JAKARTA – Indonesia is unveiling a slew of tax breaks to lure companies and people to move to its new capital in the heart of Borneo.

Banks and insurers operating in Nusantara – as the capital is known – would pay no income tax for up to 25 years if they invest before 2035, according to an Investment Ministry presentation seen by Bloomberg. Those investing before 2045 can get a tax break of up to 20 years.

That is only one of various incentives being offered by the government to get businesses to support President Joko Widodo’s 600 trillion rupiah (S$52.8 billion) plan to move the nation’s capital from bustling Jakarta.

“I’m sure with the regulation we have formulated to make it easier and give incentives for the new capital... the investments will flow in,” said Investment Minister Bahlil Lahadalia in an interview on Tuesday. 

The incentives would be offered only until 2045, when Nusantara is set to be completed. “If we keep giving tax cuts, then where do we get money to build the area’s infrastructure? This is only fair, boss,” the minister said.

Indonesia is hunting for investors to help realise Mr Widodo’s vision of building an entirely renewable-powered and technologically advanced city out of a forest, especially with only 20 per cent of the price tag covered by the state budget. So far, 20 companies, including local and foreign ones, have shown interest in investing in Nusantara, with a few of them having signed deals, Mr Bahlil said, while declining to name them.

The government has started building basic infrastructure in the new capital, including a dam, roads and presidential and vice-presidential buildings. The target is for public officials to begin relocating there in 2024.

To sweeten the deal, the government can bear people’s income taxes up till the end of 2035, according to the presentation.

Here are more incentives being lined up for Nusantara:

• Investments larger than 10 billion rupiah in toll roads, energy, housing, shopping malls, health facilities and hotels, among others, would get various tax breaks
• Companies relocating their headquarters or regional offices to Nusantara with substantial business in the new capital would get a tax holiday of up to 100 per cent for 10 years
• Government to offer “super tax deduction” that would reimburse costs incurred by educational, research and non-profit institutions in the new capital
• Government to waive import taxes for companies expanding industries in Nusantara
• Luxury goods tax and tax on sales of land and buildings may be waived.

BLOOMBERG