Having reviewed the various measures that have been taken in mitigating the economic impact of the COVID-19 pandemic, particularly among Indonesians with low income, the Indonesian government has moved to expand its tax incentives to further ensure a speedy recovery of the nation鈥檚 economy.
Having reviewed the development of economic conditions in Indonesia, especially in regards to the increasingly widespread impact of the COVID-19 pandemic to various economic sectors, including Small and Medium-sized Enterprises&苍产蝉辫;(鈥�SMEs鈥�), the Indonesian government has deemed it necessary to expand tax incentives, which had initially only targeted the manufacturing sector.
Through Ministry of Finance Regulation of Minister of Finance No. 44/PMK.03/2020 on Taxation Incentives for Taxpayers Affected by the COVID-19 Pandemic (鈥�PMK 44/2020鈥�), which came into force on April 27, 2020, the Indonesian government has effectively expanded the tax incentive measures laid out by the earlier issued Regulation of Minister of Finance No. 23/PMK.03/2020 on Taxation Incentives for Taxpayers Affected by the COVID-19&苍产蝉辫;(鈥�PMK 23/2020鈥�), further revoking said regulation.
Under the PMK 44/2020, the Indonesian government grants the following tax incentives:
Article 21 Income Tax Borne by the Government
With the issuance of PMK 44/2020, the list of business classifications code&苍产蝉辫;(鈥�KLU code鈥�) that are eligible for Article 21 Income Tax borne by the government (鈥�Article 21 Income Tax DTP鈥�) has been expanded to 1,062 business fields from 440 business fields previously under PMK 23/2020.
Under this regulation, the Indonesian government will cover Article 21 Income Tax from employees, which was originally cut from the employees鈥� income. Employees are first required to fulfill the following criteria in order to obtain Article 21 Income Tax DTP:
- Employees who receive income from employers:
- that have a KLU code as listed in appendix A of PMK 44/2020;
- are determined as Export-Oriented Import Facilities&苍产蝉辫;(鈥�KITE鈥�) companies based on the Decree of the Minister of Finance; or
- have obtained a Bonded Zone Operator permit, a Bonded Zone Entrepreneur permit, or a permit for Entrepreneur in Bonded Zone who also acts as Operator in Bonded Zone (鈥�PDKB permit鈥�).&苍产蝉辫;
- Have a Taxpayer Identification Number (鈥�NPWP鈥�); and
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Receive or obtain an annual gross income which does not exceed IDR 200 million in the related tax year.
The KLU code as mentioned above in this section is in accordance with the KLU code stated in:
- Annual Tax Return (鈥�SPT鈥�) of Income Tax for 2018 reported by the employer; or
- Masterfile of Taxpayer, for new taxpayers registered after 2018 or for government agencies.
Article 21 Income Tax DTP 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 since the Tax Period of April 2020 until September 2020.
In the event that an employee who receives Article 21 Income Tax DTP submits the Annual Personal Income Tax Return for the 2020 Tax Year and declares overpayment, then the overpayment originating from Article 21 Income Tax DTP is non-refundable.
These are the procedures required to implement the incentive of Article 21 Income Tax DTP:
- Employers must submit notifications using the format as stipulated in appendix C of PMK 44/2020 to the Head of Tax Service Office (鈥�KPP鈥�) where the employers are registered through &苍产蝉辫;(鈥�DJP Online鈥�).&苍产蝉辫;
- For KITE companies, said notifications must be submitted by employers and shall have attached the Decree of the Minister of Finance concerning their determination as KITE companies.
- For Bonded Zone Operator, Bonded Zone Entrepreneur or Entrepreneur in Bonded Zone who also acts as Operator in Bonded Zone, said notifications must be submitted by employers and it shall have attached the Decree of the Minister of Finance concerning their permit.
Employers are required to make Tax Payment Slips or Printed Billing Code affixed with an official stamp along with the following statement: 鈥淧Ph PASAL 21 DITANGGUNG PEMERINTAH EKS PMK NOMOR 鈥�/PMK.03/2020鈥�.
It should be noted that employers must submit the reports on the realization of Article 21 Income Tax DTP using the form under appendix E of PMK 44/2020 through DJP Online, along with the Tax Payment Slips or Billing Codes, no later than the 20th of the following month after the tax period ends.
Final Income Tax borne by the Government for SMEs
This incentive is intended for SMEs taxpayers with a turnover of below IDR 4.8 billion in the form of Final Income Tax of 0.5% borne by the Government&苍产蝉辫;(鈥�Final Income Tax DTP鈥�). Thus, said SMEs taxpayers do not need to make a tax payment and the tax collector will not deduct for the tax.
The Final Income Tax DTP received by the taxpayer is not counted as income subject to tax. This incentive is given for the Tax Period of April 2020 until September 2020.
In order to obtain this incentive, said SMEs taxpayers must submit applications using the format as stipulated in appendix G of PMK 44/2020 to the Directorate-General of Tax through DJP Online.
The tax collector must make Tax Payment Slips or Printed Billing Code affixed with official stamp along with the following statement: 鈥淧Ph FINAL DITANGGUNG PEMERINTAH EKS PMK NOMOR 鈥�/PMK.03/2020鈥�.
