The Indonesian government recently proposed three types of new fiscal incentives under Ministry of Finance Regulation No. 34 of 2020 as a response to the outbreak of Coronavirus Disease 2019 ("COVID-19"). The incentives are in the form of customs, excise and tax facility related to import of goods for the purpose of countermeasures of COVID-19 pandemic. The government hopes that the incentives can contain the economic impact of COVID-19 outbreak, in line with the previous fiscal incentives set out by government on March (Please see our previous client alert here).
The incentives provide several benefits for importers of certain goods that will be used in the fight against the COVID-19 pandemic. The importers will be exempted from import duty, excise, Value Added Tax (VAT), Luxury Sales Tax (LST) and Income Tax Article 22 as will be elaborated below. In addition, they are also entitled to relaxed import rules for those products (i.e., exemption from additional import requirement), as long as they can provide a recommendation letter from the Indonesian National Board for Disaster Management (Badan Nasional Penanggulangan Bencana/BNPB).
Types of Customs, Excise and Tax Incentives
There are three types of incentives:
- exemption of import duty and excise
- noncollection of VAT and LST
- exemption of Income Tax Article 22 These incentives can be granted for the import of products in the following categories:
- hand sanitizer and products that contain disinfectant
- test kits and laboratory reagents
- virus transfer medium
- medicine and vitamins
- medical equipment
- personal protective equipment
The full list of the products and the HS Codes is outlined in Appendix A of Ministry of Finance Regulation No. 34 of 2020.
Further, the incentives can be sought for clearance/movement of goods that originate from offshore (import), goods that originate from other places within a customs area, goods that originate from a bonded zone and a bonded warehouse, and goods that originate from a free trade zone or a special economic zone. The incentives can also be sought by importers that enjoy Ease of Imports for Export Purposes (Kemudahan Impor Tujuan Ekspor/KITE) facilities.
The clearance of the goods mentioned above will be exempt from import duty and import tax, and also VAT and LST.
Guidelines on Application and Declaration
- Application to Obtain Incentives
Importers that would like to obtain the incentives should submit an electronic application to the Head of Customs Office at the port of entry through the Customs Portal or the Indonesia National Single Window. An application is not required for the import of:
- consigned goods with an FOB value up to USD 500 for each consignment and each receiver, which is declared under a consignment note
- passenger goods with an FOB value up to USD 500 for each person per arrival, which is declared under a customs declaration
- Timeframe of Approval
- If the application is submitted online, it should be approved within two hours after it is submitted properly and in complete form.
- If the application is submitted manually in writing, it should be approved within two working days after it is submitted properly and in complete form.
- Customs Declaration
- Generally, the import declaration will be in the form of Pemberitahuan Impor Barang/PIB.
- For bonded zones and bonded warehouses, the import declaration will be in the form of PIB and the clearance document will be in accordance with the places of destination. For example, goods cleared from bonded zones to other places within a customs area (non-bonded place) should be declared in a BC 4.1 document.
- For import of consigned goods as well as passenger goods with an FOB value above USD 500, the import declaration will be in the form of Pemberitahuan Impor Barang Khusus/PIBK.
Actions to Consider
Importers that enjoy these fiscal incentives need to be prepared for monitoring, evaluation and audit by the Directorate General of Customs and Excise (DGCE). Even though eventually all importers will be subject to a customs audit, importers that enjoy customs facilities may be under a spotlight or fall within the radar of the DGCE. Therefore, it is necessary to perform an internal customs compliance health check to minimize any risks. Importers that violate the provision on this regulation will be subject to the following sanctions:
- administrative sanction in the form of penalty of a minimum 100% of the payable import duty or a maximum 500% of the payable import duty in accordance with the Customs Law
- sanction in accordance with the Excise Law
- sanction in accordance with the Tax Law
In addition to the above, importers that are under sanction will not be able to conduct customs activities as their customs access right will be blocked for one-year period.