1. Reduction of Corporate Income Tax rate

Matter

Current

Draft

Income Tax Rate

Corporate income tax rate (normal tax rate) is 25%

The tax rate will be reduced gradually to 22% in fiscal years 2021 and 2022, and to 20% starting fiscal year 2023

Income Tax Rate for publicly traded entities (certain requirements apply)

Corporate income tax rate is 5% lower than normal tax rate

Newly publicly traded entities qualify for:

• Rate 3% lower than normal tax rate, which is
• Valid for 5 years

2. Income Tax Relief on Dividends

Matter

Current

Draft

Received from domestic entity

Dividends received by:

1. Domestic corporate taxpayer with 25% or more ownership are exempt from income tax
2. Domestic corporate taxpayer with less than 25% ownership are taxed at normal income tax rate
3. Domestic individual taxpayer are subject to 10% Final Tax rate

Dividends received by:

1.                 –- No change –

1. Domestic corporate taxpayers with less than 25% ownership are taxed at normal income tax rate, unless reinvested in Indonesia within a certain time frame
2. Individual taxpayers are subject to Final Tax of 10%, unless reinvested in Indonesia within a certain time frame

Received from foreign entity

Dividends received by domestic corporate or individual taxpayers are subject to normal income tax rate

Dividends received by domestic corporate or individual taxpayers are subject to normal income tax rate, unless reinvested in Indonesia within a certain time frame

3. Imposition of Income Tax

Matter

Current

Draft

Indonesian citizen or expatriate as domestic taxpayer

• Indonesian citizen is a domestic taxpayer due to citizenship and
• An expatriate having been present in Indonesia for more than183 days is deemed to be a domestic taxpayer

Domestic taxpayer status is determined by time test of  physical presence in Indonesia:

• More than 183 days as a domestic taxpayer
• 183 days or less as a foreign taxpayer

Principal on income taxation

World wide

Territorial

4. Relaxation in Crediting Input VAT

Matter

Current

Draft

Input VAT prior to registration as VAT-able Entrepreneur

Non-creditable

Creditable based on tax invoice received

Input VAT not reported in tax return and discovered during tax audit

Non-creditable

Creditable based on tax invoice received

Input VAT billed by way of Tax Assessment

Non-creditable

Creditable limited to tax base

Input VAT prior to taxable sales incurred by Enterpreneur

Creditable limited to capital goods

Creditable. Any overpayment can be carried forward to the following month and restitution can be requested at year end

5. Adjustments on Tax Penalties

Matter

Current

Draft

Interest charge penalty for underpayment of tax due to tax return amendment

2% a month from underpayment of tax

Benchmark interest rate plus 5% (from underpayment of tax), pro-rated on a monthly basis

Interest charge penalty for underpayment of tax imposed due to tax assessment letter

2% a month from underpayment of tax

Benchmark interest rate plus 10% (underpayment of tax), pro-rated on a monthly basis

The penalty for failure to issue, or late issuance of a VAT invoice

2% from VAT base

1% from VAT base

Failure to register as VAT-able Entrepreneur

No administrative penalty

1% from VAT base

6. Tax Facilities to be included in sections within Tax Laws

Matter

Current

Draft

Tax holiday

Available to corporate taxpayers in pioneer industries

(Regulated by Investment Law and Ministry Of Finance Regulation)

Available to:

1. Corporate taxpayers in pioneer industries
2. Main business activity located in  bonded zone
3. Developments in certain industrial regions

Super deduction

Available to corporate taxpayers who:

1. Perform vocational training and R&D
2. Invest in labor-intensive industries

(Regulated by Government Regulation)

Available to corporate taxpayers who:

1. Perform vocational training and R&D
2. Invest in labor-intensive industries

Income tax facility in bonded zone

1. Reduction of net income by up to 30%;
2. Accelerated depreciation;
3. Additional loss compensation period of up to 10 years;
4. Income tax on dividends at 10%

(Regulated by Law regarding Special Economic Regions)

1. Reduction of net income by up to 30%;
2. Accelerated depreciation;
3. Additional loss compensation period of up to 10 years;
4. Income tax on dividends at 10%.

Income  tax on SBN (Government Securities) traded on international market

Lower tax rate / tax holiday on interest/discount, reciprocal principal applies

Tax holiday/reduction of tax on interest/discount

7. Taxation on Trading by Electronic System

Matter

Current

Draft

Imposition and remittance of VAT on import of intangible goods and services

Performed by domestic consumer (importer) with Tax Remittance Slip

To appoint:

1. Foreign taxpayer (Foreign trader, foreign service provider, foreign platform) to withhold, remit, and report VAT
2. Foreign taxpayer is able to appoint a representative in Indonesia to withhold, remit, and report VAT on foreign taxpayer’s behalf

Taxation of income with respect to electronic transactions performed in Indonesia by foreign taxpayers who do not have physical presence in Indonesia

No ruling on this yet

1. Define Permanent Establishment (BUT) not only by physical presence but also by significant economic presence
2. Tax rate and base are subject to provisions of income tax