One of President Joko Widodo’s main goal for his term is to expand Indonesia’s manufacturing capabilities. To that effect, he has pushed for investments in the manufacturing sector, promoted Industry 4.0, relaxed Indonesia’s negative investment list, implemented tax holidays and introduced an omnibus bill as an effort to reform the labor law. Therefore, as the COVID-19 pandemic continues to reveal its impact on Indonesia’s economic growth, the government has made the sustainability of the manufacturing sector a priority. Under President Widodo’s Large-Scale Social Restriction (Pembatasan Sosial Berskala Besar or PSBB) decree, some factories would be allowed to continue operations under certain conditions. Factory Operational Requirements during the COVID-19 Pandemic In this regard, the Minister of Industry issued Circular of the Minister of Industry No. 4 of 2020 on the Implementation of Factory Operations during the Period of Public Health Emergency of Coronavirus Disease 2019 (“Circular 4/2020”). Issued on April 7, 2020, the circular is intended as a guideline for Industry Associations, Industrial Companies and Industrial-Areas Companies in carrying out their activities during the COVID-19 outbreak in Indonesia. Under Circular 4/2020, Industrial Companies and Industrial-Areas Companies may be granted industrial activity permits to continue carrying out their business activities under the condition that they fulfill the following requirements: Implement early screenings to all workers by measuring their body temperature and conduct detections of employees with respiratory symptoms, including coughs/flu/shortness of breath, when entering factory areas and during shift changes; Prohibit sick workers from participating in any company activity and recommend them to immediately check with their company’s or government health facilities; Ensure sick workers and workers with travel history from any country or zone/city with known COVID-19 local transmission during the last 14 days are prohibited from entering factory areas. This is to be informed about through a notification in the entrance area. Information on the list of countries with local transmissions of COVID-19 can be accessed at www.covid19.kemkes.go.id; Ensure that working areas have proper air circulation and have adequate hand-washing facilities; Ensure the availability of soap and running water or alcohol-based sanitizers for hand-washing, as well as masks, gloves and clothing that ensure the safety of workers and company products; Increase routine cleaning frequency with disinfectant fluids within commonly used areas such as bathrooms, registration and payment counters, dining areas; Limit the number of workers allowed in public facilities such as mosques, canteens, and toilets; Provide multivitamins and nutritional foods for all workers; Prepare guidelines for workers from arrival at factories until they return to their residences; and Participate in and promulgate a clean and healthy lifestyle, as well as inform about COVID-19, through the installation of banners/ infographics at strategic locations throughout factory areas. Further, workers of Industrial Companies and Industrial-Areas Companies are required to comply with the following provisions: If there are any sick workers in factory areas, stop any activity in the factory and immediately go to the company or government health facilities; Workers returning from any country or zone/city with known COVID-19 local transmissions during the last 14 (fourteen) days must inform the company. Wearing masks since leaving home and also gloves once arrived in factory areas; Maintain a minimum distance of 1 (one) meter (physical distancing) and avoid crowds during break time; All workers must implement a clean and healthy lifestyle such as washing hands regularly using water and soap or alcohol-based sanitizers for hand-washing and avoid touching unnecessary areas of the face; and Ban any handshake with fellow workers or individuals and consider adopting alternative forms of greeting. Industrial Activity Permits during the COVID-19 Pandemic In regards to industrial activity permits as referred to in Circular 4/2020, the Minister of Industry has issued Circular No. 7 of 2020 on Guidelines for the Submission of Applications for Industrial Activity Implementation Permits during the Period of Public Health Emergency of Coronavirus Disease 2019 (COVID-19) (“Circular 7/2020”), which came into force on April 9, 2020. Circular 7/2020 stipulates that Industrial Companies and/or Industrial-Areas Companies may continue their business activities by obtaining operational and mobility permits in the form of certificate for industrial activities, either for factory operational activities, office administration, or industrial activities mobility related to raw materials, auxiliary materials, finished goods, and/or workers. In order to obtain said certificate, Industrial Companies and/or Industrial-Areas Companies shall submit an application electronically through SIINas portal (siinas.kemenperin.go.id) by complying to the following procedure: log in to the SIINas (siinas.kemenperin.go.id) account; select the “e-services” option; select “Izin Operasional dan Mobilitas”; fill in the form, continue with selecting “Simpan”; and after an application has been validated via the system, the relevant business may print out the certificate by selecting the “Cetak” option. The certificate shall be valid during the public health emergency of Corona Virus Disease (COVID-19) period and it features a QR Code which can be scanned to prove the validity. Industrial Companies and/or Industrial-Areas Companies encountering technical difficulties during the submission of an application can complain to SIINas Helpdesk. It should be noted that the Ministry of Industry may revoke the issued certificate, if any discrepancy between the data submitted and the actual conditions is found.
