Draft PP Revising Provisions on PBB Migas Reduction

The government is adjusting the mechanism for the reduction of the Land and Building Tax (“ PBB ”) in the Revised Regulation of the Government No. 53 of 2017 (“ PP 53/2017 ”) on Tax Treatment for Upstream Oil and Gas Business (“ Migas ”)Activity through Gross-Split Production Sharing Contracts.

“We are focusing the revision on adjustments to existing regulations,” said Laode Sulaiman, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources (“ ESDM ”).

In the draft Regulation of the Government (RPP) obtained by Hukumonline, the scope of PBB reductions is expanded, particularly for the period after commercial production begins. Article 25, Paragraph 1, letter C of the RPP stipulates that contractors may be granted PBB reduction facilities on the earth’s surface from the commencement of commercial production until the expiration of the Cooperation Contract.

Furthermore, Article 35, Paragraph 4 provides that the percentage of PBB reduction on the earth’s surface during the commercial production period shall be calculated based on the additional profit-sharing percentage (split) granted to the contractor. This additional profit-sharing percentage includes a variable component, a progressive component, and any additional profit-sharing granted by the Minister of ESDM.