On February 23, 2022, EKONID, in partnership with Roedl &聽Partner, held an Online Roundtable discussion on the recently ratified Tax Harmonization Law. Passed by the Indonesian parliament on October 7, 2021, and further signed into law on October 29, 2021, the Tax Harmonization law (Law No.7/2021 or HPP law) introduces a number of changes to the existing tax laws that aims to simplify the tax code and improve the country鈥檚 tax revenues in a more 鈥渇air and equal鈥� manner.聽
Presented by Stefan Ewers, Partner and Head of Roedl and Partner operations in Indonesia, and Wahyu Indradi, Associate Partner at Roedl and Partner, the roundtable discussion touched upon the various changes introduced by the HPP Law, including the increase of income tax rates on businesses, the elimination of taxes on individuals making less than Rp 500 million (around US$34,000) a year, as well as 鈥� for the first time in the country鈥檚 history 鈥� the introduction of a carbon tax scheme to the tax code.
鈥淔rom our observation, [the HPP Law] is not so much of a good-news for the [individual taxpayer]. But of course, there are certain notable features in this that we appreciate, like the reduction of sanctions to tax objections and tax appeals that, for corporate, helps a lot,鈥� said Mr. Indradi.
Listed below are some of the more notable stipulations of the HPP Law:
1. The merging of the national identification number (or NIK) and the Taxpayer Identification Number (or NPWP).
2. The introduction of a 35% income tax rate to individuals with an annual income of Rp 5 billion or more.
3. A 22% fixed corporate income tax rate for businesses, with a 50% tax deduction for local small-and-medium-sized enterprises.
4. An 11% added-value tax rate for 2022 which will be increased to 12% starting January 2025, as well as an increase in the number of goods categorized as added-value goods that will be susceptible to the new tax rate effective April 2022.
5. The introduction of a Carbon Tax Scheme of Rp 30 per kilogram of Carbon Dioxide and its equivalent, which would be implemented in accordance with the national carbon reduction roadmap policy effective April 2022.
As many as 36 individuals and representatives of companies attended the Online Roundtable, which ended up hosting a lively discussion on the merit and practicality of the exact implementation of the law. In this regard, it might be interesting to note that the HPP Law is not yet fully effective as it may still face some legal challenges in court 鈥� not unlike the case with the Omnibus Law.
On November 2021, the Constitutional Court decided that the Omnibus Law was procedurally unconstitutional, prohibiting the government from issuing further implementing regulation while giving the government two years to revise the procedurally flawed provisions.
Overall, the Online Roundtable successfully introduced the HPP Law to EKONID members. Mr. Jan R枚nnfeld, Managing Director of EKONID, who also opened the event, closed it by thanking the two legal experts who shared their expertise with those in attendance, further encouraging attendants to not hesitate in seeking consultation from Roedl & Partner or EKONID should they need any support in doing business in Indonesia.