Jakarta. Mercedes-Benz is supporting: The COVID-19 pandemic is affecting everyone. Especially in times like these, it is important for Mercedes-Benz to meet its social responsibilities. PT Mercedes-Benz Distribution Indonesia has therefore offered its support with the provision of one Sprinter van to Ambulans Gawat Darurat (AGD) Dinas Kesehatan Provinsi DKI Jakarta or Ambulance Emergency Service of the Jakarta Health Agency. With the aid of the Sprinter van, medical workers can be transported from medical institutions to various locations that is urgently needed as a result of the current COVID-19 pandemic. The Sprinter van will be operated by AGD as logistics support for the medical workers that are in the frontline of combatting the coronavirus. “These are hard times. Apart from ensuring the health and safety our employees and business partners, we also feel obliged to support the ones who are in the frontline: the medical workers. By providing the Sprinter for use by AGD, we trust that Mercedes-Benz can fulfil the need of transportation for medical workers who constantly need to be on standby during this pandemic”, says Choi Duk Jun, President Director, PT Mercedes-Benz Distribution Indonesia. The Mercedes-Benz Sprinter is configured as a passenger transporter van with a capacity of up to 20 persons and will be used by Ambulans Gawat Darurat for a period of 6 months. AGD is appointed by the Jakarta Health Agency as the medical emergency service provider for Jakarta Province.
The COVID-19 pandemic is bringing the world economy, if not already brought, closer to a recession. The IMF is already projecting a worldwide GDP contraction of 3% for a short-lived outbreak. The Indonesian government’s baseline scenario in this regard is for Indonesia’s economic growth to drop to 2.3%, the lowest in 21 years, with a worst-case scenario of an economic contraction of 0.4%. In order to avoid that worse-case scenario, the Indonesian government has issued several tax incentives to help businesses stay afloat and to help workers to survive the pandemic with their jobs intact. Through Minister of Finance Regulation No. 23/PMK.03/2020 on Taxation Incentives for Taxpayers Affected by the Coronavirus Pandemic (PMK 23/2020), which came into force on April 1, 2020, the government will bear income taxes, import tax and value-added tax in order to stimulate the economy. Relaxation of Article 21 Income Tax (PPh 21) With the issuance of this regulation, the Indonesian government will cover Article 21 Income Tax from employees which were originally cut from the employees’ income. This incentive applies to all employees that fall under the following criteria: Employees who receive income from employers: Companies with the business field classifications (KBLI) code listed in appendix A of PMK 23/2020; and/or Companies determined as Export-Oriented Import Facilities (KITE) companies based on the Decree of the Minister of Finance. Have a Taxpayer Identification Number (NPWP); and Receive or obtain annual gross income which does not exceed IDR 200 million in the related tax year. Article 21 Income Tax borne by the government must be paid in cash by the employers at the time of payment of income to the employees and it will not be calculated as taxable income. Furthermore, this incentive will be granted from the Tax Period of April 2020 to September 2020. These are the procedures to implement Article 21 Income Tax incentive: Employers must submit written notifications using the format as stipulated in appendix C of PMK 23/2020 to the Head of Tax Service Office (KPP) where the employers are registered. For KITE companies, said notifications must be submitted by employers and shall attach their Decree of the Minister of Finance concerning the determination as KITE companies. It should be noted that employers must submit reports on the realization of Article 21 Income Tax borne by the government to the Head of KPP where the employers are registered, along with the Tax Payment Slips or Billing Codes, no later than: July 20, 2020, for the Tax Period of April 2020 until June 2020; and October 20, 2020, for the Tax Period of July 2020 until September 2020. Relaxation of Article 22 Income Tax on Import (PPh 22 Impor) Article 22 Income Tax on import is levied by the Foreign Exchange Bank or the Directorate General of Customs and Excise on taxpayers importing goods. These are the criteria for taxpayers to be exempt, as stipulated by Article 22 Income Tax on import: Companies with KBLI code listed in appendix F of PMK 23/2020; and/or KITE companies. In order to obtain this incentive, the taxpayers must submit written applications for the Certificate of Exemption of Article 22 Income Tax on import to the Head of KPP where the taxpayers are registered by using the form under appendix G of PMK 23/2020. The incentive period is valid from the date of issuance of the Certificate of Exemption until September 30, 2020. On a per three-month basis, the taxpayers