Indonesia: Expansion of Tax Incentives in Relation to COVID-19

In brief

The government has expanded the tax incentives given to taxpayers that are affected by COVID-19. Some taxpayers that were not entitled to tax incentives under Minister of Finance Regulation No. 23/PMK.03/2020 ("MOF Regulation 23") may now enjoy those tax incentives under Minister of Finance Regulation No. 44/PMK.03/2020 ("MOF Regulation 44"). The government has also expanded the types of tax for which tax incentives are given. 

MOF Regulation 44, which revokes MOF Regulation 23, came into force on 27 April. 

The Directorate General of Taxation has also issued Circular Letter No. SE29/PJ/2020 on 30 April 2020 as an implementing regulation of MOF Regulation 44.


Contents

Tax Incentives under MOF Regulation 44

Under MOF Regulation 44, the Indonesian government expands the following: 

  • types of tax for which the tax incentives are given to include taxes for Small and Medium Enterprises (that have gross sales of up to IDR 4.8 billion in a year), which will be borne by the government for six months, from April to September this year 
  • types of taxpayers that are entitled to the tax incentives to include taxpayers that have a bonded zone operator permit, a bonded zone entrepreneur license or an entrepreneur in bonded zone permit - types of industry fields that are entitled to the tax incentives

Based on MOF Regulation 44, the tax incentives are as follows: 

  1. Income Tax Article 21 

Employees of companies engaging in one of 1,062 certain industry fields, of companies that receive import facilities for export purposes (kemudahan impor tujuan ekspor or KITE), and of companies in bonded zones may obtain income tax article 21 facilities borne by the government for the fiscal periods of April to September 2020. 

  1. Income Tax Article 22 on Import 

Taxpayers engaging in one of 431 certain industry fields, KITE companies and companies in bonded zones may receive an exemption from income tax article 22 on import for the fiscal periods of April to September 2020. 

  1. Income Tax Article 25 Instalment 

Taxpayers engaging in one of 846 certain industry fields, KITE companies, and companies in bonded zones may receive a deduction of income tax article 25 instalments amounting to 30% of the instalments that should be payable for fiscal periods from the notice from the taxpayer up to September 2020. 

  1. VAT 

Taxpayers engaging in one of 431 certain industry fields, KITE companies, and companies in bonded zones are determined as low-risk taxable business actors. They may receive an expedited restitution facility (the total of overpaid tax status in the tax return should not exceed IDR 5 billion) without the requirement to carry out certain activities such as export of taxable goods or services, delivery to VAT collectors, or delivery that is not subject to VAT. This incentive is given for fiscal periods of April to September 2020. 

  1. Final Tax on Small and Medium Enterprises 

Small and Medium Enterprise business actors applying a 0.5% final tax under Government Regulation No. 23 of 2018 regime may receive tax incentive borne by the government. Based on this, they do not need to make tax payments, and tax withholders or collectors do not deduct or collect tax when making tax payments to them for fiscal periods of April to September 2020.

Expansion of the Type of Industry Fields 

In MOF Regulation 44, the government has expanded certain types of industry fields that are entitled to tax incentives for Income Tax Article 21, Income Tax Article 22, Income Tax Article 25 and VAT refunds. Below are some of the additional types of industry fields now entitled to tax incentives: 

  • agriculture 
  • plantation 
  • certain services (e.g., reparation services, mining services, IT and computer services, tourism, management) 
  • oil and gas 
  • mining 
  • construction 
  • trading 
  • transportation services 
  • hotel 
  • financial and insurance services  
  • education 
  • hospital

Actions to Consider

MOF Regulation 44 has a transitional provision. Taxpayers that have already submitted a notification to obtain the tax incentives under MOF Regulation 23 or have obtained fiscal incentives under MOF Regulation 23 do not need to resubmit their notifications under MOF Regulation 44. Further consultation may be required to fully understand the details of the new fiscal facilities provided by the government.


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