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Indonesian government removing land tax for geothermal developers

Drilling rig at Sarulla project, Indonesia (source: Sarulla Operations)
Alexander Richter Alexander Richter 24 Nov 2016

Indonesia has announced a new decree that will remove a land tax for companies holding a geothermal business permit and are still in the exploration stage.

With a continuing struggle to speed up geothermal development in the country, the central government in Indonesia has decided to remove a land tax for companies exploring geothermal energy resources. This is done through a new decree, that will from 2017 on, scrap a land tax for all companies holding a geothermal business permit and are still in the exploration stage, according to Indonesia Investments in a news piece today.

On the website of Indonesia’s Finance Ministry it is explained that companies will be entitled to a 100% tax reduction in land tax each year, for up to seven years.

Indonesia contains huge potential in terms of geothermal energy having about 40 percent of the world’s total geothermal reserves. However, this potential remains largely untapped. Indonesia only uses about 5 percent of its geothermal capacity.

Issues that make investors hesitant to investment in Indonesia’s geothermal sector are red tape, high exploration costs, the lack of experienced developers licensed for the concession, lengthy negotiations with PLN for the feed-in tariffs, and the weak infrastructure in Indonesia, especially in the more isolated areas.