are required to submit realization reports concerning the exemption of Article 22 Income Tax on import using the form as set out in appendix J of PMK 23/2020 to the Head of KPP where the taxpayers are registered by no later than: July 20, 2020, for the Tax Period of April 2020 until June 2020; and October 20, 2020, for the Tax Period of July 2020 until September 2020. Relaxation of Article 25 Income Tax (PPh Pasal 25) Taxpayers who fulfill the criteria as mentioned in the incentive of Article 22 Income Tax on Import may also be granted a 30% deduction of Article 25 Income Tax installments. The notification for deduction of Article 25 Income Tax installment must be submitted by the taxpayers in writing using the format as stipulated in appendix C of PMK 23/2020 to the Head of KPP where the taxpayer is registered. Furthermore, the taxpayers are obliged to submit realization reports on the deduction of Article 25 Income Tax installments every three months to the Head of the KPP where the taxpayers are registered, in which said reports must use the form under appendix L of PMK 23/2020, and no later than: July 20, 2020, for the Tax Period of April 2020 until June 2020; and October 20, 2020, for the Tax Period of July 2020 until September 2020. Relaxation of Restitutions of Value Added Tax (PPN) The Value Added Tax (VAT) incentive in the form of preliminary returns of tax overpayments for low-risk Corporate Taxpayers (PKP) will be granted by the government according to the following criteria of taxpayers: Satisfying the criteria as referred to in the incentive of Article 22 Income Tax on Import and Article 25 Income Tax; and Those who have submitted a Periodic Tax Return (SPT) of VAT for overpaid restitution with a maximum overpayment amount of IDR 5,000,000,000.00 (five billion rupiah). The low-risk PKP will be granted a preliminary return under the following conditions: PKP are not required to submit any applications for determination as low-risk PKP; The Director-General of Tax will not issue any Decree on determination as low-risk PKP; and PKP is listed in the KBLI code listed in appendix F of PMK 23/2020, or the KITE facilities provided to PKP are still valid at the time of submission of the notification of overpayment for restitution. PMK 23/2020 stipulates that the period for the provision of VAT incentives runs for the Tax Period of April 2020 until September 2020, submissions to be no later than October 31, 2020. The tax incentives mentioned above is one of the ways the Indonesian government is implementing to support businesses and workers who are affected by the highly contagious novel coronavirus 2019. While the economic impact of the COVID-19 pandemic is still ongoing, the stimulus should at least provide some reprieve for Indonesia’s move towards a speedy public health and economic recovery.
The Rupiah is gaining ground after weeks of devaluation amidst the COVID-19 pandemic. On March 23, 2020, the Rupiah dropped to its lowest point this year to Rp 16,575 per US dollar. By April 9, the currency rose 2.3% to close at Rp 15,880 against the dollar, the biggest gain since October 2015. The appreciation is in part due to aggressive intervention by the Indonesian government. Just last month, the country spent $9.4 billion of its Foreign Reserves as Bank Indonesia stepped up market intervention to stabilize the rupiah exchange rate amid heavy capital outflows. On top of that, Bank Indonesia also struck a $60 billion repo facility deal with the US Fed - nearly half of the Indonesia’s total reserves. BI Governor Perry Warjiyo said the deal was a show of confidence in Indonesia’s economic prospect. “The Fed only works with a few emerging countries, including Indonesia, on such deals,” Mr. Warjiyo said in a recent teleconferenced meeting following announcement of the deal with the Fed Aside from the Fed, Indonesia also has a $30 billion bilateral swap agreement with China, $22.7 billion with Japan, around $7 billion with Singapore and an undisclosed amount with Australia and other central banks, as well as a $2.5 billion repo line agreement with the Bank of International Settlements and another $3 billion with the Monetary Authority of Singapore, according to data from the Central Bank. “This will be the second line of defense other than bilateral currency swaps in case we need dollar liquidity,” Mr. Warjiyo said as quoted by the Jakarta Post, adding that the current forex reserves level was “adequate” for further market interventions. Currently, the country’s financial system remains relatively safe. Data from the Central Bank shows that, as of February 2020, Indonesia’s banks retain a high CAR (Capital Adequacy Ratio) of 22.27% as well as a relatively low NPL (Non-Performing Loan) of 2.79% (gross) and 1.04% (nett). Mr. Warjiyo expressed confidence that the Rupiah will continue its climb to Rp 15,000 per dollar, adding that the Central Bank was ready to take the necessary measures to safeguard the currency.
