Draft Regulation of the Government on Upstream Oil and Gas Taxation Harmonized

The government has harmonized the Draft Regulation of the Government (“RPP”) amending Regulation of the Government No. 53 of 2017 (“Regulation 53/2017”) on Tax Treatment of Upstream Oil and Gas Business Activities with Gross Split Production Sharing Contracts. The amendments are made to adjust the tax incentive regulations under the gross split regime.

“We are focusing on the existing mechanism. The revisions are merely adjustments,” said Laode Sulaiman, Director-General of Oil and Gas at the Ministry of Energy and Mineral Resources (“ESDM”).

Laode ensured that the RPP is in line with the government's policy of giving Cooperation Contract Contractors (“Contractors”) the flexibility to choose between gross split and cost recovery incentive schemes to attract investment in the upstream oil and gas sector.

In the RPP, the direction of change emphasizes strengthening governance through the regulation of tax facility procedures, improving coordination between agencies, and monitoring mechanisms as part of the incentive scheme. The changes are made to provide certainty for upstream oil and gas activities, from exploration to exploitation, in line with national targets for economic growth and sustainable development.