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In brief

The Indonesian 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. 44/PMK.03/2020 (“MOF Regulation 44“) may now enjoy those tax incentives under Minister of Finance Regulation No. 86/PMK.03/2020 (“MOF Regulation 86“). MOF Regulation 86, which revokes MOF Regulation 44, came into force on 16 July.


Contents

In more detail

Below are some changes from the previous regulation i.e., MOF Regulation 44, related to tax incentives:

Types of industry fields that are entitled to the tax incentives:

  • For income tax article 21, 1189 industry fields are now entitled to the tax incentives (previously are 1,062 under MOF Regulation 44).
  • For income tax article 22, the Indonesian government expands the industry fields that are entitled to the tax incentives to 721 (previously are 431 under MOF Regulation 44).
  • For income tax article 25, the Indonesian government expands the industry fields that are entitled to the tax incentives to 1,013 (previously are 846 under MOF Regulation 44).
  • For value added tax, the Indonesian government expands the industry fields that are entitled to the tax incentives to 716 (previously are 431 under MOF Regulation 44).

Additional types of industry fields that are now entitled to tax incentives are the forestry sector, large and small trade (retail) sector, professional services sector, drinking water industry sector, domestic sea transportation sector, fruit and vegetable processing industry sector, financial services sector and cooperatives sector.

Extension of the period of utilization of tax incentives:

  • All of the taxpayers that already enjoyed the tax incentives (i.e., income tax article 21, income tax article 22, income tax article 25, value added tax and final tax on small and medium enterprises) under MOF Regulation 44 can avail of the incentives until December 2020 (previously only up to September 2020), without a requirement to resubmit their notifications under MOF Regulation 86.

Ease of reporting obligations to enjoy tax incentives:

  • Notification of the utilization of income tax article 21 incentives for both a head office and branches is now given by the head office only (previously both of head office and the branches has separate obligations to file a notification).
  • Small and medium enterprises are now only required to submit a realization report to enjoy the tax incentives for final income tax (previously small and medium enterprises are required to request a statement letter).

Actions to Consider

Since now most corporate taxpayers may be entitled to the these tax incentives, you may consider taking the following actions:

  • Check whether your company is now included in the list of industry codes (Klasifikasi Lapangan Usaha/KLU) that can enjoy the tax incentives.
  • Apply for the facility by submitting a notification under MOF Regulation 86, if previously you were not entitled to the facility under MOF Regulation 44.

MOF Regulation 86 has a transitional provision. Further consultation may be required to fully understand the details of the expansion of tax incentives provided by the government.  Since the facilities offered under MOF Regulation 86 are similar to the facility under MOF Regulation 44, you may refer to our previous client alert on MOF Regulation 44.

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Author

Ponti Partogi heads the Tax & Trade Practice Group at Hadiputranto, Hadinoto & Partners. He provides comprehensive tax advice on a variety of transactions from both legal and accounting perspective. He is a registered legal counsel at the Indonesian Tax Court and is a member of the Indonesian Advocates Association (PERADI) and the International Fiscal Association - Indonesian Chapter. For several consecutive years, Ponti was named Tax Controversy Leader for Indonesia by the International Tax Review. He was also named a leading lawyer in 2017 Asia Pacific Legal 500.

Author

R. Daru Hananto is an Associate Partner in Baker McKenzie's Jakarta office.

Author

Irfan Pradana is a Tax Specialist in Baker McKenzie's Jakarta office.