To safeguard the national economy against the COVID-19 pandemic, President Joko Widodo issued Government Regulation in Lieu of Law Number 1 of 2020 on State Financial Policy and Financial System Stability for Mitigation of Pandemic Corona Virus Disease 2019 (COVID-19) (Perppu 1/2020), which came into force on March 31, 2020. One of the many substantial policies addressed in Perppu 1/2020 is taxation. They are as follows: Corporate Tax One of the main regulatory changes introduced in the Perppu is on Corporate Tax, in which the Indonesian Government provides a reduction of Corporate Income Tax of 22% (twenty two percent) from the current 25% (twenty five percent) for companies and permanent establishment (BUT), which applies for the Tax Years 2020. For Tax Year 2022, the tax deduction will be 20% (twenty percent). Public companies listed in the Indonesia Stock Exchange (IDX) that sell more than 40 percent of their shares to the public and meet certain requirements will be eligible for an additional 3% (three percent) reduction. E-commerce Tax With the issuance of this regulation, domestic and foreign online business practitioners that conduct e-commerce activities in Indonesia will be charged: value added tax (VAT) on taxable intangible goods and/or services sold through their e-commerce platforms. income tax or electronic transaction tax on their e-commerce activities. Foreign online business practitioners with a significant economic presence in Indonesia will be declared as permanent establishments. The significance of the company’s economic presence is determined by the company’s gross circulated product, sales and/or active users in Indonesia. As is all permanent establishments, these companies will now be subject to Indonesian taxation regulations. In the event that the Indonesian government is not able to determine certain foreign online business practitioners as permanent establishments due to tax treaties with certain countries, these companies will be charged an electronic transaction tax on their company’s sales in Indonesia. Further provisions regarding the rate, object and calculation of the income tax and the electronic transactions tax will be regulated through a Government Regulation (PP). Under Perppu 1/2020, domestic and foreign online business practitioners that fail to comply with the provisions will be subject to: administrative sanctions in accordance with prevail Indonesian taxation regulations. termination of companies’ access by the Minister of Communication and Information Taxation Obligations Via Perppu 1/2020, the Indonesian government will further provide relaxation to taxpayers in regards to the extension of filing an objection to tax payments and returning tax overpayments due to the COVID-19 pandemic. For the submission of objections, the Indonesian government has decided that the due date for the submission of the objection is extended to a maximum of 6 months. Meanwhile, the due date for returning tax overpayments has now been extended for a maximum of 1 month. Furthermore, the due date for requesting the return of overpayment of taxes, filing an objection letter, as well as requesting a reduction or an elimination of administrative sanctions, cancellation of incorrect tax assessments, and cancellation of inspection results will be extended for a maximum of 6 months. The severity period due to the COVID-19 pandemic refers to the determination of the Indonesian government through the Head of the National Disaster Management Agency (BNPB). Import Duties Exemption Lastly, Perppu 1/2020 stipulates that the Minister of Finance has the authority to grant exemptions or relaxations on import duties, which can be done in the context of handling the COVID-19 pandemic and in facing any threats that endanger the national economy and/or the stability of the financial system. Under this authorization, changes to imported goods which are exempted from import duties based on their intended use under the article 25 paragraph (1) and article 26 paragraph (1) of the Customs Law will now be regulated through the Regulation of the Minister of Finance (PMK). It is clear that the changes in the tax regulation stipulated in Perppu 1/2020 is meant to ensure that Indonesia has enough fiscal space to mitigate the impact of the COVID-19 pandemic as well as to ensure a speedy economic recovery. It should be noted that while a Perppu is legally binding at the time of issuance, the government must still submit the Perppu to the Parliament for it to become law. The Parliament has the power to reject the Perppu and force the government to retract it. In this regard, the Perppu has been handed over to the Parliament on April 2, 2020, and, as of the time of writing, is still being deliberated by lawmakers.