SMEs taxpayers must submit their reports on the realization of Final Income Tax DTP using the form under appendix H of PMK 44/2020 through DJP Online, along with the Tax Payment Slips or Billing Codes, no later than the 20th of the following month after the tax period ends.
Exemption of Article 22 Income Tax on Import
Based on PMK 44/2020, the list of KLU codes that are entitled to be exempted from the imposition of Article 22 Income Tax on Import expands to 431 business fields from only 102 business fields previously in PMK 23/2020.
The Article 22 Income Tax on import is levied by the Foreign Exchange Bank or the Directorate General of Customs and Excise when the taxpayers import goods. These are the criteria of taxpayers who can be exempted from the Article 22 Income Tax on import under said article:
- Taxpayers that have a KLU code as listed in appendix I of PMK 44/2020;
- Taxpayers that are determined as KITE companies based on the Decree of the Minister of Finance; or
- Taxpayers that have obtained a Bonded Zone Operator permit, a Bonded Zone Entrepreneur permit, or a PDKB permit.
The KLU code as referred to in this section is in accordance with the KLU code stated in:
- Annual SPT of Income Tax for 2018 reported by the employer; or
-
Masterfile of Taxpayer, for new taxpayers registered after 2018.
These are procedures required to obtain this incentive:
- Taxpayers must submit applications for a Certificate of Exemption of Article 22 Income Tax on Import Collection (鈥�SKB Pemungutan鈥�) through DJP Online by using the form under appendix J of PMK 44/2020. The incentive period is valid from the date of issuance of the Certificate of Exemption until September 30, 2020.
- For KITE companies, said applications must be submitted by taxpayers and shall have attached the Decree of the Minister of Finance concerning their determination as KITE companies.
- For Bonded Zone Operator, Bonded Zone Entrepreneur or Entrepreneur in Bonded Zone who also acts as Operator in Bonded Zone, said applications must be submitted by taxpayers and shall have attached the Decree of the Minister of Finance concerning their permit.
On an every three-month basis, 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 M of PMK 44/2020 through DJP Online 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.
Deduction of Article 25 Income Tax Installment
Under PMK 44/2020, the government has further included 846 business fields in the list of KLU code entitled to obtain 30% deduction to their Article 25 Income Tax installment. The criteria are as follows:
- Taxpayers that have a KLU code as listed in appendix N of PMK 44/2020;
- Taxpayers that are determined as KITE companies based on the Decree of the Minister of Finance; or
- Taxpayers that have obtained a Bonded Zone Operator permit, a Bonded Zone Entrepreneur permit, or a PDKB permit.
The aforementioned KLU code in this section is in accordance with the KLU code stated in:
- Annual SPT of Income Tax for 2018 that has reported by the employer; or
- Masterfile of Taxpayer, for new taxpayers registered after 2018.
The notification for deduction of Article 25 Income Tax installment must be submitted by the taxpayers using the format as stipulated in appendix C of PMK 44/2020 to the Head of KPP where the taxpayers are registered through DJP Online.
Furthermore, the taxpayers are obliged to submit realization reports on the deduction of Article 25 Income Tax installments every 3 (three) months through DJP Online, of which said reports must use the form under appendix P of PMK 44/2020 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.
Preliminary Refund of Value Added Tax (VAT) overpayment
The Value Added Tax (VAT) incentive in the form of preliminary refunds of tax overpayments as Low-Risk Taxable Entrepreneur&苍产蝉辫;(鈥�Low-Risk PKP鈥�) will be granted by the government to the following criteria of taxpayers:
- Those that have fulfilled the criteria as referred to in the section of Exemption of Article 22 Income Tax on Import; and
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Those who have submitted a 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 refund under the following conditions:
- Taxable Entrepreneur 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
- Taxable Entrepreneur must be operating within certain business sectors as listed in appendix I of PMK 44/2020, or must still be in possession of valid KITE facilities or valid Bonded Zone permits at the time of submission of the relevant notification of overpayment for restitution.
Employers or taxpayers, who have submitted notifications for Article 21 Income Tax DTP and/or deduction of Article 25 Income Tax Installment under the guidelines stipulated in PMK 23/2020, do not need to re-submit notifications.
Meanwhile, employers or taxpayers that have submitted applications for the SKB Pemungutan and/or whose SKB Pemungutan has been issued under PMK 23/2020, do not need to re-submit applications.
It should be noted that employers or taxpayers, who have been approved to obtain taxation incentives in accordance with PMK 23/2020, are still entitled to enjoy the tax incentives. However, they must submit the realization reports based on the provisions under PMK 44/2020.
The incentives above show the Indonesian government鈥檚 acknowledgement of the country鈥檚 economic backbone, namely the SMEs. It also shows the government鈥檚 awareness of the potentially significant economic threat that the COVID-19 pandemic poses to the most vulnerable, namely the low-income bracket of the population. Viewed along with the other measures that have been taken, such as the intensified distribution of social aid, it is clear that the Indonesian government is ready to take all necessary measures to protect its poorest citizens.