Indonesia adjusts nickel industry policy: smelter tax incentives face tightening

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The Indonesian government has adjusted its nickel industry policy, tightened tax incentives for smelters, promoted the downstream development of minerals, optimized the industrial structure, and promoted the upgrading of the new energy materials industry.

In the Indonesian government officially launched the policy adjustment process for the nickel smelting industry, and plans to gradually tighten the preferential treatment for nickel processing enterprises. With the rapid expansion of domestic nickel smelting capacity, the Ministry of Energy and Mineral Resources announced that nickel pig iron and ferronickel production enterprises will be removed from the priority development industry catalog, which means that the tax relief policy originally based on the "advanced industry" will face systemic adjustment.

According to official disclosure, the policy adjustment involves three core areas: first, the Ministry of Finance is reassessing the continuity of the tax exemption policy for rotary kiln electric furnace smelters, and specific tax exemption periods may be shortened or canceled in the future; Secondly, the Investment Coordination Agency has completed the reclassification of 12 projects that no longer meet the advanced industry standards and is revising the relevant industry identification criteria. Finally, although the existing tax incentives are facing tightening, however, the government has made it clear that it will continue to promote the downstream strategy of minerals and enhance the added value of products through deep processing.

The deep motivation of policy shift lies in the optimization of industrial structure. Data show that the number of nickel smelters in Indonesia has tripled in five years, but the proportion of primary products still exceeds 60%. Officials from the Ministry of Energy pointed out that the current incentive system has been unable to effectively guide industrial upgrading, and it is necessary to guide enterprises to extend to the field of high-purity nickel products and battery materials through differentiated policies. As a complementary measure, the Ministry of Finance is studying alternative support schemes, which may include new incentive tools such as technology research and development subsidies and export tax rebates.

The adjustment of is regarded as a milestone reform in the governance of mineral resources in Indonesia. While maintaining its position as the world's largest nickel ore exporter, the government is trying to achieve a dual goal through policy leverage: not only to avoid price wars caused by overcapacity, but also to make room for the development of the new energy industry chain. Analysts believe that although it may increase the operating costs of enterprises in the short term, it will help promote Indonesia's transformation from a raw material supplier to a new energy material manufacturing base in the long term.

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