Surat Pemberitahuan Obyek Pajak) along with a copy of a valid SKFP to the Head of the Tax Office where the Land and Building Tax Object is administered. The Head of the Tax Office will then apply the reduction in the Land and Building Tax Notification Letter (Surat Pemberitahuan Pajak Terhutang Pajak Bumi dan Bangungan) based on SKFP.
  4. SKFP will be declared invalid in any of the following events:
    1. Gross Split Production Sharing Contract is terminated (as of the contract expiration date or prior to commercial production)
    2. the commencement of commercial production
  5. If later it is found that  the tax facilities provided under this regulation are not intended for petroleum operations and/or the contractor utilizes an invalid SKFP to obtain taxation facilities, the contractor must pay back all the tax facilities received to the state treasury, and will be subject to administrative penalties in accordance with the prevailing tax regulations.

Ponti Partogi is head of the Tax and Trade Practice Group at Hadiputranto, Hadinoto & Partners (HHP Law Firm), a member of Baker & McKenzie International. He has been practicing for more than 20 years, focusing on domestic and international tax and trade issues relating to inbound and outbound investment and cross-border corporate exercises including JVs, M&As, divestitures, spin-offs and takeovers. His combined legal and accounting background allows him to provide comprehensive tax advice on various transactions both from the legal and the accounting perspective.


Daru Hananto is a partner – tax advisory and transaction services in the Tax and Custom Practice Group at HHP Law Firm, a member firm of Baker & McKenzie International.
Daru has extensive experience in Indonesian taxation. He also has significant experience in tax litigation and controversy, and in advising clients on taxation issues related to consumer goods, construction, production sharing contracts, and digital economy.


Iman Suryanto Hindrajanto is a Senior Tax Specialist in Baker McKenzie's Jakarta office.